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CONSUMER LAW UNLOCKED Elizabeth de Stadler

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de Stadler Consumer Law Unlocked

www.siberink.co.za Chapter 2: Marketing 1

What to expect in this Chapter

Marketing .................................................................................................................................... 2

1 Sources of marketing law ..................................................................................................... 2

1.1 Legislation ............................................................................................................................... 2

1.2 The common law ..................................................................................................................... 3

1.3 Self-regulation ......................................................................................................................... 3

1.4 Appropriate foreign and international law ............................................................................. 4

2 Fair and responsible marketing: the general standard ........................................................... 5

3 Specific practices ................................................................................................................. 8

3.1 Direct marketing ..................................................................................................................... 8

3.2 Promotional competitions .................................................................................................... 12

3.2.1 Application and scope of section 36 ............................................................................. 12

3.2.2 Who is responsible for compliance? ............................................................................. 14

3.2.3 Entry forms .................................................................................................................... 15

3.2.4 Cost of transmitting entries and entering into the competition .................................. 16

3.2.5 The competition rules ................................................................................................... 17

3.2.6 Eligibility for and description of the prize ..................................................................... 18

3.2.7 Notifying the prize winner ............................................................................................ 20

3.2.8 Acknowledgment of receipt of the prize ...................................................................... 20

3.2.9 Partial or complete restriction on the availability of the prize ..................................... 21

3.2.10 Oversight and certification procedures ........................................................................ 22

3.2.11 Competition report ....................................................................................................... 23

3.2.12 Prohibited practices ...................................................................................................... 25

3.3 Bait marketing ....................................................................................................................... 27

3.4 Negative option marketing ................................................................................................... 28

3.5 Catalogue marketing ............................................................................................................. 29

3.5.1 The application and scope of section 33 ....................................................................... 29

3.5.2 Price display .................................................................................................................. 30

3.5.3 Information which must be disclosed to the consumer ............................................... 30

3.6 Customer loyalty programmes ............................................................................................. 32

3.6.1 The scope and application of section 35 ....................................................................... 32

3.6.2 Who is responsible for compliance? ............................................................................. 32

3.6.3 General principle ........................................................................................................... 32

3.6.4 Loyalty credits or awards are equivalent to cash ......................................................... 32



3.6.5 Offer to participate in the loyalty programme ............................................................. 33

3.6.6 Obligations of the sponsor or supplier ......................................................................... 33

3.6.7 Partial or complete restriction of the availability of goods or services ........................ 36

3.7 Trade coupons and similar promotions (promotional offers) .............................................. 36

3.7.1 The application and scope of section 34 ....................................................................... 36

3.7.2 General rule .................................................................................................................. 37

3.7.3 The form of the promotional offer ............................................................................... 37

3.7.4 Obligations of the supplier and/or sponsor .................................................................. 38

3.8 Alternative work schemes..................................................................................................... 39

3.9 Referral selling ...................................................................................................................... 40

4 The consequences of non-compliance with the CPA’s provisions on marketing .................... 41

4.1 Prohibited conduct leading to an administrative fine .......................................................... 41

4.2 Agreements resulting from misleading marketing (unconscionable conduct) ..................... 41

4.3 Misleading marketing and the quality of goods or services ................................................. 43

5 Who will police marketing infractions/contraventions ........................................................ 43

5.1 Liability under the CPA .......................................................................................................... 43

5.2 Self-regulation ....................................................................................................................... 44

Marketing

1 Sources of marketing law

1.1 Legislation

The Consumer Protection Act 68 of 2008 (the CPA) is the first comprehensive piece of legislation to

govern South African consumer law, which includes the rules and standards required when

marketing products to consumers.1 The general standard required by the CPA and the specifically

regulated practices are discussed in this chapter.

The CPA has not repealed industry specific legislation which covers marketing, but will apply

concurrently where possible, and where there is a conflict between it and another act, the act which

1 Although the application of the Act is very wide, there are some transactions which fall outside its scope and

therefore the marketing of those transactions will also not be subject to the CPA (see section 5). Also see Dale Hutchison and Chris-James Pretorius (eds) The Law of Contract in South Africa 2 ed (Oxford University Press 2012) 435 for a discussion of the application of the CPA.



provides the greater protection to consumers will be applied.2 An example of industry specific

regulation is the Foodstuffs, Cosmetics and Disinfectants Act 54 of 1972 and GN R146/2010.3 This

means that in practice, suppliers are required to comply with both the CPA and any industry specific

legislation applicable to them.

1.2 The common law

The common law rules relating to misrepresentations apply to situations where a buyer has been

misled by the supplier.4 The CPA does not replace the common law as the consumer’s right to

exercise common law remedies has also been retained.5 This means that the common law relating to

misrepresentations will still apply.

1.3 Self-regulation

Aside from the statutory regulation of marketing activities, the marketing communication industry

also regulates the content of advertising voluntarily through the Advertising Standards Authority of

South Africa (the ASA).6 All members of the ASA are required to adhere to its Code which will be

referred to in this Chapter. The Code is generally only binding on the members of the ASA.7 The

Direct Marketers Association of South Africa (DMASA)8 and the Wireless Application Service

Providers Association (WASPA)9 are other examples of voluntary associations which have their own

codes which are binding on their members.

None of these codes have general application, i.e. they do not apply to all suppliers, but some of

their provisions are discussed as additional and more specific guidelines to facilitate compliance with

the CPA. Regardless, the provisions of the codes as well as the decisions of the ASA Directorate can

be insightful as they are more specialised instruments than the CPA. The references to the codes in

2 Section 2(9) of the CPA governs the concurrent application of acts. It is not always easy to gauge the level of

protection provided by a particular piece of legislation. As a general proposition the provision with the strictest regulation will probably be applied. 3 Other examples include the National Credit Act 34 of 2005, the Electronic Communications Act 36 of 2005,

the Electronic Communications and Transactions Act 25 of 2002 (this act does not regulate an industry, but rather a particular method of communication) and the Financial Advisory and Intermediary Services Act 37 of 2002. 4 See Chapter 4 of Dale Hutchison and Chris-James Pretorius (eds) The Law of Contract in South Africa 2 ed

(Oxford University Press 2012). 5 Section 2(10).

6 See www.asasa.org.za.

7 Compliance with the Code can be extended to non-members through legislation. For example, section 55 of

the Electronic Communications Act 36 of 2005 extends the application of the code to all marketing done via by broadcasting service licensees. 8 See http://www.dmasa.org/. The DMA has a code of ethics and standards of practice.

9 See http://www.waspa.org.za/index.shtml. WASPA has a code of conduct as well as advertising rules.

http://www.asasa.org.za/

http://www.dmasa.org/

http://www.waspa.org.za/index.shtml



this Chapter should be treated as examples or guidelines save where the supplier is a member of any

of these organisations.

The CPA provides for another method of self-regulation. Any of these associations or a member of a

particular industry may apply to the National Consumer Commission to have a code of conduct

accredited as an ‘industry code’10 with an ‘accredited industry ombud’.11 Accreditation will only take

place if it is recommended by the National Consumer Commission to the Minister of Trade and

Industry, but only after it was published for comment and members of the relevant industry

havebeen consulted.12 The National Consumer Commission can also decide to recommend any

industry code without receiving a proposal, i.e. by acting on its own initiative.13 An accredited

industry code becomes binding on all suppliers.14

1.4 Appropriate foreign and international law

The CPA provides that ‘appropriate foreign and international law’ and ‘appropriate international

conventions, declarations or protocols relating to consumer protection’ may be taken into account

when interpreting its provisions.15 Here are some examples:

the International Chamber of Commerce’s Advertising and Marketing Communication

Practice Consolidated Code;16

the Federal Trade Commission is a federal agency tasked with protecting consumers in the

United States. The Bureau of Consumer Protection operates within the agency and enforces

laws that protect consumer against unfair or deceptive practices. It publishes guidance

documents and other legal resources on advertising and marketing;17

10

Section 82. 11

Section 82(6). 12

Section 82(3). 13

Section 82(3). 14

Section 82(8). 15

Section 2(2)(a) and (b). There are many dangers in transplanting foreign laws in this way. Care must be taken to take the context and legal system in which a particular provision is applied into account in order to establish whether it is compatible with the South African context. 16

The Code can be accessed on http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2011/Advertising-and-Marketing-Communication-Practice-(Consolidated-ICC-Code)/ [last accessed on 7 October 2012]. 17

The Advertising and Marketing guidance documents can be accessed on http://business.ftc.gov/advertising-and-marketing/ [last accessed on 7 October 2012].

http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2011/Advertising-and-Marketing-Communication-Practice-(Consolidated-ICC-Code)/

http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2011/Advertising-and-Marketing-Communication-Practice-(Consolidated-ICC-Code)/

http://business.ftc.gov/advertising-and-marketing/

http://business.ftc.gov/advertising-and-marketing/



the United Kingdom Advertising Standards Authority enforces codes for both broadcast and

non-broadcast marketing practices;18

the EC Directive concerning unfair business-to-consumer commercial practices;19

the EC Directive on the protection of individuals with regard to the processing of personal

data and on the free movement of such data.20 It must be read with the EC Directive on

distance contracts regulates contracts which are concluded without meeting in person, i.e.

by the ‘exclusive use of one or more means of distance communication up to and including

the moment at which the contract is concluded’; 21

the Australian Consumer Law which is a schedule to the Competition and Consumer Act

2010.

2 Fair and responsible marketing: the general standard

Sections 29 and 41 of the CPA prescribe a general standard which applies to all forms of marketing.

In fact, fair and responsible marketing is one of the consumer’s rights in terms of the CPA. 22 This

right is closely related to the consumer’s rights to ‘disclosure and information’23 and ‘fair and honest

dealing’.24 In addition to creating a general standard, certain specific marketing practices such as

direct marketing and promotional competitions are regulated in sections 29 to 38 and are discussed

in this chapter.

18

These codes can be accessed on http://www.cap.org.uk/Advertising-Codes.aspx [last accessed on 7 October 2012.] 19

Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. See articles 6 and 7 in particular. The Directive is available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:149:0022:01:en:HTML [last accessed on 7 October 2012]. 20

Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. 21

Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts. This Directive is useful when interpreting the CPA’s provisions on direct marketing (see Elizabeth de Stadler, ‘The CPA and direct marketing; Exactly how “cool” is the cooling off period?’ Legalbrief Today (24 August 2011) at http://www.legalbrief.co.za/article.php?story=2011082408312377 [last accessed on 4 October 2012]. 22

The CPA provides that all consumers have the right to fair and responsible marketing (Chapter 2, Part E). There are certain specific misrepresentations which are mentioned in these sections which must be treated as examples. 23

Chapter 2, Part D. 24

Chapter 2, Part F.

http://www.cap.org.uk/Advertising-Codes.aspx

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:149:0022:01:en:HTML

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:149:0022:01:en:HTML



Section 29 creates a general standard for the marketing of goods or services. It prohibits marketing

which is misleading, fraudulent or deceptive. Information relating to the following attributes or

features of the goods or services which are being advertised must be treated with particular care:25

(i) the nature, properties, advantages or uses of the goods or services; (ii) the manner in or conditions on which those goods or services may be supplied; (iii) the price at which the goods may be supplied, or the existence of, or the relationship of the price to, any previous price or competitor’s price for comparable or similar goods or services.

This means that when determining whether a marketing strategy is misleading or not, attention will

be focused on these attributes as they are generally considered material as they influence the

consumer’s decision to enter into the transaction which is being promoted. There may be other

attributes or features which may be material depending on the particular goods or services.

Section 29 is applicable to any supplier in the supply chain. That means that ensuring responsible

marketing is the responsibility of the producer (manufacturer), importer, distributor, retailer or the

service provider. It is often the case that a marketing campaign is designed by only one of the

members of the supply chain and that the others have very little say in the matter. In such cases it is

advisable for the parties in the supply chain to allocate the risk between them contractually.26 It is

also often the case that a supplier will appoint a marketing agency to design its marketing

campaigns. It remains the supplier’s responsibility to ensure that the content of the marketing

complies with the CPA.

Section 41 deals with the closely related topic of false, misleading or deceptive representations.27

The prohibition on ‘false, misleading or deceptive representations concerning a material fact’ is

repeated in this section.28 The section cautions against the use of ‘exaggeration, innuendo or

ambiguity as to a material fact’ and the ‘failure to disclose a material fact’. 29 A failure to correct a

false impression (i.e. misrepresentation by omission) is also prohibited if it amounts to a ‘false,

misleading or deceptive misrepresentation’.30

25

Section 29(b). 26

This is typically done by ensuring that the respective parties’ responsibilities and liabilities are clearly spelt out. 27

A ‘representation’ is nothing other than information given by the supplier (in whichever form) to the consumer. 28

Section 41(1)(a). 29

Section 41(1)(b). 30

Section 41(1)(c).



Section 41 lists several examples of false, misleading or deceptive representations.31 The consumer

may not be misled about the following qualities or characteristics:

That the supplier has a particular status, affiliation, connection, sponsorship or approval.

That a particular product has certain ingredients, performance characteristics, accessories,

uses, benefits, qualities, sponsorship or approval.

That the product is of a particular standard, quality, grade, style or model.

That the product is new if it is not.

That it has been used for a period to an extent or in a manner that is materially different

from what is actually the case.

That it is supplied in accordance with a previous representation.

That the product is available or can be delivered or performed within a specified time.

That any land or other immoveable property may lawfully be used, or is capable of being

used, for a purpose that is in fact unlawful or impractical.

That any immoveable property has or is proximate to any facilities, amenities or natural

features that it does not have, or that are not available or proximate to it.

Previously, it was possible for suppliers to contract out of liability for misrepresentations (but not

fraud) by including a ‘no representations clause’ in their terms and conditions. It is likely that such a

clause will no longer be enforceable as a result section 51(1)(g) which provides that ‘[a] supplier

must not make a transaction or agreement subject to any terms or condition if … (g) it falsely

expresses an acknowledgment by the consumer that – (i) before the agreement was made, no

representations or warranties were made in connection with the agreement by the supplier or a

person on behalf of the supplier’.32 The net effect of this prohibition is that a supplier will be liable

for the representations made by it, many of which will be made during the course of marketing the

goods or services.

31

Section 41(3). 32

Sections 51(3) and 52 will apply to any clause which contravenes section 51(1)(g).



3 Specific practices

3.1 Direct marketing

The law relating to direct marketing is changing. At the time when this chapter was being written the

National Assembly had just passed the Protection of Personal Information Bill (the PPI) which also

contains provisions regarding direct marketing.33 It is uncertain at this stage whether the

Information Regulator which will be established under the PPI or the National Consumer

Commission will have jurisdiction over direct marketing. This section discusses the provisions of the

CPA which regulate direct marketing. Cross-references to the PPI have been included. Note that this

section of this Chapter may change before the book is published.

Direct marketing is governed by sections 11, 12, 16, 20(2)(a), 32 and regulation 4. In addition, direct

marketers have been regulating themselves since before the inception of the CPA through the Direct

Marketers Association of South Africa (the DMASA).34

The CPA established an opt-out system, i.e. direct marketers are allowed to approach a consumer

using direct marketing, subject to the rules discussed below, until the consumer has requested the

specific direct marketer, or direct marketers in general,35 to stop the direct marketing. Direct

marketing means to approach a person, either in person or by mail or electronic communication, for

the direct or indirect purpose of promoting goods or services.36 Electronic communication means

communication by means of electronic transmission, including by telephone, fax, sms, wireless

computer access, e-mail, or any similar technology or device.37

If a product is sold as a result of direct marketing the consumer has the right to return goods within

5 days from the conclusion of the transaction or the delivery of the goods (whichever is the later) for

33

Section 69 of the Protection of Personal Information Bill provides that direct marketers must obtain the consumer’s consent before marketing, unless the consumer is an existing client and has been given the opportunity to opt out. See Elizabeth de Stadler, ‘Direct marketing: Opt in or opt out?’ in the August 2012 edition of Consumer Law Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 29 October 2012] and Elizabeth de Stadler, ‘Introduction to PoPI (part 2): When is the processing of information lawful?’ in the October 2012 edition of Consumer Law Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 29 October 2012]. 34

http://www.dmasa.org/. The DMASA is also a member of the ASA. 35

By registering their details with a national opt-out registry established in terms of section 11(3) and (6) read with regulation 4(3). 36

Not all unsolicited communications received from direct marketers will be ‘for the direct or indirect purpose of promoting goods or services’. For instance, some communications will be re required for purposes of fulfilling the supplier’s contractual obligations. 37

‘Direct marketing’ is defined in section 1. The PPI’s definition of ‘direct marketing’ is the same. However, the definition of ‘electronic communication’ differs.

http://www.jutalaw.co.za/newsletter/consumer-law-review/




no reason.38 It is referred to as a cooling-off right. The consumer must be informed of this right in

plain language by the direct marketer.39 If any goods are left with the consumer during the course of

direct marketing without requiring or arranging payment the goods will become unsolicited goods.40

This means that the consumer may, under certain circumstances, keep the goods without paying the

supplier.41

Consumers may not be contacted at home ‘for any promotional purpose’42 at the following times:43

Sundays or public holidays;

Saturdays before 09h00 and after 13h00;

All other days between the hours of 20h00 and 08h00 the following day.

It means that consumer can only be contacted at home from 08h00 to 20h00 on business days and

between 09h00 and 13h00 on Saturdays.44 If the consumer has ‘expressly or implicitly requested or

agreed’ otherwise the consumer may be contacted.45

When contacted every consumer has the right:

to refuse to accept any direct marketing;

to require a supplier to discontinue direct marketing; or

to pre-emptively block any direct marketing.46

38

Section 16. This section does not apply if section 44 of the Electronic Communications and Transactions Act 25 of 2002 applies. That section only applies to ‘electronic transactions’ and gives the consumer a cooling-off right of 7 days. Also note the other rights which are given to consumers in terms of Chapter VII (Consumer rights). The application of section 16 of the CPA is not without its problems. See Elizabeth de Stadler, ‘The CPA and direct marketing; Exactly how “cool” is the cooling off period?’ Legalbrief Today (24 August 2011) at http://www.legalbrief.co.za/article.php?story=2011082408312377 [last accessed on 4 October 2012]. 39

Section 32. Section 22 regulates the use of plain language. 40


Section 21(5) to (7). 42

Section 12. 43

These times were published in a notice which was published in GN R293 in GG 34180 of 1 April 2011. 44

The regulations provide that the consumer may not be contacted at home during the prohibited times. This seems to suggest that they may be contacted at work. 45

Section 12(1). 46

Section 11(1). It is open to the supplier to argue that the communication was not ‘primarily for the purpose of direct marketing.’ The right to demand that the communication be discontinued is repeated in section 11(2). Section 45 of the Electronic Communications and Transactions Act 25 of 2002 also provides for an opt-out system in respect of ‘unsolicited commercial communications’. The section provides that (a) the consumer



Direct marketing can also refer to mail which is delivered to the consumer’s postal box.47 A

consumer may pre-emptively refuse any ‘material related to direct marketing’ (also referred to as

junk mail) by placing a sign on a postal box or other container for mail.48 Specifically, if a consumer

places a sign saying ‘no adverts’ on their post box, no junk mail may be delivered.49 The prohibition is

widely phrased and includes placing or attaching the marketing material ‘in or near the postal box,

post office box, container, or in, or near the fence, gate or any other part of the premises of the

consumer.’50

The consumer may not be charged for opting-out of direct marketing and the direct marketer must

implement appropriate procedures to facilitate the receipt of demands to discontinue or pre-

emptively block direct marketing.51 The supplier must provide the consumer with written

confirmation that the opt-out message was received.52 Once the consumer has demanded not to be

contacted or has registered a pre-emptive block the supplier must not deliver any communication

aimed at direct marketing to that consumer.53

Curiously, the CPA does not require that the consumer must be informed of the opt-out right. The

DMASA Code requires that consumers must be informed of the opt-out right at least every 3 years

and that it must be ‘easy-to-see, easy-to-understand and easy-to-execute’.54 The WASPA Code

provides that ‘[t]he reply "STOP" or alternative opt-out procedure must be included in all direct

marketing communications.’55

must be informed of the option to unsubscribe to the mailing list.’ Unfortunately the CPA does not contain a similar provision. 47

See the definition of ‘direct marketing’. 48

Regulation 4(1)(b). 49

Regulation 4(2). An example of such a notice was published as Annexure A to the regulations published in GN R293 in GG 34180 of 1 April 2011. 50

Regulation 4(1)(b)(i). 51

Section 11(4)(a). This means that the supplier must have an ‘Internal Do Not Contact List’ (see paragraph 12.4.3 of the DMASA Code). The CPA is silent on how long a number must be kept on the do not contact list before a consumer can be contacted again (paragraphs 12.5.2 and 12.6.4 of the DMASA Code provides that the contact details must be kept on the list for 3 years). This probably means that the consumer cannot be contacted again unless the consumer has consented. However, the direct marketer can also not contact the consumer for the purpose of obtaining such consent. See section 11(4)(b)(i) which provides that the consumer may not be contacted again ‘for the purpose of direct marketing’. This is wide enough to include contacts aimed at getting consent. 52

Regulation 4(1)(b)(ii). 53


Paragraph 10.4 of the DMASA Code. 55

Paragraph 5.1.5.



The CPA provides for the establishment of a registry where consumers can register a pre-emptive

block.56 Every direct marketer will be required to register with this registry. A direct marketer must

assume that a consumer has registered a pre-emptive block unless the administrator of the register

has confirmed that a pre-emptive block has not yet been registered, except in the case of an existing

client where the supplier can prove that the client ‘expressly consented to receiving direct

marketing’ after 1 April 2011.57 The implementation of this part of the Act will be delayed until the

Minister declares that the registry has been established. The Minister will publish a date in the

Government Gazette by when suppliers must start consulting the registry.58 Until this is the case no

check needs to be done to determine whether the consumer has registered a block.

Section 69 of the PPI provides for a different regime without providing any guidance on how to

resolve the conflict.59 The PPI 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.60

This is clearly quite different to the system envisaged by the CPA in that it is an opt-in system.61 The

CPA provides that where there is a conflict between it and another act, the ‘provision that extends

56

Section 11(3) read with section 11(6). Regulation 4(3) contains detailed provisions regarding the operation of the registry. 57

Regulation 11(5). 58

Item 4 of Schedule 2 to the CPA. 59

See Elizabeth de Stadler, ‘Direct marketing: Opt in or opt out?’ in the August 2012 edition of Consumer Law Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 4 October 2012]. 60 Elizabeth de Stadler, ‘Direct marketing: Opt in or opt out?’ in the August 2012 edition of Consumer Law

Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 4 October

2012]. The short comings of the opt-out system is discussed in Sebo Tladi ‘The regulation of unsolicited

commercial communications (spam): Is the opt-out mechanism effective?’ (2008) SALJ 178. 61

See Elizabeth de Stadler, ‘Direct marketing: Opt in or opt out?’ in the August 2012 edition of Consumer Law Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 4 October 2012]. The difference between opting-in and opting-out can be very subtle. Where, for instance, a consumer is asked to confirm that they want to receive direct marketing by means of a ‘tick box’ and the tick box is ticked by default, it is an opt-out system. The question is whether the default position (i.e. if the consumer does nothing) is that the consumer will receive direct marketing or whether it is the opposite. If the answer is that the consumer will (by default) receive the marketing, it is an opt-out system.






the greater protection to a consumer’ would be applied.62 In this case, if one accepts that obtaining

the consumer’s consent will be a more effective way of protecting the consumer’s privacy, the PPI’s

provisions will apply. In light of this, direct marketers would be well advised to adopt this as their

approach.

The DMASA administrates the ‘DMA Do Not Contact Me List’ which operates as an opt-out register.

Until such a time as the CPA registry is established, the members of the DMASA are required to ‘use

the DMASA's Do Not Contact Service when conducting marketing by way of a consumer telephone

call, cell phone call or SMS, e-mail or fax’..63

3.2 Promotional competitions

3.2.1 Application and scope of section 36

Promotional competitions are regulated by section 36 and regulation 11 of the CPA. Defining what is

considered to be a ‘promotional competition’ in terms of the Act is not easy as it contains many

defined terms resulting in constant cross-referencing to section 1.

As a point of departure, the phrase ‘promotional competition’ is defined in section 36(1)(d) of the

CPA. It includes ‘any competition, game, scheme, arrangement, system, plan or device for

distributing prizes by lot or by chance … irrespective of whether a participant is required to

demonstrate any skill or ability before being awarded a prize’. This means that if there is the

slightest element of luck (as opposed to skill) involved in determining the prize winners, the CPA will

apply. Only if the determination of the winner is entirely dependent on the skill of the participant,

i.e. the competition is judged, the competition will not be a promotional competition for purposes of

the CPA.

The term ‘prize’ is also defined.64 It includes ‘a reward, gift, free good or service, price reduction or

concession, enhancement of quantity or quality of goods or services, or other discounted or free

thing’. The definition is very wide and would include most, if not all, forms of ‘prizes’.

In order to qualify as a promotional competition, the competition must be conducted in the ordinary

course of business65 and must be ‘for the purpose of promoting a producer, distributor, supplier, or

association of any such persons, or the sale of any goods or services’. In short, the purpose of the

62

Section 2(10). 63

Paragraph 10.3 of the DMASA Code. 64

Section 36(1)(b).



competition must be to promote a supplier or the actual goods or services. ‘Promote’ is defined in

section 1 of the CPA. It means to

(a) advertise, display or offer to supply any goods or services in the ordinary course of business, to all or part of the public for consideration;

(b) make any representation in the ordinary course of business that could reasonably be inferred as expressing a willingness to supply any goods or services for consideration; or

(c) engage in any other conduct in the ordinary course of business that may reasonably be construed to be an inducement or attempted inducement to a person to engage in that transaction.

Again, the net is cast very wide and includes even indirect endorsements of a supplier or product or

‘inducements’ to purchase a product or service.

Section 36(1)(b)(ii)66 provides that a competition will only be governed by the CPA if ‘the prize

offered exceeds the threshold prescribed by’ the Minister. Given the onerous obligations placed on

promoters a differentiated approach based on the value of the prize would have been very sensible.

However, for the time being, the monetary threshold was set at R1.00, with the result that all

promotional competitions have to comply with all the provisions in the CPA.67

What if the consumer is automatically entered into the competition if he or she buys a product? This

is still a promotional competition.68 However, if all consumers who buy the product get a prize it is

not a promotional competition but a promotional offer.69 A supplier must never call a promotion a

competition if it is not a competition.70

Use this checklist to determine whether a promotion is a ‘promotional competition’ and has to

comply with the CPA. It is a promotional competition if:

prizes are being distributed through a game, scheme or arrangement, system, plan or

device;

65

Section 36(1)(d)(i). ‘Business’ is defined in section 1 of the CPA. It means the ‘continual marketing of any goods or services’. 66

Read with section 36(11)(a). 67

See regulation 11(4). 68

‘Participant’ is defined as ‘a person who enters, competes in or is otherwise eligible to win a promotional competition’ (s 36(1)(a)). This leaves room to include consumers who are ‘automatically’ entered into a competition. 69

Section 34 governs promotional offers and is discussed in this chapter. 70

It is prohibited in terms of section 36(2)(b)(ii) and (iii). The conduct is not prohibited per se, but it is prohibited to promote it as a competition.



the determination of the competition contains any element of ‘lot or chance’ (i.e. luck);

the competition is conducted in the ordinary course of business; and if

the aim of the competition is to promote a producer, distributor, supplier or a particular

product or service.

3.2.2 Who is responsible for compliance?

The ‘promoter’ of the promotional competition must ensure that the promotional competition

complies with the CPA and will ultimately be liable if it is not. The term ‘promoter’ is defined in

section 36(1)(c). It is ‘a person who directly or indirectly promotes, sponsors, organises or conducts a

promotional competition, or for whose benefit such a competition is promoted, sponsored,

organised and conducted.’

It is clear from the definition that more than one entity can be a ‘promoter’ of a particular

promotional competition. This means that more than one entity can share liability if the competition

does not comply. The promoter can include the advertising agency who ‘organises’ the competition,

the company who ‘conducts’ or administrates the competition,71 the retailer on whose premises the

competition is held (or the promoted product or service is sold), the sponsor of the competition and

the brand holder ‘for whose benefit’ the competition is held.

It is important to ensure that all the possible promoters involved in the competition understand

their obligations and how the competition works (i.e. the rules of the competition). If the intention

of the responsible parties are that one of them should take responsibility for compliance this should

be recorded in an agreement.72

It is equally important that the consumer is told who will be responsible for the administration of the

competition. This information can be included on the ‘offer to participate’ (entry form) or in the

marketing material promoting the competition. This should include the contact details where a

consumer can direct queries or complaints.

71

This is often done by wireless application service providers (or WASPS as they are known). The WASPA Code contains specific rules relating to promotional competitions (see paragraph 9). 72

Any party which fits the definition of a promoter will still be liable to consumers. The agreement can only regulate the liability between the parties.



3.2.3 Entry forms

Section 36(5) governs entry forms. They are referred to as ‘offers to participate’. They form an

integral part of the promotional material which relates to a promotional competition. The promoter

of the competition is also required to draft the rules of the competition. Section 36(5) requires that

many of these rules must be repeated in the entry form.

A competition will not always have an entry form (i.e. where you enter via sms) or there will be

limited space. Section 36(6) provides that the offer to participate may take the form of ‘any medium

through which a person participates in a promotional competition’,73 any document accompanying

that medium,74 or the information may be contained in any advertisement that

(i) is published during the time and throughout the area in which the promotional competition is conducted; and

(ii) draws attention to and is clearly associated with the promotional competition.75

This means that all the information required in terms of section 36(5) need not be contained in one

‘document’, but instead that the actual invitation to enter the competition may contain a reference

to (for instance) the competition rules which are available elsewhere or on the web.76 The manner in

which the prescribed information is relayed to the consumer will be important should a consumer

dispute that the information was brought to his or her attention.

The entry form must contain the following information:77

the competition (or benefit)78 to which it relates;

the requirements (steps) for entering the competition;79

73



Section 36(6)(c). 76

Promoters would be well advised to publish at least the following information in the offer to participate or marketing material instead of referring the consumer to another document: the steps which must be taken to enter the competition, the closing date; the method of determining the winner and the date on which this will be done; the way in which the prize will be delivered, and; where the consumer can access the rules of the competition. 77

Section 36(5)(a) to (f). 78

The inclusion of ‘benefit’ in this context is strange. The term is not used elsewhere in the section. It insertion here cannot broaden the scope of section 36. Presumably a ‘benefit’ is the prize for which the consumer will become eligible. The prize must be very clearly described. It is necessary to stipulate features which are not included, where those things are necessary to make use of the prize. An example is where the prize is accommodation, but does not include travel to the destination or only includes flights from Johannesburg.



the basis on which the results will be determined;

the closing date of the competition;

how the results will be announced;

where the winner will receive the prize; and

where and how the competition rules can be obtained.

In addition to specifying the information that must be contained in the promotional material,

paragraph 9 of the WASPA Code prescribes that it must contain ‘any information which is likely to

affect a decision to participate’. This is a good test to apply when deciding what to include in the

promotional material. In addition, it is also advisable to include any other significant or unexpected

terms and conditions.80

The participant has a right to participate in the competition at the moment at which he or she

complies with ‘any conditions that are required to earn that right’81 and has possession of the

‘medium, if any, through which a person may participate in that promotional competition.’82 The

relevance of this is that a consumer will be able to complain if their entry was not taken into account

despite the fact that he or she complied with the conditions for a valid entry. It is illegal to delay the

vesting of the right to participate by making it subject to a further (undisclosed) condition or

requirement.83 This emphasises the need for clearly formulated offers to participate and rules.

3.2.4 Cost of transmitting entries and entering into the competition

It is illegal to charge consumers to enter into a promotional competition.84 They can be expected to

pay the reasonable cost of transmitting the entry. What constitutes ‘reasonable cost’ may differ, but

it is submitted that it means the actual cost of sending the entry.

79

For instance, where there is a restriction on the number of entries which one consumer can submit, or where the competition is limited to a particular geographical area or other restrictions. 80

For instance, ‘significant costs which a reasonable consumer might not expect to pay in connection with collection, delivery or use of the prize or item’ (see paragraph 9.1.5 (e) of the WASPA Code). 81

Section 36(7)(a). An example of this would be where the consumer is required to purchase a particular product to become eligible for the competition. 82

Section 36(7)(b). Where a consumer can enter electronically by way of sms, there will be no ‘medium’ through which to enter and the right to participate will vest as soon as the consumer has met all the conditions for eligibility. 83

Section 36(9). 84

Section 36(3)(a) read with section 36(4).



A special rule applies to electronic entries:85 the cost of sending the entry may not exceed R1.50.86 If

the interpretation of ‘reasonable cost’ as meaning the actual cost of transmission is applied here, it

means that standard rates must apply as long as those standard rates do not exceed R1.50. It does

not mean that a supplier can charge R1.50 regardless of the standard rate. Regulation 11(2) provides

that this cost ‘includes the total cost for all subsequent electronic communication to the consumer in

respect of that particular entry.’

Section 36(4) elaborates on this general provision.87 It prohibits requiring payment, directly or

indirectly, ‘for the opportunity to participate in the promotional competition, for access to the

competition or for any device by which a person may participate in the competition’.88 It does not

add much to the general prohibition apart from accommodating situations where payment is

required ‘indirectly’. It also prohibits requiring the consumer to purchase goods or services where

the price is more than the price which is ordinarily charged.89

3.2.5 The competition rules

Section 36(3)(c) provides that the promoter must prepare competition rules ‘before the beginning of

the competition’. These rules must be made available to any consumer or the National Consumer

Commission on request and without any cost.90 The rules must be retained for a period of 3 years

after the end of the competition.91

Although, section 36 does not prescribe any particular rules, the rules must be formulated carefully

as they cannot contradict any of the other provisions of the CPA that apply to promotional

competitions.92 The importance of the competition rules is emphasised by the fact that it is illegal to

offer a prize if the prize is ‘subject to a previously undisclosed condition’.93 Many of the rules of the

competition must also appear on the offer to participate (entry form).94 These rules should be

repeated in the competition rules.

85

Electronic includes telephone, fax, sms, wireless computer access, e-mail or any similar technology or device. 86

Regulation 11(1). 87

With the traditional rider that it must not be interpreted to ‘limit the generality’ of section 36(3)(a). 88



Section 36(3)(c). 91

There are several other documents and records which must also be retained. They are listed in regulation 11(6). 92

Prohibited practices in terms of the CPA are discussed immediately below. It is particularly important to ensure that the competition rules do not contravene those sections or regulations. 93

Section 36(2)(a)(iii). 94

Section 36(5).



All documents which are required in terms of the CPA must be in ‘plain language’.95 The plain

language requirement is discussed in detail in the context of consumer agreements, but the same

principles apply here. It stands to reason that the rules must also be visible, i.e. the consumer must

know of their existence and they must be accessible.96

Generally it can be expected that consumers will not read the rules of a competition unless they are

disputing the outcome of the competition, their disqualification or if the prize which they won did

not meet their expectations. Keeping this in mind, the following rules are particularly important:

Rules that determine who can enter. Competitions are sometimes limited to a certain age

group or geographical area. This must be spelled out very clearly.

Rules that determine how to qualify. Often a consumer has to buy a particular product or

answer a question correctly to become eligible for a lucky draw (for instance).

Any rules which determine when a consumer can be disqualified.

Rules that determine how the winner will be determined and how they will be contacted.97

The consequences of a failure to collect a prize, receive a prize or if the incorrect details

were given (i.e. bank details), particularly where this could lead to disqualification.

3.2.6 Eligibility for and description of the prize

All the steps which must be taken by the consumer to be eligible for the prize must be set out on the

offer to participate.98 Remember that this information may be set out in ‘any medium through which

a person participates in a promotional competition’,99 any document accompanying that medium,100

or in any advertisement that

95

Section 22. 96

Many of the rules will form part of the offer to participate (entry form) (see section 36(5)). Often the offer to participate will refer to the rest of the rules by stating that ‘competition rules apply’. It is important to give as much prominence to this reference as possible. The DMASA Code (paragraph 12.2.1) provides that ‘all terms and conditions of a contest [must be presented] in a manner that is clear, visible, easy to find, easy to read and easy to understand.’ 97

A consumer who won and could not be contacted is likely to complain. It is essential that the rules must be clear on how, how often and for what period they will be contacted before they will be disqualified. 98

Section 36(5). 99

Section 36(6)(a). 100

Section 36(6)(b). This means that the steps to become eligible for the prize may be set out in the competition rules as long as the offer to participate (entry form) contains a clear reference to the rules. Promoters would be well advised to publish the following information in the offer to participate or marketing



(i) is published during the time and throughout the area in which the promotional competition is conducted; and

(ii) draws attention to and is clearly associated with the promotional competition.101

It is equally important that the prize must be described accurately. For instance, ‘a trip to

Madagascar’ is not the same as ‘airplane tickets to Madagascar’. To the average consumer a trip will

include accommodation and perhaps even some other expenses. The test which is employed to

establish whether a document is in plain language102 will also be employed here. This means that the

prize must be described in such a way that an ordinary consumer who forms part of the market at

which the competition is aimed, who has average literacy skills and minimal experience in the goods

or services which are being promoted will understand the description of the prize (and any

exclusions) correctly without making an undue effort.103 If the prize and all the exclusions (i.e. the

components or expenses which are not covered by the prize) is not accuratelye described the

consumer may be able to insist on the prize which he or she understood would be given.

Section 36(8) provides that the right to any prize104 ‘conferred on a person as a result of that

person’s participation in a promotional competition is fully vested immediately upon the

determination of the result of the competition.’ This means that the consumer has the right to claim

the prize as soon as the result is determined in accordance with the rules of the competition. This

right must not be made subject to any conditions in addition to those listed in the offer to

participate (entry form), the competition rules or the marketing material.105 For instance, the

consumer cannot be disqualified for a reason which was not set out in the offer to participate (entry

form), the competition rules or the marketing material. The consumer must also not be required to

pay any consideration for the prize.106 It is also prohibited to require that the consumer purchase

additional goods or services before becoming eligible for the prize.107

material instead of referring the consumer to another document: the steps which must be taken to enter the competition, the closing date; the method of determining the winner and the date on which this will be done; the way in which the prize will be delivered, and; where the consumer can access the rules of the competition. 101

Section 36(6)(c). 102

See section 22 of the CPA. 103

Section 22. 104

The sub-section refers to a ‘benefit or right’. 105

Section 36(9)(a) read with section 36(9)(b)(ii). 106

Section 36(9)(b)(i). The same prohibition appears in section 36(2)(b)(iii). 107

Section 36(9)(b)(iii). That is not to say that a consumer cannot be required to purchase a particular product before becoming eligible to enter into the competition. However, the price of the product must not be more than hat would ordinarily be charged.



3.2.7 Notifying the prize winner

There are two ways in which prize winners are notified: either by public announcement or by

contacting them personally. The CPA does not prescribe the way in which consumers must be

contacted, but only that the manner in which it will be done must be stipulated in the offer to

participate.108

Regulation 11(6)(n) and (q) provides that the supplier must keep a record of ‘the means by which the

prize winners were announced and the frequency thereof’ and ‘in the event that a prize winner

could not be contacted, the steps taken by the promoter to contact the winner or otherwise inform

the winner of his or her winning a prize’. Many disputes arise as a result of a consumer being

disqualified because her or she could not be reached. Therefore, it is important that the competition

rules must stipulate the following:

When will the consumer be contacted?109

Where will the consumer be contacted?110

How many times will the consumer be contacted and/or how long does the consumer have

to respond?111

What will happen if a particular consumer cannot be contacted?112

3.2.8 Acknowledgment of receipt of the prize

Regulation 11(6)(i) provides that a promoter must retain ‘an acknowledgment or receipt of the prize

signed by the prize winner, or legal guardian where applicable, and his or her identity number, and

the date of receipt of the prize, or where this is not possible, proof by the promoter that the prize

was sent by post or other electronic means to the winner using his or her provided details.’

The acknowledgement of receipt should contain the following:

the details of the competition;

108

Section 36(5)(e). 109

For example, on a certain date or within a week of the closing date. 110

For example, at the number provided or at the number from which an sms was sent. 111

For example, 6 attempts will be made to contact the winner. If the winner could not be contacted or if the consumer did not contact the promoter within 72 hours from the first attempt the winner will be disqualified. 112

For example, the prize will not be awarded or the next consumer on the randomized list will be contacted.



a precise description of the prize;

the full names and identity number of the prize winner;

the date on which the prize was delivered; and

the signature of the prize winner.

Often it will not be possible to obtain a signed acknowledgment of receipt or the prize winner will

not give their co-operation. In such instances any proof of the delivery of the prize to the details

(such as address or bank account details) must be retained.113 Examples of this are a signed

acknowledgment of receipt from the courier or through registered post or proof of payment. The

promoter must always ensure that delivery or payment was made correctly in accordance with the

prize winner’s instructions and that any evidence of the delivery is retained.

Prizes do not necessarily have to be delivered as long as it is stated clearly in the competition rules

that the prize must be collected by the consumer. However, it is not advisable to make it impossible

for the consumer to collect the prize. So for instance it would be problematic to conduct a national

competition if consumers are required to collect the prize at a location in the Western Cape.

The consequences of a failure to collect or receive a prize must be clear from the competition rules,

particularly if it will lead to disqualification if the prize is not collected on a certain date, within a

certain period or if the incorrect details are given.

3.2.9 Partial or complete restriction on the availability of the prize

Section 36(10) provides that section 35(5), which relates to loyalty programmes (which is discussed

in this chapter), also applies to promotional competitions. The section, when adapted to the context

of promotional competitions, provides that a promoter may ‘impose a partial or complete restriction

on the availability’ of the prize(s) ‘during any specific period’, but only if the promoter has given 20

business days’ notice, in writing, to the participants of the promotional competition with the rider

that ‘the total of all such periods’ must not exceed 90 days within a particular calendar year.

The application of that section to promotional competitions is very awkward given that promotional

competitions may in many cases not be periodic, but will be a once off occasion. It would appear

that the section does not give the promoter the right to cancel the competition on 20 business days’

notice, but provides for a temporary partial or complete restriction. The 90 day restriction would



hardly make sense if the section was meant to include permanent cancellation of the promotional

competition.

Competition rules which give the promoter the right to cancel the competition without notice to the

participants are common place. It would appear that this practice is now illegal as a result of the

application of section 35(5) to competitions. Competitions cannot be cancelled and participants have

to be given notice if the availability of the prize is restricted.

3.2.10 Oversight and certification procedures

Regulation 11(5) provides that ‘the conducting of the competition’ must be overseen and certified

by an independent accountant, registered auditor, attorney or advocate. The certification must be

reported through the promoter’s internal audit reporting procedures. The person must certify that

the competition was conducted legally.114 That is, that all the requirements of the CPA have been

complied with and that the supplier is not engaging in any prohibited practices.

The requirement of independence means that the accountant, auditor, attorney or advocate must

not be employed by the promoter. An accountant, auditor, attorney or advocate who provides

services to a promoter as an independent contractor may still be able to oversee competitions as

they are not in the employ of the promoter.115

The CPA prescribes that a competition report must be compiled and retained for 3 years.116 One of

the items in this report is ‘whether an independent person oversaw the determination of the prize

winners’ and the name and identity number of that person.117

113

Regulation 11(6)(i) also provides for this possibility. 114

The duties of the independent person are not clearly described in the CPA. Regulation 11(6)(m) refers to ‘the determination of the prize winners’. This is but one aspect of the competition. The regulation can be used as authority for the fact that the role of the ‘independent person’ is more limited as it conflicts with the broader formulation of regulation 11(5) which provides that the ‘conducting of the competition’ must be overseen. Whatever the case may be, it is difficult to imagine how the ‘determination of the prize winners’ would be ‘overseen’ without certifying the competition as a whole. 115

This may be the case even where the attorney or advocate has given advice on the format of the competition or the competition rules as the legality of the competition rules must also be ‘overseen’. 116

Regulation 11(7) read with section 11(6). 117

Regulation 11(6)(m). This regulation is somewhat confusing as it only refers to the overseeing of the determination of the prize winner. However, the wide wording of regulation 11(5) makes it clear that the independent person is tasked with overseeing the entire competition and not only the determination of the winner.



3.2.11 Competition report

Regulation 11 (7) provides that a competition report must be compiled and contain the information

listed in regulation 11(6). This report must be retained for three years.118 The report must be

submitted to the National Consumer Commission if it is requested by them in writing.

The competition report must contain the following information:

The promoter’s full details, including its registration number, address and the contact

details.119

The rules of the promotional competition.120

A copy of the offer to participate (entry form) or the marketing or other material in which

the steps to enter the competition was set out.121

The names and identity numbers of the persons responsible for conducting the promotional

competition.122

A list of all the prizes offered.123

A representative selection of material marketing the promotional competition or electronic

copies of those materials.124

A list of all instances when the promotional competition was marketed. This list must include

the dates, the medium used (i.e. newspaper, websites, social media) and the places where

the marketing took place.125

118

These are the ‘minimum standards and forms for keeping records associated with promotional competitions’ referred to in section 36(11)(b). 119

Regulation 11(6)(a). 120

Regulation 11(6)(b). 121

Regulation 11(6)(c) read with section 36(6). 122

Regulation 11(6)(d). This is different to the independent person appointed to oversee and certify the competition in terms of regulation 11(5). That person’s information must also form part of the report in terms of regulation 11(6)(m). This means that regulation 11(6)(d) refers to the persons under the employ of or hired by the promoter to conduct the competition. This list could be very long. It is suggested that the list does not need to contain the names of all persons involved in the competition, but only those of the responsible manager(s) and those persons who had contact with the consumers. 123

Regulation 11(6)(e). 124

Regulation 11(6)(f). 125

Regulation 11(6)(g). While regulation 11(6)(f) refers to a representative selection of the marketing material, this regulation requires records of all the instances, mediums through which and places where the competition



The name and identity number (or registration number) of the person (or entity) responsible

for conducting the selection of prize winners in the promotional competition.126

The acknowledgment of receipt signed by the winner (or legal guardian) or other proof that

the prize was received.127 This must include the identity number of the winner and the date

of receipt of the prize.

A declaration on oath by the person(s) who conducted the competition128 that the winner is

not (to the best of their knowledge) a director, member, partner, employee, agent or

consultant of the promoter or any related organisation who controls or is controlled by the

promoter or the marketing service providers for the competition or a supplier of goods or

services in connection with the competition. In addition to the related entities listed, the

spouses, life partners, business partners or immediate family members of these related

entities may also not take part in the competition.129

The basis on which the prize winners were determined (i.e. by way of a randomized draw by

a computer).130

A summary describing the process used to determine the winners, including the names of

the persons participating in the determination, the date and place where it took place and

whether it was open to the general public.131

Whether an independent person oversaw the determination of the prize winners, and his or

her name and identity number.132

How the prize winners were announced and the frequency of the announcements.133

were argued. This is necessary as section 36(5) provides that information regarding the competition can be communicated to consumers through the media. 126

Regulation 11(6)(h). 127

Regulation 11(6)(i). 128

The person contemplated in regulation 11(6)(d). This is different to the independent person appointed to oversee and certify the competition in terms of regulation 11(5). That person’s information must also form part of the report in terms of regulation 11(6)(m). This means that regulation 11(6)(d) must refer to the persons under the employ of or hired by the promoter to conduct the competition. 129

Regulation 11(6)(j). 130

Regulation 11(6)(k). 131

Regulation 11(6)(l). 132

Regulation 11(6)(m). The difference between ‘the basis on which on which the prize winners were determined’ in regulation 11(6)(l) and the ‘proceedings to determine the winners’ in 11(6)(m) is not clear. Presumably it refers to the same thing. 133

Regulation 11(6)(n).



A list of the names and identity numbers of the prize winners.134

A list of the dates when the prizes were handed over or paid to the prize winners.135

The steps taken by the promoter to contact the winner or otherwise inform the winner of

his or her winning a prize, in the event that the prize winner could not be contacted.136

If a prize winner did not receive their prize, the reasons for this and the steps taken by the

promoter to hand over or pay the prize to that prize winner.137

3.2.12 Prohibited practices

Many prohibited practices have been set out above, but deserves emphasis. Other prohibited

practices do not fall under any of the headings discussed above. For this reason some of the absolute

prohibitions contained in section 36 and regulation 11 are set out below. The competition rules and

manner in which the competition is conducted must not contravene any of these prohibited

practices.

A promoter must not inform a consumer or any other person, that a consumer has won a

competition if a competition was not conducted.138

A promoter must not inform a consumer that he or she won (or have a right to) a prize if this

is in fact not the case at all or if the prize is subject to ‘a previously undisclosed condition’.139

A consumer must not be required to pay any further consideration or be required to

purchase further goods or services in order to be eligible for the prize.140

A consumer must not be charged to enter the competition save for the reasonable cost of

posting the entry141 or, in the case of electronic entries, a maximum amount of R1.50. The

134

Regulation 11(6)(o). 135

Regulation 11(6)(p). 136

Regulation 11(6)(q). 137

Regulation 11(6)(r). If the prize winner did not receive the prize because he or she could not be contacted, regulation 11(6)(q) and 11(6)(r) will overlap. 138

Section 36(2)(a)(i). This prevents promoters from using non-existent competitions as a selling point in a marketing campaign. 139

Section 36(2)(a)(ii) and (iii) and section 36(2)(b)(i). This prevents promoters from luring consumers to a presentation or other marketing activities by informing consumers that they have won a prize when they are required to fulfil other requirements before they will be eligible. 140

Sections 36(2)(a)(iv), 36(3)(a), 36(4) and section 36(9)(b)(ii). Section 36(4)(b) provides that the purchase of goods or services can be a prerequisite for entering into a competition, as long as the price of those goods or services is not more than the price which would ordinarily be charged (excluding discounts).



latter amount includes ‘the total cost of all subsequent electronic communication to the

consumer in respect of that particular entry’.142

A consumer must not be informed that they have won a promotional competition if ‘the

prize was generally available or offered to all similarly situated persons or class of

persons’.143

A prize cannot be awarded to a consumer if it is unlawful to supply that product to that

consumer, but the prize may still be awarded if the person’s right to possess or use the prize

is just restricted by public regulation.144

Section 36(3)(b)(ii) provides that a prize cannot be awarded to an individual or company who

is a supplier of goods or services in connection with that competition or ‘a director, member,

partner, employee or agent of, or consultant to the promoter or any other person who

directly or indirectly 'controls or is controlled by the promoter’.145 Regulation 11(6)(j) adds

that ‘the spouses, life partners, business partners or immediate family members’ of the

related persons listed in section 36(3)(b)(ii) may also not take part in the promotional

competition.

Regulation 11(3) provides that a consumer must not be disqualified because he or she would

not agree to the use of his or her image, would not participate in any marketing activity or

was not present at the draw or when the winners are announced. The consumer can be

invited to take part in these activities, but must be informed of the right to refuse without

being disqualified.146

141

Section 36(3)(a). 142

Regulation 11(1) and (2). 143

Section 36(2)(b)(ii). This type of activity could be subject to section 34 which governs trade coupons and other promotional offers, or section 35 which governs customer loyalty programmes. 144

Section 36(3)(b)(i). An example would be a prize which comprises of alcohol. 145

Section 36(3)(b)(ii)(aa) and (bb). The prohibition of this practice is so important that the person ‘conducting’ the competition (see regulation 11(6)(d)) must attest under oath that ‘to their best knowledge’ this section was not contravened (see regulation (11(6)(j)). The person ‘conducting’ the competition is not the same as the person overseeing and certifying the competition in terms of section 11(5). The latter is a registered auditor, attorney or advocate appointed for that person (also referred to in regulation 11(6)(m)). 146

Regulation 11(3)(a) to (b).



Once entries have been received the competition cannot be cancelled without notifying the

consumer.147 If the prize becomes unavailable or is substituted the consumers who have

entered must be given 20 business days’ notice.

3.3 Bait marketing

Section 30 of the CPA provides that ‘[a] supplier must not advertise any particular goods or services

as being available at a specified price in a manner that may result in consumers being misled or

deceived in any respect relating to the actual availability of those goods or services from that

supplier, at that advertised price.’ In short, a supplier must not mislead a consumer by advertising

goods at a specified price, if those goods are not available at that price.148 Doing so would constitute

‘bait marketing’ whereby the consumer is lured to the store by a promotion which was in fact not

available.

The section provides that ‘[i]f a supplier advertises particular goods or services as being available at a

specified price, and the advertisement expressly states a limitation in respect of the availability of

those goods or services from that supplier at that price, the supplier must make those goods or

services available at that price, to the extent of the expressed limits.’ It would seem that suppliers

will always need to make good on their promises, even where stocks have run out since advertising

the particular goods. Suppliers typically address this issue by stating that goods are available ‘while

stocks last’ or that there is ‘limited stock’. It is submitted that this practice is still acceptable and will

protect suppliers, as what the section seeks to prevent is situations where the goods were never

available as advertised to begin with or where consumers were ‘misled’ regarding the availability of

the product.149

Clause 4 of Section IV of the Advertising Standards Authority Code (Non-availability of advertised

products) states that ‘[a]dvertisements should not be submitted for publication unless the advertiser

has reasonable grounds for believing that it can supply any demand likely to be created by the

advertising.’ This clause is aimed at preventing the same conduct as section 30 of the CPA and its

formulation may be used as a test for whether bait marketing has been employed. In other words,

did the supplier have reasonable grounds for believing that it could meet the demand which would

be generated by the marketing?150

147

Section 36(10). 148

Section 30(1). 149

Section 30(2). 150

See the ruling of the ASA Directorate in Game Gillette Blades / R Naidoo / 11291 (25 August 2008).



A certain price or promotional offer may only be available at certain stores. Suppliers cater for this

possibility by stating that there is ‘limited availability’ or that the promotion is only available at

‘selected stores’. Where possible it will always be preferable to list the stores at which a certain

product will be available. However, this will often not be possible due to space limitations on

advertising materials. The section cannot be interpreted so strictly so as to force suppliers to give

consumers substitute goods should a certain store not carry a particular product, as long as the

promotion was available at other stores. However, suppliers should not mislead consumers by

creating the impression that (for instance) a product is available nationally by advertising nationally,

if it is only available in one province.

Suppliers also often advertise goods as being available from a certain price, meaning that some of

the goods are available at this lower end, but that other products will be more expensive. Often in

this type of marketing the lower end of the price range is emphasised in order to make the goods

seem cheaper, and the fact that it is a ‘from’ price is not emphasised. There is nothing in the

legislation to prohibit this practice per se, but if the consumer is misled relating to the price it may

constitute ‘bait marketing’ in addition to being generally misleading. 151

Section 30(3) provides a defence to an allegation of bait marketing. That is if, ‘the supplier offered to

supply or procure another person to supply a consumer with the same or equivalent goods or

services of the kind advertised within a reasonable time, in a reasonable quantity, and at the

advertised price’. This defence will also be available if the consumer refused to accept this substitute

delivery and that refusal was ‘unreasonable’.

3.4 Negative option marketing

Section 31 provides that a supplier must not supply goods or services, offer to enter into or modify

an agreement ‘on the basis that the goods or services are to be supplied, or the agreement or

modification will automatically come onto existence, unless the consumer declines such offer.’

This means that a consumer cannot be held to an agreement for the supply of goods or services or

to the modification to an agreement ‘by default’, i.e. if by not opting out of the supply of the goods

151

These are referred to as ‘up to…’ and ‘from…’ claims. This type of advertising is dealt with in clause 4.5 of section II of the Advertising Standards Authority Code. Such claims are not ‘acceptable where there is a likelihood of the consumer being misled as to the availability of the benefits offered’ or where the advertisement ‘bears no relation to the prevailing level of prices or benefits, and in particular where it does not apply to the goods or services actually advertised or to more than an insignificant proportion of them’.



or services, the agreement or the modification comes into existence ’automatically’.152 In other

words, any agreement or modification which comes into existence as a result of negative option

marketing will be void.153

Section 21(1)(d) provides that ‘if any goods have been delivered to, or any services performed for, a

consumer … without consumer having expressly or implicitly requested that delivery or

performance, the goods or services … are unsolicited goods.’ Given that negative option marketing

cannot lead to an agreement it could be argued that section 21(1)(d) is applicable. This means that

the consumer may, under certain circumstances, keep the goods without paying the supplier.154

3.5 Catalogue marketing

3.5.1 The application and scope of section 33

Section 33 of the CPA is devoted to ‘catalogue marketing’. The section imposes a disclosure

obligation on suppliers. The obligation is imposed on any agreement ‘that is not entered into in

person’ and where the consumer did not have the opportunity to inspect the goods before the

transaction. This includes (by way of example) agreements which are entered into telephonically,

but only if the contact was initiated by the consumer, and agreements concluded by postal order or

in a similar manner. If the consumer had an opportunity to inspect the goods this section will not

apply. 155

The section does not apply to franchise agreements or to transactions which are subject to Chapter

7 of the Electronic Communications and Transactions Act 25 of 2002. Chapter 7 of that Act only

applies to electronic transactions. The Act does not give a definition of ‘electronic communications’

which confuses matters. One view is that it includes electronic transactions ‘which are wholly and/or

partly electronically concluded, and for which the services or goods are either paid for in cash or

152

Section 45(2) of the Electronic Communications and Transactions Act 25 of 2002 provides that ‘no agreement is concluded where a consumer has failed to respond to an unsolicited communication.’ This is another way of prohibiting negative option marketing. Ina Opperman and Rosalind Lake (Understanding the Consumer Protection Act (Juta 2012) 40) formulates the prohibition as follows: ‘Suppliers cannot deliver goods or services to consumers who have not accepted or declined the offer until consumers say they want them (sic).’ 153

Section 31(2) and (3). 154

Section 21(5) to (7). 155

Section 33(2).



electronic form’.156 This is a very wide definition which means that the application of section 33

would be limited given the prevalence of e-commerce.

3.5.2 Price display

The display of prices on goods is regulated by section 23. It provides that the price of goods must

always be displayed except if the goods are ‘displayed predominantly as a form of advertisement of

the supplier, or of goods or services, in an area within the supplier’s premises to which the public

does not ordinarily have access’.157

It specifically regulates catalogues.158 It provides that prices will be considered as correctly displayed

if the catalogue specifies a date on which the price will no longer be valid159 or if the catalogue is

dated (i.e. the date of publication is displayed).160 Often the price is not displayed on a catalogue, but

rather is subject to a price list which can be requested. This allows a supplier to change the prices

without having to republish the catalogue. This will be an acceptable practice in most cases as this

type of catalogue will often function as a form of advertisement.161

Section 23 will not apply if the supplier gave the consumer a price estimate in terms of section 15.162

It is also excluded in cases where section 43 of the Electronic Communications and Transactions Act

25 of 2002 applies to the particular transaction.163 In other words, it does not apply to electronic

communications, as is the case with the whole of section 33.164

3.5.3 Information which must be disclosed to the consumer

The following information must be disclosed ‘in an appropriate manner, having regard to the

manner in which the supplier and consumer communicate in concluding the transaction’:165

the supplier’s name and licence or registration number (if any);

156

See F Cronje & Reinhardt Buys (eds) Cyberlaw @ SA II: The Law of the Internet in South Africa 2 ed (2004) at 142 cited in Snail, Sizwe Lindelo ‘South African e-consumer law in the context of the ECT Act (part 1)’ (2007) JBL 40 41. 157

Section 23(4). 158

Section 23(5)(c). 159

Section 23(5)(c)(i). 160

The catalogue will be regarded as ‘out of date’ after a reasonable period and would then no longer be seen as an adequate display of the price of the products. 161

Section 23(4). 162

Section 23(1)(a). Section 15 only applies to repair or maintenance services or the supply or installation of replacement parts where the supplier takes possession of the consumer’s property or where the consumer request an estimate in respect of any other type of transaction. 163

Section 23(1)(b).



the address of the supplier’s physical business premises and related contact details;166

the currency in which the consumer must pay;

the delivery arrangement, which includes the identity of the shipper, the mode of

transportation and the place of delivery to the consumer;

the supplier’s cancellation, return, exchange and refund policies, if any;167

the manner and form in which a complaint may be lodged;

other additional information required in terms of section 26;168

the supplier’s VAT number;

the date of the transaction;

the name and description of the goods or services to be supplied;

the unit price of the goods or services to be supplied;169

the quantity of the goods or services to be applied;

the total price of the transaction before any applicable taxes;

the amount of any applicable taxes;

the total price of the transaction including any taxes; and

any other prescribed information.

The information must be disclosed before the agreement or transaction is concluded and should be

in plain language.170

164

Section 33(1)(b). 165

Section 33(3)(a) to (h). 166

This should preferably be the address from which the goods or services were supplied (also see section 26(3)(b)). 167

These policies must comply with the provisions of the CPA. In particular the returns policy must not contradict section 55 read with section 56(2) which prescribes the standards which all goods must comply with and the rights of consumers if they do not. 168

Section 26(3)(a) to (i). Section 26 applies to all ‘sales records’, but not if section 43 of the Electronic Communications and Transactions Act 25 of 2002. The information required in terms of this section overlaps with that required in section 33. Those which do not overlap have been listed here. 169

Subject to the exemptions in section 23(4).



3.6 Customer loyalty programmes

3.6.1 The scope and application of section 35

The concept of a ‘customer loyalty programme’ is not defined. The key to distinguishing it from

other promotional offers is probably that it is a ‘programme’ of which the consumer must be a

member and that it is not a once off promotional offer. An example of this type of programme

would be programmes which reward consumers based on the amount of purchases they make at a

particular supplier.

3.6.2 Who is responsible for compliance?

Section 35(2) simply refers to ‘a person’ and does not define the concept of a ‘promoter’ as is the

case in the context of promotional competitions. However, aspects of that definition can be applied

here. That means that the responsible party would be any person who promotes, sponsors,

organises or conducts a loyalty programme. Section 35(4) and (5) refers to ‘the sponsor of a loyalty

programme, or a supplier who offers or holds out a willingness, to accept any loyalty credits or

awards as consideration of in exchange for any particular goods or services’ which extends the

responsibilities in terms of this section even further. This means that more than one person can be

responsible for compliance as the supplier who is conducting the loyalty programme may not

necessarily be the sponsor of the awards given in terms of that loyalty programme. In addition yet

another entity may be administrating the loyalty programme.

3.6.3 General principle

Section 35(2) provides that a ‘person’ must not give a consumer the opportunity to participate in a

loyalty programme if the supplier does not intend to provide the loyalty credits or awards171 or if the

supplier intends to provide the loyalty credits or awards ‘in a manner other than as offered.’172

3.6.4 Loyalty credits or awards are equivalent to cash

Section 35(1) provides that ‘loyalty credits or awards are a legal medium of exchange when offered

or tendered as consideration for any goods or services offered, or transaction contemplated, in

terms of that loyalty programme’. This cannot be limited in terms of ‘any law, agreement or notice’.

This means that the loyalty credits or awards do not rank lower than a cash purchase when it comes

170

See section 22. 171

Section 35(2)(a). 172

Section 35(2)(b).



to a particular loyalty programme and that a supplier must not discriminate against consumers who

want to purchase goods with credits or awards in favour of consumers who offer cash.

3.6.5 Offer to participate in the loyalty programme

Section 35(3) prescribes that certain information must be included in the document which contains

the offer to participate in the loyalty programme. This information must be in plain language.173

These requirements are important in light of the fact that section 35(2)(b) provides that the supplier

may not provide the loyalty credit or award in ‘a manner other than as offered’.

The section provides that the offer ‘must clearly state’:

the nature of the programme, credit or award;174

the goods or services to which the offer relates;175

The steps which the consumer must take in order to make use of the loyalty credits or

awards earned.176

The particulars of any person from whom, any place where, and any date and time on or at

which, the consumer may ‘gain access to the programme, or to any loyalty credit or awards

in terms of the programme.’177

3.6.6 Obligations of the sponsor or supplier

The sponsor or supplier must ensure that the goods and services which can be exchanged for loyalty

credits or awards are in fact available. The stock of the goods or services must be ‘sufficient to

accommodate all reasonably anticipated demands for those goods or services in exchange for loyalty

173

See section 22. All documents which are required in terms of the CPA must be in ‘plain language’. The plain language requirement is discussed in detail in the context of consumer agreements, but the same principles apply here. 174

Section 35(3)(a). In other words, the consumer must understand the nature of the credit or award to which he or she is entitled. 175

Section 35(3)(b). In other words, the consumer must understand the steps which must be taken to become eligible for a credit or award. This would include clearly identifying the goods and quantities which the consumer must purchase in order to qualify for the loyalty credits or awards. 176

Section 35(3)(c). Often there are additional limitations on the use of the credits or awards once they have been earned. For instance, the consumer may only have access to certain goods or services. This requirement is important in light of the fact that section 35(2)(b) provides that the supplier may not provide the loyalty credit or award in ‘a manner other than as offered’. The limitations imposed on the redemption of the loyalty credits or awards must be consistent with the obligations and prohibitions contained in section 35(4) which is discussed immediately below.



credits or awards.’178 Note that the CPA does not provide that the supplier must have sufficient

supply to meet the demands of all consumers who have loyalty credits or awards, but only those

which were ‘reasonably anticipated.’ This ‘reasonably anticipation’ would be heavily dependent on

the circumstances of each case. It is not clear whether a sponsor or supplier is allowed to limit the

availability of the goods or services to ‘while stocks last’, but it would seem that this is the case given

the fact that the duty to have stocks is not absolute. It will be a defence to a claim in terms of section

35(4)(a) if the sponsor or supplier offered comparable goods or services to the consumer and the

consumer accepted the replacement or unreasonably refused the offer.179

No limitations or restrictions must be placed on the sponsor or supplier’s capacity to supply the

goods or services in exchange for a loyalty credit or award, unless the same limitation or restriction

is imposed on consumers who are paying cash for the same goods.180 In other words, a supplier

cannot discriminate against a consumer who wants to use a loyalty credit or award in favour of a

consumer who is using cash.181

A sponsor or supplier must accept the loyalty credits or awards if the supplier has the capacity to

supply the particular goods or services at the time at which the consumer offers them as

consideration.182 Again, the aim of the sub-section is to prevent situations where services or goods

are denied to members of the loyalty programme when those services or goods are in fact available

to other consumers.

Similarly, a sponsor or supplier must not force the consumer to accept an inferior quality or version

of the goods or services when the consumer is redeeming loyalty credits or awards.183 The goods or

services must be of the same quality or the same version which is generally available to any other

consumer who wants to purchase the goods or services on the same date. This is aimed at

preventing suppliers from dumping low quality goods on the holders of loyalty credits or awards

while reserving superior quality goods for consumer who are paying cash.

177

Section 35(3)(d). The offer to participate should also include the contact details where the consumer can direct queries or complaints. 178

Section 35(4)(a). This is identical to the standard employed in the context of trade coupons and similar promotions (see section 34(5)). 179

Section 35(6). The defence is extended to instances where arrangements are made to have comparable goods or services delivered by another supplier. 180

Section 35(4)(b). 181

This is confirmed by section 35(1) which provides that ‘loyalty credits and awards are a legal medium of exchange when offered or tendered as consideration for any goods or services’. 182

Section 35(4)(c). 183

Section 35(4)(d).



A sponsor or supplier must not charge a fee ‘for the administration, processing or handling of such a

transaction if the consumer is required to pay a periodic fee to remain a member of the loyalty

programme’.184

The members of the loyalty programme must not be forced to purchase any other goods or services

as a condition of redeeming loyalty credits or awards.185 This is in addition to the goods or services

which the consumer may have had to purchase to qualify for the loyalty credits or awards. The latter

is allowed, but the sponsor or supplier cannot make the redemption of the loyalty credits or awards

which have been earned subject to a further transaction.

Trace coupons or awards are often only valid for a limited period after which they become invalid. In

terms of section 63 any ‘prepaid certificate, card, credit, voucher or similar device’ only expires 3

years after it was issued.186 It is not clear whether this section will also apply to trade coupons or

rewards. According to section 63(1) the section will only apply to ‘transactions in which a supplier (a)

accepts consideration187 from a person in exchange for a prepaid certificate, card, credit, voucher or

similar device’. In the case of trade coupons or awards the supplier did not necessarily receive

consideration directly for the trade coupon or award, but rather for the goods or services which the

consumer was buying in order to qualify for the trade coupon or award. This may differ from case to

case, but it could be argued that section 63 does not apply as the trade coupon or award is a ‘gift’.

If section 63 does apply, the further consequence is that the consideration paid in exchange for the

trade coupon or award remains the property of the bearer.188 The section is difficult to apply in the

case of trade coupons or awards as the ‘consideration’ paid relates to another transaction concluded

to qualify for the trade coupon or award189 and the value of the trade coupon or award may be a

different amount. It is presumably this latter amount which remains the property of the consumer

until the trade coupon or award is redeemed.

184

Section 35(4)(e). 185

Section 35(4)(f). 186

Section 63(2)(b). 187

The definition of ‘consideration’ in section 1 of the Act is exceptionally wide which further increases the likelihood that section 63 may also, depending on the facts, apply to trade coupons and awards. It includes ‘(a) money, property, a cheque or other negotiable instrument, a token, a ticket, electronic credit, credit, debit or electronic chip or similar object; (b) labour, barter or other goods or services; (c) loyalty credit or award, coupon or other right to assert a claim; or (d) any other thing, undertaking, promise, agreement or assurance.’ 188

Presumably, this is aimed at protecting the consumer against the consequences of the sequestration or winding-up of the supplier. Section 64 which relates to prepaid services serves a similar purpose. 189

The sum paid for those goods or services surely becomes the property of the supplier.



3.6.7 Partial or complete restriction of the availability of goods or services

Section 35(5) provides that where loyalty credits or awards are accepted in exchange for a particular

product or service, the sponsor or supplier can ‘impose a partial or complete restriction on the

availability’ of those goods and services.190 The restriction can only be imposed if the consumer

received ‘direct or indirect’ notice of the suspension 20 business days’ notice before the beginning of

that period. These restrictions may not exceed 90 business days within a calendar year.

This does not mean that the sponsor or supplier has the right to cancel the loyalty programme by

giving 20 business days’ notice. Section 35(5) contemplates a temporary partial or complete

restriction. The 90 day restriction would hardly make sense if the section was meant to include

permanent cancellation of the loyalty programme.191 If the sponsor or supplier fails to give notice,

the supplier will have to offer comparable goods or services in terms of section 35(6) to prevent a

contravention of section 35.

3.7 Trade coupons and similar promotions (promotional offers)

3.7.1 The application and scope of section 34

Trade coupons or similar promotions (referred to as ‘promotional offers’) refer to ‘an offer or

promise, expressed in any manner, of any prize, reward, gift, free good or service, price reduction or

concession, enhancement of quantity or quality of goods or services, irrespective of whether or not

acceptance of the offer is conditional on the offeree [the consumer] entering into another

transaction.’192

This section does not apply to franchise agreements, ‘customer loyalty programmes, loyalty credits

or awards’193 or ‘promotional competitions.’194 The latter two are of course also forms of

promotional offers, but they are regulated separately. Effectively this means that promotions which

190

Section 35(5). 191

A sponsor or supplier would be able to restrict the time within which a consumer must make use of a particular loyalty credit or award. Section 63 of the CPA which regulates prepaid certificates, credits and vouchers and provides that they must be valid for 3 years may not apply here as the consideration paid by the consumer was for the goods or services which the consumer purchased on order to receive the credit or award, and not for the credit or award itself. Unfortunately it is not clear that this is the case given the wide definition given to consideration (see section 1 of the CPA). 192

Section 34(2). 193

Section 35. Customer loyalty programmes are not defined. There is a potential overlap between activities covered by section 34 and section 35 as it will not always be possible to distinguish between a coupon or similar promotion or a loyalty credit or award. This means that in certain instances a supplier may have to comply with both of these sections.



do not qualify as loyalty programmes or promotional competitions for whichever reason will be

regulated by this section.

3.7.2 General rule

A supplier must not make a promotional offer with the intention of not fulfilling the promise or with

the intention of fulfilling it in a manner other than how it was offered.195 This means that there

cannot be hidden conditions which must be met by the consumer before they are eligible for the

promotional offer. This goes hand in hand with the consumer’s right to information which is in clear

and understandable language.196 That is to say, if there is a limitation placed on the redemption of

the coupons or a promotional offer (for instance, they have to be redeemed within a certain period

or only apply to certain goods or services) this must be spelled out for the consumer.

3.7.3 The form of the promotional offer

The document in which the promotional offer is set out must contain the following information in

clear and understandable language:197

The nature of the reward, gift, free good or service, price reduction or concession etc. In

other words, it must be clear to the consumer what the promotional offer to which they are

entitled comprises of.

The goods or services to which the promotion relates. Put differently, the steps which the

consumer must take to become eligible for the promotional offer. For instance, the goods

and quantities which the consumer must purchase in order to qualify for the promotional

offer.

The steps which the consumer must take to make use of the promotional offer. Often

suppliers will make it difficult for consumers to redeem vouchers or other forms of

promotional offers to deter them from making use of them. This type of conduct has not

been prohibited, but the supplier will have to make all the steps which the consumer must

take to make use of the voucher or other promotion clear at the time the offer is made.

194

Section 36. The use of the word ‘prize’ in the definition of ‘promotional offer’ in section 35(2) is curious and unnecessarily confusing given that promotional competitions are regulated separately. 195

Section 34(3)(a) and (b). 196

Section 22. 197

Section 34(4)(a) to (d).



The particulars of any person from whom, any place where, and any date and time on or at

which, the consumer may receive the promotional offer.

3.7.4 Obligations of the supplier and/or sponsor

Section 35(5) sets out the obligations of the supplier and/or sponsor of a promotional offer. The

obligations are placed on ‘a person who makes or sponsors a promotional offer’. It will often be the

case that the person who makes the promotional offer and the person who sponsors it will not be

the same person. If that is the case, the consumer will be able to hold either or both responsible for

compliance with this section.198

The sponsor must ensure that the supply of the particular goods or services which form the subject

of the promotional offer ‘is sufficient to accommodate all reasonably anticipated demands resulting

from the offer’.199 Note that the CPA does not provide that the supplier must have sufficient supply

to fulfil all of the individual promotional offers which were made, but only those which were

‘reasonably anticipated’. This ‘reasonable anticipation’ would be heavily dependent on the

circumstances of each case. It is not clear whether a supplier or sponsor is allowed to limit the

promotional offer to ‘while stocks lasts’. Of course the supplier can always limit the promotion to

the stocks which are available of a particular product, but once the consumer has bought that

product and presents the coupon or a promotional offer for redemption the supplier must oblige. It

will be a defence to a claim in terms of section 34(5)(a) if a supplier and/or sponsor offered

comparable goods or services to the consumer and the consumer accepted the replacement or

unreasonably refused the offer.200

No limitations or restrictions must be placed on the supplier or sponsor’s capacity to supply the

goods or services in redemption of a coupon or another promotional offer unless the same limitation

or restriction is imposed on consumers who are paying cash for the same goods.201 In other words, a

supplier cannot discriminate against a consumer who has a coupon in favour of a consumer who is

paying cash.

198

These parties should regulate this risk between them. This would typically be done by entering into an agreement identifying who will assume the responsibility for CPA compliance. Even where this is done, the consumer would still be able to approach either party; the agreement should contain the appropriate indemnities to provide for this possibility. 199

Section 34(5)(a). 200

Section 34(6). 201

Section 34(5)(b). The defence is extended to instances where the comparable goods or services are to be delivered by another supplier.



Similarly, the supplier or sponsor must not force the consumer to accept an inferior quality or

version of the goods or services when redeeming a coupon or another promotional offer.202 The

standard required is that quality or version which is generally available to any other consumer who

wants to purchase the goods or services on the same date. This is aimed at preventing suppliers

from dumping low quality goods on voucher holders while reserving superior quality goods for

consumers who are paying cash.

A supplier or sponsor must not charge a fee ‘for the administration, processing or handling of a

transaction in respect of which the consumer tenders a coupon.’203 This prevents suppliers from

using such charges to deter consumers from using the voucher earned during a promotion.

3.8 Alternative work schemes

Section 37 regulates the marketing of ‘alternative work schemes’. Alternative work schemes are

schemes where the consumer is invited to conduct the work, activity or business from home,204 or

where the consumer is invited to take part or invest in a scheme which is associated with the

investment of money.205 The crux of section 37 is that the supplier must not make any

misrepresentations about the ‘availability…profitability, risk or other material aspect of the work’.

Specifically any advertisement for such schemes must contain a ‘cautionary statement’ which must

disclose that the amount of work and income is uncertain, the details of ‘the person promoting the

matter’ and the nature of the work, business, activity or investment.206 Regulation 12 prescribes the

exact wording of the statement:207

Results, examples and testimonials promised or contained in this advertisement may be out of the ordinary and should not be taken to provide guarantees with regard to the availability of work, business or activity available, projected income or any other benefit promised or implied. There is no guarantee whatsoever that you will achieve the results or outcomes promised or implied in this advertisement. You are strongly urged to ascertain or obtain, at your own cost, assistance to ascertain the probable results or outcomes based on realistic facts and assumptions and all currently relevant and applicable circumstances.

202

Section 34(5)(c). 203

Section 34(5)(d). 204


Section 37(1)(c). 206

Section 37(2)(a). 207

The regulation also requires that the statement must be ‘in the same font as the rest of the advertisement and in a prominent place where it is likely to be seen by a consumer’.



The formulation of this ‘statement’ is extremely problematic. First, it is not in plain language and will

not be understandable to the ordinary consumer.208 Second, the ‘statement’ in fact absolves the

supplier from responsibility if the advertisement is inaccurate, as it places the responsibility to

investigate whether the representations are accurate on the consumer. It is doubtful that this is

what the legislature wanted to achieve, but unfortunately regulation 12 also provides that the

statement must be published ‘without change’.

3.9 Referral selling

Referral selling takes place if a supplier promotes the sale209 of goods or services on the basis that

the consumer is given a reward210 for providing the information of other consumers or otherwise

assists the supplier to supply goods or services to other consumers if the reward is dependent on an

event which must take place after the transaction with the consumer is concluded.211 This means

that it is acceptable if a consumer is given free product, a discount, a credit or a monetary reward for

the details of another consumer if it stops there. However, if that reward depends on whether a

transaction is concluded with the new consumer (or another ‘event occurring after the consumer

agrees to the transaction’) the practice becomes unacceptable.

The provisions governing direct marketing212 will apply when the supplier contacts the consumers

whose details have been disclosed.

208

See section 22 for the definition of plain language. 209

Section 38(1) does not only refer to the promotion of the sale, but states that a person ‘must not promote, offer, supply, agree to supply, or induce a consumer…’. It is clear that there does not have to be an actual sale for this section to be contravened. Promoting goods and services on that basis will be enough to contravene the section. 210

The reward can take the form of a ‘rebate, commission or other benefit’. 211

Section 38(1)(a) and (b). Note that both (a) and (b) must be present in order for the conduct to be prohibited. 212

Sections 11, 16, 20 and 32.



The law relating to unsolicited contact with consumers is changing. At the time that this chapter was

being written the National Assembly had just passed the Protection of Personal Information Bill (the

PPI) which also contains provisions regarding direct marketing.213 It is uncertain at this stage whether

the Information Regulator which will be established under the PPI or the National Consumer

Commission will have jurisdiction over direct marketing. This section discusses the provisions of the

CPA which regulate direct marketing. Cross-references to the PPI have been included. Note that this

section of this Chapter may change before the book is published.

4 The consequences of non-compliance with the CPA’s provisions on marketing

4.1 Prohibited conduct leading to an administrative fine

If a supplier contravenes sections 29 to 39, which includes the general prohibition on misleading

marketing as well as all of the specific practices discussed above, that supplier will be guilty of

prohibited conduct. If the National Consumer Commission is of the reasonable belief that a supplier

is engaging in prohibited conduct it can issue a compliance notice against a supplier requiring the

supplier to cease the prohibited conduct.214 If the supplier fails to rectify its conduct the National

Consumer Commission can apply to the National Consumer Tribunal to impose an administrative

fine on the supplier.215

4.2 Agreements resulting from misleading marketing (unconscionable conduct)

Marketing which does not comply with section 41 must be dealt with in accordance with section 51

of the Act.216 This means that if a supplier has made misrepresentations which fall within the ambit

213

Section 69 of the Protection of Personal Information Bill provides that direct marketers must obtain the consumer’s consent before marketing, unless the consumer is an existing client and has been given the opportunity to opt out. See Elizabeth de Stadler, ‘Direct marketing: Opt in or opt out?’ in the August 2012 edition of Consumer Law Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 29 October 2012] and Elizabeth de Stadler, ‘Introduction to PoPI (part 2): When is the processing of information lawful?’ in the October 2012 edition of Consumer Law Review (Juta) at http://www.jutalaw.co.za/newsletter/consumer-law-review/ [last accessed on 29 October 2012]. 214

Section 100(1). Section 100(3) sets out what the compliance notice must contain in order to be valid. A supplier can approach the National Consumer Tribunal to have the notice set aside (see section 100(4)). Compliance notices have been set aside for non-compliance with section 100 in the following cases: City of Johannesburg v the National Consumer Commission (NCT/2667/2011/101(1)(P), NCT/2081/2011/101(1)(P)) [2012] ZANCT 6 (30 March 2012); Vodacom Service Provider Company (Pty) Ltd and Another v National Consumer Commission (NCT/2793/2011/101(1)(P)) [2012] ZANCT 9 (8 June 2012); Associated Motor Holdings (Pty) Ltd t/a Chery Isando v National Consumer Commission (NCT/4057/2012/101(1)(P) (15 August 2012); MultiChoice Africa (Pty) Ltd v the National Consumer Commission (NCT/3220/2011/101(1)(a)(P)) [2012] ZANCT 4 (23 March 2012). 215

Section 100(6)(a). 216

Marketing which contravenes section 29 will almost always also contravene section 41. It is not clear why both of these sections where needed. Section 41(5) provides that section 51 will apply to ‘court proceedings’





of section 41, any ‘transaction or agreement, provision, term or condition of a transaction or

agreement, notice to which a transaction or agreement is purported to be subject, is void to the

extent that it’ contravenes section 41.217 It will not be the actual transaction or agreement which

contravenes section 41, but rather the representations made leading up to the transaction.

When a consumer alleges in a court218 that section 41 has been contravened the factors listed in

section 52(2) must be taken into account. This section is only relevant if the CPA ‘does not otherwise

provide a remedy sufficient to correct the relevant prohibited conduct, unfairness, injustice or

unconscionability’.219 The relevance of these factors is not as clear in the context of marketing as

they are when considering whether a particular contractual term is relevant or not.220 For the

purposes of this chapter it is important to note that the ‘relative capacity, education, experience,221

sophistication and bargaining position’ of the parties will be taken into account when establishing

whether section 41 was contravened.222 The courts must also consider the ‘extent to which any

documents relating to the transaction or agreement’ was written in plain language.223

Once these factors and the ‘principles, purposes and provisions of the Act’ have been taken into

account the court can make an order in terms of section 52(3). This means that a court can declare

the consequent transaction ‘unconscionable, unjust, unreasonable or unfair’,224 ‘restore money or

property to the consumer’,225 ‘compensate the consumer for losses or expenses’ relating to the

transaction or agreement and legal costs226 and ‘require the supplier to cease any practice, or alter

any practice, or document, as required to avoid a repetition of the supplier’s conduct.’227

concerning the section. Section 29 does not (except for the reference to section 41 in section 29(a)) contain a similar provision. 217

Section 51(3). Section 51(3) provides that the transaction would be void to the extent that it contravenes section 51. It is necessary to substitute section 51 with section 41. 218

There is considerable confusion regarding whether the policing of section 40, 41 and 48 must be done by a court or whether the National Consumer Commission and Tribunal will also have jurisdiction. 219


See the discussion of all of these factors in the chapter on Contracting. 221

‘Previous dealings between the parties’ and ‘custom[s] of trade’ are also taken into account (see section 52(2)(h)). 222

Section 52(2)(b). 223

Section 52(2)(g). 224

Section 52(3)(a). 225

Section 53(2)(b)(i). 226

Section 53(2)(b)(ii) and (iii). 227

Section 52(3)(b)(iii).



In addition the court may ‘sever’ part of the relevant ‘agreement, provision or notice’ or ‘alter it to

the extent required to render it lawful’ if it is reasonable to do so.228 The court can also declare the

entire agreement void from the date on which it took effect.229

4.3 Misleading marketing and the quality of goods or services

Misleading marketing can also have indirect consequences. Section 55(4) provides that when

determining whether goods are faulty ‘all of the circumstances of the supply of those goods must be

considered’ which includes ‘the manner in which, and the purposes for which, the goods were

marketed, packaged and displayed, the use of any trade description230 or mark, any instructions for,

or warnings with respect to the use of the goods’.231 Marketing creates the context for the eventual

sale and shapes the consumer’s expectations. Inaccurate or deceptive marketing may enable the

consumer to claim that the goods are faulty (defective) and be entitled to a refund, because the

consumer’s expectations and all circumstances of the supply of goods, are taken into account when

determining whether goods are faulty.232

5 Who will police marketing infractions/contraventions

5.1 Liability under the CPA

There are two principal ways in which a supplier can be brought to task for engaging in misleading

marketing or for non-compliance with the other provisions of the CPA relating to specific marketing

practices. First, a consumer can lay a complaint against the supplier.233 The National Consumer

Commission can also initiate a complaint of its own accord.234

There is some confusion as to whether the National Consumer Commission and the Tribunal have

the jurisdiction to hear matters relating to section 41 or whether these matters must be referred

directly to the ordinary courts. This confusion arose out of the use of the term ‘court’ in section 52,

which is defined in section 1 to exclude the ‘consumer courts’. In addition to the consumer courts

there are also the National Consumer Commission and the National Consumer Tribunal. The failure

to refer to the Commission and the Tribunal in section 52 has created the impression that only the

228

Section 52(4)(a)(i)(aa). 229

Section 52(4)(a)(i)(bb). 230

Section 24 is dedicated to trade descriptions and product labelling. See the chapter on Labelling. 231

Section 55(4)(a). 232

See the chapter on Faulty and Unsafe Goods. Note that it is no longer possible for a supplier to contract out of liability for misrepresentations which were made before the contract was concluded (see section 51(1)(g)). 233

Section 69. Section 4(1) lists the persons who have standing to bring consumer complaints. 234

Section 71(2).



ordinary courts can hear matters regarding sections 40, 41 and 48. Section 69 governs consumers’

enforcement rights. It provides that the ordinary courts can only be approached ‘if all other

remedies available to that person in terms of national legislation have been exhausted.’235 This

means that the consumer will first have to go through alternative dispute resolution by approaching

the applicable industry ombud or another alternative dispute resolution agent,236 by approaching

the consumer court of the province with jurisdiction,237 or by filing a complaint with the National

Consumer Commission. This is confirmed by the fact that section 52 will only apply if the CPA ‘does

not otherwise provide a remedy sufficient to correct the relevant prohibited conduct’.

Despite this confusion it would therefore seem likely that a consumer would also be able to

approach the NCC if a supplier contravenes section 41 of the CPA. In any event it is wide enough to

include most (if not all) claims relating to misleading advertising. In addition the National Consumer

Commission has jurisdiction over contraventions in relation to any of the other specific marketing

practices regulated under the CPA.

5.2 Self-regulation

Complaints may also be made to the Advertising Standards Authority of South Africa, the DMA or

WASPA.238

235

Section 69(d). 236

Section 69(c)(i) and (iii) read with section 70. 237

Section 69(c)(ii). 238

See paragraph 14 of the WASPA Code. In addition to demanding that the member remedy the breach in question, WASPA can also impose a fine.

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