AMERICAN CHAMBER OF COMMERCEBrandholder Anti-Counterfeiting Forum

08 FEBRUARY 2018

Magauta MphahleleActing Ombudsman

PURPOSE OF THE CONSUMER PROTECTION ACT (CPA)

establishing a legal framework for the achievement and maintenance of a consumer market that is fair, accessible, efficient, sustainable and responsible for the benefit of consumers generally;Establishing

and ameliorating any disadvantages experienced in accessing any supply of goods or services by consumers –Reducing

promoting fair business practices;Promoting

consumers from unconscionable, unfair, unreasonable, unjust or otherwise improper trade practices; anddeceptive, misleading, unfair or fraudulent conduct;Protecting

consumer awareness and information and encouraging responsible and informed consumer choice and behavior;Improving

PURPOSE OF THE CPA

consumer confidence, empowerment, and the development of a culture of consumer responsibility, through individual and group education, vigilance, advocacy and activism;Promoting

for a consistent, accessible and efficient system of consensual resolution of disputes arising from consumer transactions; andProviding

for an accessible, consistent, harmonized, effective and efficient system of redress for consumers. Providing

APPLICATION OF THE CPAIn terms of section 5, the CPA applies to transactions and the promotion of any goods or services or the supplier of any goods or services. Suppliers include:

Any business whether profit or nonprofit that promote or supply goods or services to consumers across all sectors of the economy unless exempted;

Government institutions or any entity contracted by the state to provide goods or services to consumers;

Franchisors;

APPLICATION OF THE CPAThe CPA does not apply to instances:

1. Where the consumer is the state;

2. Where the consumer is a juristic person whose asset value or annual turnover is equal to or less than 2 million;

3. Where the Act specifically excludes certain agreements or provides exemptions;

4. Goods or services supplied under an employment agreement; and

5. Collective bargaining agreements.

DEFINITION OF SERVICES“service” includes, but is not limited to -

1) any work or undertaking performed by one person for the direct or indirect benefit of another;

2) the provision of any education, information, advice or consultation, except advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002);

any banking services, or related or similar financial services, or the undertaking, underwriting or assumption of any risk by one person on behalf of another except to the extent that any such service -

i. constitutes advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); or

ii. is regulated in terms of the Long-term Insurance Act, 1998 (Act No. 52 of 1998), or the Short-term Insurance Act, 1998 (Act No. 53 of 1998);

1) the transportation of an individual or any goods;

2) the provision of -i. any accommodation or sustenance;ii. any entertainment or similar intangible product or access to any such entertainment or intangible product;

DEFINITION OF SERVICES1) access to any electronic communication infrastructure;

2) access, or of a right of access, to an event or to any premises, activity or facility; or

3) access to or use of any premises or other property in terms of a rental;

4) a right of occupancy of, or power or privilege over or in connection with, any land or other immovable property, other than in terms of a rental; and

5) rights of a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5 (6)(b) to (e);

6) irrespective whether the person promoting, offering or providing the services participates in, supervises, or engages directly or indirectly in the service;

DEFINITION OF GOODS“goods” includes -

1) anything marketed for human consumption;

2) any tangible object not otherwise contemplated in paragraph (a), including any medium on which anything is or may be written or encoded;

3) any literature, music, photograph, motion picture, game, information, data, software, code, or other intangible product written or encoded on any medium, or a licence to use any such intangible product;

4) a legal interest in land or any other immovable property, other than an interest that falls within the definition of ‘service’ in this section; and

5) gas, water and electricity;

EXCLUSION OF CREDIT AGREEMENTS

Section 5(2) (c) of the CPA, excludes any transaction “that constitutes a credit agreement under the National Credit Act, BUT the goods and services that are the subject of the credit agreement are not excluded from the ambit of this Act”

VICARIOUS LIABILITY

113.(1)If an employee or agent of a person is liable in terms of this Act for anything done or omitted in the course of that person’s employment or activities on behalf of their principal, the employer or principal is jointly and severally liable with that person.

(2)This section does not apply in respect of criminal liability.

WHO IS THE CONSUMER?consumer”, in respect of any particular goods or services, means

1) a person to whom those particular goods or services are marketed in the ordinary course of the supplier’s business;

2) a person who has entered into a transaction with a supplier in the ordinary course of the supplier’s business, unless the transaction is exempt from the application of this Act by section 5 (2), or in terms of section 5 (3);

3) if the context so requires or permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective whether that user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and

WHO IS THE CONSUMER?

1) a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5 (6)(b) to (e); Franchisees irrespective of their size of the size of the transaction. Franchise transactions covered include

i. Solicitation of offers to enter into franchise transactions;

ii. Offers to enter into franchise agreements;

iii. A franchise agreement including supplementary agreements; and

iv. The supply of any goods or services in terms of the franchise agreement.

CONSUMER RIGHTS

Part A:

Right of equality in the consumer market

Part B:

Right to privacy

Part C:

Right to Choose

CONSUMER RIGHTS

Part D:

Disclosure and information

Part E:

Fair and responsible advertising, marketing and promotion:

CONSUMER RIGHTS

Part F:

Fair and honest dealings

Part G:

Right to fair, just and reasonable terms and conditions

Part H:

Right to Fair Value, Good Quality and safety:

CPA INSTITUTIONAL ARRANGEMENTS

Courts

National Consumer Tribunal

Alternative Dispute Resolution Agents, Consumer Courts and Ombuds

National Consumer Commission

FUNCTIONS OF THE NCC

Negotiating and concluding undertakings and consent orders contemplated in section 74;

Issuing and enforcing compliance notices;

Investigating and evaluating alleged prohibited conduct and offences;

Monitoring the consumer market to ensure that prohibited conduct and offences are prevented, or detected and prosecuted; and

Receiving complaints concerning alleged prohibited conduct or offences, and dealing with those complaints in accordance with Part B of Chapter 3;

PromotingThe informal resolution of any dispute arising in terms of this Act between a consumer and a supplier, but is not responsible to intervene in or directly adjudicate any such dispute;

THE ROLE OF THE NCC

THE ROLE OF THE NCTThe NCT was established in terms of the National Credit Act. Through consequential amendments of the CPA the existing mandate was extended to include the adjudication of matters arising from the CPA. In terms of section 149 – 150 of the NCA, the Tribunal can make the following orders:

➢Grant Interim relief; ➢Declare conduct to be prohibited; ➢Issue an interdict in respect of prohibited conduct; ➢Impose administrative fines; ➢Confirm Consent Orders; ➢Condone non-compliance with its rules and procedures; ➢Confirm an order against an unregistered person to cease engaging in any activity that registration with

the regulator; ➢Cancel or suspend a registrants’ registration; ➢Require repayment to a consumer of any excess amount charged together with interest set out in the

agreement; or any other appropriate order required to give effect to a right as contemplated in the Act.

NCC PROCESS AFTER RECEIPT OF COMPLAINT

Issue a notice of non referral;

Refer the complaint to an ADR, Provincial Consumer Affairs Office, Consumer Court;

Refer the case to another Regulatory Authority;

Or order a formal investigation;

NCC PROCESS AFTER INVESTIGATION OF COMPLAINT

Issue a notice of non referral

Refer the matter to the NPA

Enter into a consent

agreement

Issue a compliance

notice

Refer the matter to a Consumer

Court or Tribunal

PENALTIESIf a person to whom a compliance notice has been issued fails to comply with the notice, the Commission may apply to the Tribunal for an order and/or the imposition of an administrative fine amounting to:

1) 10% of the entity’s annual turnover during the preceding year; or

2) R1 000 000

ADMINISTRATIVE PENALTIES

copyright (C) Madeasy.co.za

The nature, duration, gravity and extent of the contravention;

Any loss or damage suffered;

The behaviour of the respondent;

The market circumstances in which the contravention took

place;

The level of profit derived from the

contravention;

The level of cooperation by the

respondent with the Commission;

Previous contraventions;

TRIBUNAL CONSIDERATIONS BEFORE ISSUING FINE

CONSEQUENCES OF NCT REFERRAL

Judgment and Reasons NCC v Western Car Sales CC NCT/81554/2017173

SUPPLIER ORDERED TO REFUND CONSUMER R61 450 & FINED R100 000 TO BE PAID WITHIN 30 BUSINESS DAYS FROM DAY OF JUDGMENT!!

THE FOLLOWING WAS CONSIDERED ONE OF THE AGGRAVATING FACTORS:

47. The behaviour of the Respondent;

The Respondent refused to comply with the ruling made by the MIOSA. It then did not defend the application before the Tribunal. This behaviour is indicative of a dismissive attitude towards the rights of consumers and the dispute resolving process in general. The Respondent was granted an ideal opportunity to cooperate and resolve the matter through the MIOSA. The fact that it chose to simply ignore the ruling made by the MIOSA and not engage further in any way to resolve the dispute is an aggravating factor.

ALTERNATIVE DISPUTE RESOLUTION

70.(1) A consumer may seek to resolve any dispute in respect of a transaction or agreement with a supplier by referring the matter to an Alternative Dispute Resolution Agent who may be—

➢ an Ombud with Jurisdiction, if the supplier is subject to the jurisdiction of any suchombud;

➢ an Industry Ombud accredited in terms of section 82(6), if the supplier is subject tothe jurisdiction of any such ombud;

➢ a person or entity providing Conciliation, Mediation or Arbitration Services; or

➢ applying to the Consumer Court of the province with jurisdiction over the matter,(if one exists)

ABOUT THE CGSO➢The Office is established and accredited in terms of section 82(6) of the Consumer Protection Act and started operating in March 2013;

➢Its role, purpose and jurisdiction is outlined in the Consumer Goods and Services Industry Code of Conduct promulgated by the Minister of Trade and Industry on the 29 April 2015;

➢It is governed by a Board of Directors comprised of Industry, Consumer Body and Independent representatives;

➢It is funded through levies and fees which it is empowered to charge in terms of the CGSI Code;

➢It currently has 15 full time staff members & 3 Contractors who handle an average of 538 complaints per month;

➢To date 663 industry participants have signed up.

GOVERNANCE & REPRESENTATION1. The CGSO is governed by a Board of Directors

comprised of

i. 6 Industry representatives (Currently Nestle, TigerBrands, National Clothing Retail Federation andConsumer Goods Council of South Africa)

ii. 2 Consumer Body representatives; (National ConsumerUnion and Black Sash)

iii. 1 Independent representatives who is also theChairperson of the Board;

2. The Board is responsible for strategic input and oversight butdoes not get involved in the resolution of disputes.

3. In terms of the Code only the Ombudsman and the relevantstaff can adjudicate complaints.

PURPOSE OF THE CGSI CODE

Section 2 of the Code provides that the purpose of the Code is to:

2.3.1 Raise the standards of good conduct in the Industry without endangering the vitality and growth of business;

2.3.2 Generate growth in the Industry by increasing the level of certainty for all Participants;

2.3.3 Offer guidance to Participants in the Industry as to the implementation of and the compliance with the CPA and what constitutes fair business practices to be followed when operating within the Industry;

2.3.4 Educate Consumers as to their rights and redress available to them should a Participant breach the CPA or the Code; and

2.3.5 Provide for a scheme of alternative dispute resolution as described in section 82 (6) of the CPA.

CODE EXEMPTIONS

CODE EXEMPTIONS YES/NO

It is not involved in the Consumer Goods and Services Supply Chain

It is regulated elsewhere by other public regulation or a Code prescribed by the Minister

in terms of section 82 of the CPA

It falls within the jurisdiction of an Ombud with Jurisdiction, or an Industry Ombud

accredited in terms of section 82 (6)

Its transactions are not covered by the CPA and/or are governed by other public

regulation

It is an organ of state

The belong to the automotive industry, , Electronic Communication Service as defined in

section 1 of the Electronic Communications Act, 2005 (Act No. 36 of 2005); and

NOTE!!It is mandatory for all QUALIFYING Participants to comply with the provisions of the CGSI Code, to register with the CGSO in accordance with the procedures provided on the CGSO website from time to time, and contribute towards the funding of the CGSO in accordance with the approved funding model.

MAIN FUNCTIONS OF THE CGSOThe main functions of the CGSO outlined in the Code are:

1) Create supplier and Consumer awareness of rights and responsibilities;

2) Receive and mediate complaints;

3) Ensure compliance with the Code by suppliers;

4) Ensure the CGSO is well resourced and funded;

5) Monitor the quality of process, procedures and consumer experience;

6) Ensure Good Corporate Governance and Independence of Ombudsman

7) Monitor and report trends

CGSO JURISDICTION LIMITS

Amount Involved – Cannot consider business to business complaints unless the business falls within threshold limit of R2 MILLION

01Time Limits- three

year prescription counting from the day the consumer became aware of the or the problem or ought to have reasonably became aware of the issue

02Other Ombudsman-the matter falls within the jurisdiction as per its enabling legislation

03Other Processes Underway- The

matter is in front of a Court, Tribunal , Ombud wit Jurisdiction or Regulatory Boby. Right of intervention allowed if lawful

04Appropriateness -Could be more appropriately be dealt with by the police or other regulatory body

05

MEDIATION OUTSIDE JURISDICTION

6.2.4The Board shall from time to time determine the scale of fees to be charged to any entity which falls outside of the CGSO’s jurisdiction and with which the CGSO has entered into an agreement to render dispute resolution services.

FUNDING OF THE CGGSO➢ Participants shall contribute to the funding of the operations of the CGSO by means of the payment of a joining fee and

an annual levy and (if necessary) a special levy, as shall be determined from time to time by the Board of the CGSO.

➢ In determining the joining fee, annual levy and special levy, the Board may have regard to the relative market share ofthe Participants in each Sector Industry Category, the anticipated number of complaints to be dealt with by the CGSOannually and the costs of operating the CGSO.

➢ With reasonable notice to the Participants, a special levy may be raised when deemed necessary by the Board toprovide for un-anticipated expenditure incurred by the CGSO due to increased caseloads or any other reasonacceptable to the Board.

➢ The Board shall from time to time determine the scale of fees to be charged to any entity which falls outside of theCGSO’s jurisdiction and with which the CGSO has entered into an agreement to render dispute resolution services.

!!!The CGSO shall be entitled to take legal action to recover any outstanding fees or levies owed by a Participant.

GENERAL SUPPLIER CODE OBLIGATIONSEstablish an internal complaints-handling process and monitor its effectiveness;

Advise customers that they are bound by the Code and display CGSO DECAL on their premises;

Provide details of how complainants may lodge complaints against the supplier;

Provide consumers with the contact details of Consumer Goods and Services Ombud in case the internal process has been exhausted;

Ensure that relevant staff members have suitable working knowledge of the Act, Code and Services Ombud’s Procedures

NUMBER OF PARTICIPANTSLev of Participation Number Funding Tier

Group 1 42 R 250 000

Group 2 21 R 150 000

Group 3 17 R 50 000

Group 4 425 R 3 000

Group 5 101 R 1 500

Group 6 57 R NIL

TOTAL 663

CGSO COMPLAINT HANDLING RESPONSIBILITY

Receive and acknowledge

complaint;

Assess for jurisdiction

and urgency;

Track the complaint

from initiation to resolution and; provide

status updates to the

consumer;

Refer out of jurisdiction case to the

relevant entities;

Refer the matter to the

participant

Facilitate, Mediate,

Recommend

CGSO has 60 business days to conclude a case from day of receipt OR request an extension OR refer the case to the NCC

RECOMMENDATION BY OMBUDSMAN

1

Set out

• how it proposes the matter be resolved

2

Provide

• an opportunity for the parties to comment on the recommendation

3

Allow

• ten business days for the parties to respond

4

Record and report

• cases where participant refuses to accept the Ombudsrecommendation

5

Prescribe

• timeframe for parties to carry out recommendation

COMPLAINT PROCESS RESOLUTION BY PARTICIPANTS

Contact complainant to ascertain issues

and attempt resolution to the

satisfaction of the client

Resolve complaint within 15 business

days

Provide CGSO with reasonable proof that the complaint has been settled

Investigate the complaint

If unable to resolve provide

CGSO with a report and

reasons for non resolution

Respond to Ombud

Recommendation within 10 business

days

CGSO IS RESPONSIBLE FOR ENSURING PARTICIPANTS HAVE THIS PROCESS IN PLACE

CODE REPORTING REQUIREMENTSCGSO REQUIRED TO COMPILE AN ANNUAL REPORT within 6 (six) months of the close of its financial yearregarding the operations and effectiveness of the CGSO and make the report available to stakeholders,including the NCC, through the CGSO website and other suitable means. This report must include dataregarding:

✓ business complained about;

✓ the type and frequency of the Complaint;

✓ how the Complaint was resolved;

✓ time taken to deal with Complaints;

✓ type of sanction(s) imposed; and

✓ financial statements and audit reports.

!!!!Method of naming suppliers who receive the highest number of complaints raised as an issue. Benchmarking underway.

COMPLAINTS HANDLED OVER A 3 YEAR PERIOD

4583 4727 4655

14599

34952192

19570

5595 5974

38752

13817 12821

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Enquiries Complaints Received Complaints Closed

CASE STATISTICS

2014/15

2015/2016

2016/17

TOTAL

MOST COMMON COMPLAINTS RECEIVED FOR 2016/2017

37%

31%

24%

3%5%

Defective Goods

Poor Service

ContractualDisputes

Unfair/ShoddyTreatment

Marketing andDisclosure

HOW CONSUMERS HEAR ABOUT CGSO

45%

23%

5%

4%

6%

6%

4%3%1%1%1%1%0%

NCC

Internet

TV

Radio

Friend

Other Ombud

Legal Advisor

Supplier

CGCSA

Newspaper

Relative

OCP

OUTCOME OF CASES (2016/17)

48%

18%

15%

5%

7%

7% 0%

Resolve Type

Upheld Fully

No cooperation fromsupplier

Not upheld

Upheld Partially

No cooperation fromcomplainant

Assistance Provided

Mediation Held

OUTCOME OF CONSUMER SATISFACTION SURVEYSQUESTION YES NO

1. Was the outcome of the complaint explained adequately; 86% 14%

2. Were you kept up to date with the progress of your complaint

89% 11%

3. Was the CGSO easy to contact 95% 5%

4. Were you happy with the outcome of your complaint 76% 24%

5. Would you recommend the CGSO 89% 11%87% average approval rate

CREATING A POSITIVE CUSTOMER EXPERIENCE

1.Adequacy/fairness of the outcome: Both the problem solution and fairness of any compensation.

2. Access: Ease of finding competent contact person.

3. Friendliness: Politeness, courtesy, communication style.

4. Empathy: Willingness to take the customer’s perspective, including understanding the customer’s annoyance.