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August 2012

Dear Consumer Law recipient

It seems that the Protection of Personal Information Bill might see the light of day this year already. The Bill has been before the Portfolio Committee and appears to be close to finalisation. The Bill will apply to any company which processes personal information (see Russell Opland’s article in the May/June edition of the Consumer Law Review). In light of this, we have included an update on the progress of the Bill as well as an article on the influence of the Bill on direct marketing practices.

Some interesting matters have come before the Tribunal. You may ask why it is important to analyse these decisions? The answer is that they teach practitioners valuable lessons on how to advise and assist clients who are faced with compliance notices. In essence, the NCT is laying down the procedural rules which must be followed and is clearing up much of the confusion created by the bad drafting of the CPA in this regard.

Until next month,

Kind regards

Elizabeth de Stadler

The editor of the Consumer Law Review is Elizabeth de Stadler, a senior associate at Esselaar Attorneys in Cape Town (http://www.esselaar.co.za). Her practice consists of general regulatory compliance due diligences; training and workshops on regulatory compliance; opinion work on the CPA, the National Credit Act, Banking Law, Gaming and Lotteries, Insurance, Medical Law, Marketing Law, Contract Law; and plain language drafting.

She conducts regular workshops and training sessions on the CPA and other consumer legislation for businesses and for Law@work, a unit situated within the Law Faculty at the University of Cape Town. In addition to writing her dissertation (The consumer’s right to quality goods: a comparative analysis of the Consumer Protection Act 68 of 2008), she is the co-author of a consumer law textbook and a guide to plain language legal drafting, both of which are to be published by Juta Law.

IN THIS EDITION OF THE CONSUMER LAW REVIEW

  • Enactment of Protection of Personal Information Bill imminent?

  • Direct Marketing: Opt-in or Opt-out?

  • In the Tribunal

  • Guidelines published by Chief Commissioner of No Legal Force?

  • Plain Language Tip

ARTICLES

Enactment of Protection of Personal Information Bill Imminent?

The deliberations by the Portfolio Committee on the Bill (see the July edition of the Consumer Law Review) were drawing to a close as we were preparing this edition. According to Russell Opland, an associate director in the Technology team of PwC Advisory Services in Johannesburg, the committee is scheduled to vote on it and the publication of the Bill is expected shortly.

The implications are that it is becoming ever more likely that the Bill will become an Act before the end of this year. As things stand, the Bill provides that suppliers will have a year to comply with its provisions or else face sanctions. These sanctions include (as things stand) fines of up to 10% of annual turnover.

Given the sheer scope of the Bill, suppliers would be well advised to start assessing (a) whether they process personal information (likely), and (b) what is done with that information. See this article on Polity.org for valuable insights on why a proactive approach will benefit suppliers: http://www.polity.org.za/article/is-the-protection-of-personal-information-bill-a-necessary-evil-or-opportunity-2012-05-18

Direct Marketing: Opt-in or Opt-out?

The introduction of the Protection of Personal Information Act (PoPI) will provide direct marketers with more hurdles to clear.

The introduction of the CPA gave direct marketers much food for thought. The most important implications are that consumers must always have the option to opt-out (free of charge) and that a cooling-off right of five days has been introduced for any transaction concluded as a result of direct marketing (unless the 7 day period in terms of the Electronic Communications and Translations Act 25 of 2002 applies). The wide definition of ‘direct marketing’ means that any communication, regardless of form or format, directed at the consumer personally, is subject to the provisions of the CPA.

The CPA also provides for a registry which was to be established by the NCC. This registry would afford consumers the opportunity to opt out of direct marketing in general or in respect of a particular supplier. All direct marketers must check their database against the registry before engaging in direct marketing and must assume that a consumer has opted out until it has been confirmed that this is not the case. The only exception to this rule is where the direct marketer obtained the express consent of an existing customer after 1 April 2011. This registry has not been established yet due to budgetary constraints and it seems unlikely that this will change this year see 'No opt-out registry this year by Nicola Mawson, dated 15th July 2012 on ITweb: http://www.itweb.co.za/index.php?option=com_content&view=article&id=56683:no-optout-registry-this-year

The current position is therefore clearly an opt-out system. In other words, direct marketers can contact consumers unless they have opted out. They do not need the prior consent of a consumer.

In comes PoPI (the 7th draft). Section 74 of PoPI provides that a consumer must consent before direct marketing can take place, unless that consumer is an existing customer who gave their personal information to the supplier in the context of a sale for the purpose of direct marketing, and ‘has been given a reasonable opportunity to object, free of charge and in a manner free of unnecessary formality’. However, the direct marketer may contact any consumer ‘only once in order to obtain the consent’ of the consumer. So this looks like an opt-in system on the face of it. Or, in the case of existing customers, it is what is referred to as a soft opt-in (i.e. the direct marketer can accept that the consumer opted-in, because the consumer chose not to accept the opportunity to opt-out).  The opt-in system is watered down somewhat because the direct marketer can contact the consumer once to get their consent.

It is immediately apparent that these two acts will apply to the same situation. The CPA provides that where both acts can apply without conflict there will be concurrent application. Where there is a conflict between it and another act the act which provides ‘the greater protection to a consumer prevails over the alternative provision’ (see s 2(9) CPA). If one assumes that it is in the consumer’s best interest not to be contacted it seems to me that the position would be this:

  • Where the consumer isn’t an existing customer PoPI will apply, because it is stricter. In other words, the supplier cannot market to that consumer unless the consumer’s consent was obtained, but the marketer may contact the consumer to get their consent. However, the CPA will apply to the contact aimed at obtaining the consumer's consent. That is, if the consumer has opted-out already, either with the supplier directly, or with the registry, the direct marketer cannot even contact that consumer to obtain consent to market to them.

  • Where the consumer is an existing customer who has not expressly consented already, PoPI and the CPA will apply as both acts provide that the direct marketer can market to a consumer unless that consumer has opted-out (free of charge).

This will be the position until the registry is established in terms of the CPA. Then the position of existing customers will change slightly as the direct marketer will then have to assume that the consumer has opted-out until it is confirmed that this is not the case, instead of assuming that they have opted-in. It is also unclear what the effect of the registry would be on the direct marketer’s right in terms of PoPI to contact the consumer to get their consent.

The concurrent application is problematic in itself as PoPI will establish a new regulator. Agreement will have to be reached between the two regulators on the way in which claims and investigations relating to direct marketing will be handled. Thus far, the NCC has been reluctant to broker such agreements.

Confusing? Most certainly and unnecessarily so, as PoPI is still in its draft form. One would hope that either the reference to direct marketing in PoPI is removed or that PoPI will repeal those provisions in the CPA which deal with direct marketing and consumer consent. Which is best from a consumer perspective? On the one hand PoPI is stricter, as it requires consent, albeit that a direct marketer can still contact consumers to obtain that consent. PoPI also does away with the notion of a registry, which will be difficult and costly to establish. On the other hand, the CPA provides for a cooling off right for products or services acquired as a result of the direct marketing effort. That right should be retained.

Whatever the case may be, it would certainly appear that the drafters’ work is far from done.

In the Tribunal

While the Chief Commissioner, Mamodupi Mohlala-Mulaudzi is ‘pleading for her job’ the National Consumer Commission’s report card keeps getting worse. Her contract expires on 3 September 2012. The DTI has confirmed that her contract will not be renewed. She believes that she has ‘excelled’ and that consumers are ‘better off’ as a result of the work done by her team (see the article dated 15 August 2012 in Fin24 http://www.fin24.com/Economy/Consumer-commissioner-pleas-for-her-job-20120815. No doubt some consumers have been assisted by the NCC, but the NCC track record in the National Consumer Tribunal paints a different picture. In fact, the performance of the NCC has been so bad that the Department of Trade and Industry asked the NCT to draft a confidential report on NCT concerns. The report was leaked to the media (see this article dated 3 August 2012 in TimesLive http://www.timeslive.co.za/thetimes/2012/08/03/consumer-watchdog-gets-savage-mauling. In it the NCT outlined the following problems:

  • The Commission fails to follow the correct procedures as set out in the Act.

  • The Commission issues compliance notices which are defective and which are not authorised in the CPA.

  • The Commission's documents are poorly drafted and riddled with errors.

  • The conduct of the Commission is ‘contemptuous and unprofessional’.

  • The Commission does not understand the many and varied business models of suppliers and often asks for corrective measures which would effectively close down the businesses.

  • The Commission fails to investigate matters properly and refuses to take submissions made by suppliers into account.

  • The Commission makes inappropriate and often premature disclosures to the media.      
Chief Commissioner Mohlala-Mulaudzi responded by saying that she does not understand ‘on what basis [are] they (the tribunal) coming up with this type of insinuation’ See ‘NCC head rejects tribunal report findings’ of 8 August 2012 in Fin24 http://www.fin24.com/Economy/NCC-head-rejects-tribunal-report-findings-20120808

Well, it seems clear where the ‘insinuations’ are coming from. Their record before the NCT speaks for itself and the concerns aired by the Tribunal are not so much ‘insinuation’ as fact. Here is this month’s offering.

Remember that all NCT decisions are published and are available on its website http://www.thenct.org.za or can be accessed on SAFLII http://www.saflii.org/za/cases/ZANCT

Auction Alliance

The fight between Auction Alliance and the NCC has continued without pause (see the August edition of the Consumer Law Review for the background to the dispute).

Since last month the NCT set aside the compliance notice against Auction Alliance (without immediately publishing reasons). The NCC launched an urgent application to review this decision in the North Gauteng High Court. It lost this application as it did not follow the procedures required for a review and did not declare to the court that it in fact entered into a settlement agreement with the liquidators of the Quoin Rock estate. Two punitive cost orders were awarded against the NCC.

The NCT has now published its reasons for deciding against the NCC by setting aside its compliance order against Auction Alliance. The following findings are useful:

  • The NCT is a creature of two statutes, the CPA, but also the National Credit Act (see s 73(4)(a)). This means that the NCA also governs the procedures which may be followed by the NCT.

  • Each party must bear their own costs in matters before the NCT (see s 147 of the NCA). It is important to bear this in mind as it has the unfortunate effect that smaller suppliers will not always be able to challenge compliance notices even in cases where they may be justified, for fear of incurring substantial legal costs. The NCT can give punitive costs orders only where the application is frivolous or vexatious (see Rule 5(7) of the Tribunal rules).

  • Once the NCC has issued a compliance notice (which is one of four regulatory options it has under s 73), the consumer can no longer ask for the certificate which it requires to approach a civil court for damages. Note that the NCT cannot award damages to a consumer; this jurisdiction was retained by the civil courts. However, before approaching a court the consumer must obtain a certificate from the NCT which states that the supplier is guilty of prohibited conduct. If the NCC never asks for such a finding from the NCT, it stands to reason that it cannot issue such a certificate. This means that the NCC’s failure to follow its own procedures can (and has) deprived consumers of their rights to claim damages. The NCT’s reasoning is set out in paragraph 36 of the judgment. Presumably the consumer’s common law right to claim damages remains intact as a result of s 2(10) of the CPA which provides that the Act may not be interpreted so as to limit a consumer’s common law rights.

The NCT held that the auction could not be ‘nullified’ as the sale of the winery which formed the subject of the complaint never took place. In addition the conduct complained of had ceased. This means that issuing a compliance notice was the incorrect regulatory step to take as Auction Alliance can hardly rectify conduct which had ceased. Instead the NCC should have made a complaint of prohibited conduct and referred that to the NCT for adjudication in terms of s 73(2)(b).

Cell C

The compliance notice which was issued against Cell C for the alleged contraventions of (amongst others) s 14 and s 63 of the CPA has been set aside. These sections deal with cancellation penalties for the early cancellation of subscriber contracts and the validity period of prepaid vouchers for services such as airtime or data bundles, both incredibly important issues for consumers. Unfortunately the difficulties surrounding the application of these sections of the CPA to cell phone contracts were once again not discussed as the compliance notice was set aside on procedural grounds (see ‘Prepaid data showdown looms’ by Nicola Mawson dated 15 August 2012 in ITweb http://www.itweb.co.za/index.php?option=com_content&view=article&id=57704:prepaid-data-showdown-looms&catid=260. Again the NCC did not investigate the matter properly, issued the compliance notice for illegitimate reasons and without consulting ICASA and acted unreasonably and unfairly in the process of doing so.

Mobile Network Operators

In the meantime MTN’s woes continued. MTN has brought a practically identical application to those of Cell C and Vodacom to have the compliance notice issued against it set aside. The hearing was due to be held in July 2012. On the date of the hearing the NCC alleged that it never received notice of the hearing and that it was not prepared to argue the matter. The matter was postponed to the following day. Again the NCC was not prepared due to its legal representative falling ill. MTN was allowed to argue and the NCC was given an extension to file its heads of argument, which it failed to do. MTN now awaits a decision by the NCT, but in all probability it will (and should) go in favour of MTN based on the precedents set in the Vodacom and Cell C decisions (see ‘Consumer hearing a circus’ by Nicola Mawson dated 17 July 2012 in ITweb http://www.itweb.co.za/index.php?option=com_content&view=article&id=56809:consumer-hearing-a-circus&catid=260.

Hyginique Toilet Hire & Sales

In the case of Hyginique Toilet Hire & Sales, the supplier applied to have a compliance notice set aside. It is not necessary to go into the facts as the matter was decided on procedural grounds. The NCT agreed with the supplier on the following grounds:

  • the compliance notice referred to the wrong section of the CPA (sale of goods as opposed to the provision of services);

  • the compliance notice referred to the wrong amount (it demanded payment of 100% of the contract price in one paragraph but 90% in another);

  • it required the supplier to comply on the day that the notice was received;

  • patently incorrect or contradictory allegations are made (ie the supplier did not respond while the supplier clearly did respond) to the extent that it was found that the NCC was ‘deliberately misrepresenting the facts’ (see para 8.1.7); and

  • the NCC had not investigated the matter 

The NCC (again) did not appear at the hearing despite the fact that a notice of set down had been delivered.

Nayyara Distribution Enterprise

The case of Nayyara Distribution Enterprise is the first decision by the NCT which involves a franchisor and a franchisee. It is also the first case where an applicant makes use of s 114 of the CPA which provides that a person can apply for interim relief to prevent ‘serious, irreparable damage’ or to ‘prevent the purposes of [the] Act from being frustrated’.

It was decided that once a compliance notice has been issued by the NCC, a complainant (Nayyara Distribution Enterprise in this matter) cannot approach the NCT for interim relief. This procedure is only available where the complaint has already been referred to the Tribunal by the complainant or the NCC. In other words, the complainant cannot bring an application for interim relief on its own. The implication of this is that the NCC, by opting to issue a compliance notice instead of referring the matter to the Tribunal, can deprive a complainant of the option to apply for interim relief.

The finding that the complainant did not have standing in terms of s 114 essentially disposed of the matter. However, the Tribunal also addressed the question whether (and to what extent) the CPA can apply to pre-existing agreements as this was the second reason that the franchisor submitted for the franchisee not being eligible for interim (or any other) relief. 

The transaction between the parties was concluded during December 2012. That is, before the CPA came into operation. The CPA only applies to agreements which pre-date the Act in certain very limited circumstances which are set out in Schedule 2, Item 3. Even if it does apply to the particular agreement only certain provisions of the Act apply. The matter illustrates this principle very well:

  • the allegations relating to misrepresentations cannot be heard because the sections governing misrepresentations never applies retrospectively;

  • the allegations relating to the quality of the services could potentially apply if the contract was of a fixed term meant to endure until after 1 April 2013; and

  • the franchisee’s right to cancel the agreement within 10 days after signing it (and the right to be informed of this right) already came into operation on 24 April 2010 (the early effective date) so that, if the agreement was signed after that date the section applies.

Guidelines published by Chief Commissioner of No Legal Force?

Since the CPA came into force, the Chief Commissioner has published several documents in the Government Gazette. A careful reading of the Act reveals that she was not in fact authorised to do so which calls the legal validity of these documents into question. That is, suppliers are not bound by these guidelines and failure to comply is not prohibited conduct.

One of these documents was the National Consumer Commission Enforcement Guidelines which were published in GG 34484 of 25 July 2011. Yes, regulations may be made regarding the procedures to be followed by the NCC in terms of s 120, but these regulations must be published by the Minister to have any force and effect. The National Consumer Commission Guidelines for the development of Industry Codes of Conduct for accreditation under the Act published in GG 35375 of 23 May 2012 are similarly flawed.

Arguably the most important example for consumers is the Consumer Product Safety Recall Guidelines which were published in GG 35434 of 13 June 12. These Guidelines prescribe extensive reporting requirements in respect of product recalls and regulate the internal procedures which must be followed where a product is found to be unsafe. A failure to follow this guideline is prohibited conduct. These guidelines are authorised in terms of s 60 read with s 82. Again they were published by the Chief Commissioner instead of the Minister as prescribed by the Act and therefore they are not enforceable.


Plain Language Tip

Avoid the use of word-numeral doublets

For example: one hundred and twenty (120)

The doubling of a word and numeral to indicate an amount is often used in legal documents in the mistaken belief that this increases the comprehension of the amount or document. The doublet, however, not only decreases the readability of the document but makes it more wordy. By eliminating the doublet, the writer ensures that the reader can get through the document as quickly and easily as possible.

Keep the following in mind: Numbers between one and ten should be spelled out but numbers from 11 and above should be in numerals.

The plain language tips were drafted by Elizabeth de Stadler and Ruth Baitsewe of the Unit for Document Design at the Stellenbosch University Language Centre.

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