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Title: CONSUMER AFFAIRS COMMITTEE (CAFCOM)

1
CONSUMER AFFAIRS COMMITTEE (CAFCOM)
2
INTRODUCTION

The Consumer Affairs (Unfair Business Practices)
Act, 71 of 1988 (the Act), is administered by the
Consumer Affairs Committee, (Cafcom) a statutory
body in the Department of Trade and Industry and
resorts under the Directorate Consumer and
Corporate Regulatory Division, Consumer
Investigations.

3
PURPOSE OF THE ACT

The purpose of the act is to provide for the
prohibition or control of certain business
practices.

4
FUNCTIONS OF THE COMMITTEE

shall make known information on current policy in
relation to certain business practices in general
and unfair business practices in particular, to
serve as general guidelines for persons affected
thereby.

shall receive and dispose of representations in
relation to any matter with which it may deal in
terms of the act.

may make such preliminary investigation as it may
consider necessary into, or confer with any
interested party in connection with any unfair
business practice which allegedly exists or may
come into existence.

shall on the directions of the Minister, or on
its own initiative make such investigation as it
may consider necessary into any unfair business
practice which the Cafcom or the Minister has
reason to believe exists or may come into
existence.

Cafcom can recommend to the Minister to prescribe
by notice in the gazette such action to stay or
prevent any unfair business practice which the
committee has reason to believe exists or may
come into existence.

Cafcom shall report to the Minister on the result
of any formal investigation made by them in
terms of the act.

10
BUSINESS PRACTICE

any agreement, arrangement or understanding,
whether legally enforceable or not, between two
or more persons
any scheme, practice or method of trading,
including any method of marketing or
distribution

any advertising, type of advertising or any other
manner of soliciting business
any act or omission on the part of any person,
whether acting independently or in concert with
any other person

any situation arising out of the activities of
any person or class or group of persons excludes
a practice regulated by competition law

13
UNFAIR BUSINESS PRACTICE

The definition of an unfair business practice is
extremely wide. It is any business practice
which, directly or indirectly, has or is likely
to have the effect of

harming the relations between businesses and
consumers,
unreasonably prejudicing any consumer,
deceiving any consumer or
unfairly affecting any consumer

Sporadic allegations were and are made that the
definition of an unfair business practice, is
void for vagueness and simply unconstitutional.
His Honourable J van Dijkhorst found that the
definition is not vague.

It is important to note that the legislator did
not consider it important to distinguish between
unfair business practices that come about by
accident and those that come about by design.

17
CONSUMER

The definition of an unfair business practice
contains four references to the word consumer.
The raison d'être of the Committee, and the Act
for that matter, is thus the interest of the
consumer and specifically the consumer who is or
is likely to be faced by an unfair business
practice.

A consumer means any natural person to whom any
commodity is offered, supplied or made available
or from whom any investment is solicited or who
supplies or makes available any investment, and
any other person who the Minister, with the
concurrence of the Committee, declares to be a
consumer

19
THE ENABLING NATURE OF THE ACT

The Act is an enabling act and not prescriptive.
It prohibits nothing, although its message to
businesses is clear - do not to get involved with
unfair business practices.

The main body of the Act is devoted to various
administrative procedures to be followed, the
investigative powers of its investigating
officers, the types of investigations the
Committee could undertake and the powers of the
Minister.

The order of the Minister is published in the
Government Gazette. An infringement of an order
by the Minister, published in the Government
Gazette, is a criminal offence, punishable by a
fine of R200 000
or five years imprisonment or both the fine and
the imprisonment.

It was said earlier that the legislator did not
consider it important to distinguish between
unfair business practices that come about by
accident and those come about by design.
The Committee often finds that businesses are
involved in unfair business practices that appear
to come about by accident.
This applies particularly to the text in
advertisements. In such cases it is usually
relatively easy to convince the advertiser that
the text of the advertisement must be amended.

23
THE POWERS OF THE MINISTER

If the Minister, after consideration of a report
by the Committee in relation to an investigation
in terms of section 8(1)(a), is of the opinion
that an unfair business practice exists or may
come into existence, the Minister has
far-reaching powers to ensure the discontinuance
of the unfair business practice.

The Minister may also, if money was accepted from
consumers and he deems it necessary to limit or
prevent financial losses by those consumers,
appoint a curator, with the concurrence of a
special court, in order to realize the assets of
the person involved in an unfair business
practice and to distribute them between the
consumers concerned and to take control or and
manage the whole or any part of the business of
such a person.

25
CONSUMER CODES OF CONDUCT

In an effort to improve the relations between
businesses and consumers, the Committee developed
a policy of self regulation. This self
regulation is manifested in consumer codes of
conduct for various industries.

The former Committee known as the Business
Practices Committee developed a number of
consumer codes in co-operation with industry
associations. Industries could approach the
Cafcom to develop a code for a particular
industry or the Cafcom could, on its own
initiative, decide to develop a consumer code.
The usual procedure is that an association would
approach the Cafcom and request that the Cafcom
recognise a code for the particular industry.

The reasoning behind the codes is that industry
should be given the opportunity to regulate
themselves. These codes are intended to govern
the conduct of all firms involved in the
particular industry. The codes normally embody
principles which have or should have been
observed by the majority of members of the
industry for many years. The codes have no legal
status whatsoever.

Should the Cafcom receive a complaint concerning
a business in an industry for which it had
developed a code, the Cafcom would, if the
business is a member of the association, refer
the complaint to the association. It is then
expected of the association to keep that member
in line with the provisions of the code. Should
the association be unable to solve the complaint,
it is referred back to the Cafcom.

The complaint is then handled by the Cafcom
applying the same investigative procedures as set
out under Cafcom.

When considering complaints where a code is in
place the Cafcom will take the provisions of the
code into account in determining whether the
conduct complained about constitutes an unfair
business practice, as defined in the Act.

This applies irrespectively of whether the
business complained about is a member of the
particular association. In this respect the
codes are therefore more than a voluntary code of
conduct

The terms of these codes are not enforceable as
such. They could, however, become enforceable
should the Minister, after recommendation from
the Cafcom, declare any particular infringement
thereof as an unfair business practice, whether
in a specific case section 8(1)(a) investigation
in terms of the Act or in general section
8(1)(b) investigation.

The Cafcom is currently busy with two
investigations with regard to advertising
practices in terms of section 8(1)(b) of the Act.
These general investigations focus on the
advertising practices of inertia selling and
the practice of using the word free and prize
to mislead consumers when advertising.

The Consumer Code for Advertising was one of the
first Codes of conduct and Report No 15 published
on 12 May 1995 outlines the background to codes
in general and to the Advertising Code in
particular. The report also sets out the reasons
for the codes and the policy guidelines for
codes. A copy of Report 15 and a copy of the
Consumer Code for Advertising is available on
request

35
REPORT NO 15

In 1990 then Committee, on the instruction of the
Minister of Trade and Industry, undertook a
general investigation which resulted in the
publication of Report No 15 on Consumer codes /
self regulation

The committee consulted very widely, also
internationally, before submitting its report to
the minister
There are limits to the role self-regulation can
play, just as there are limits to the roles of
the press, government, legislation, the courts,
the market and competition and administrative
bodies like the Cafcom

The various means of consumer protection should,
however, be regarded as supplementary to one
another and not as mutually exclusive
alternatives
In its report, the committee outlined the
guidelines on consumer codes

38
Organisational

The Trade Association should have a significant
influence on the sector
Compliance with the code must be mandatory on
members of the associations
The Trade Associations must have the resources
and disciplinary sanctions available to deal
effectively with the cases of non-compliance

39
Preparation of the code

trade association must demonstrate that its
members are prepared to observe its provisions
organisations representing consumer, enforcement
bodies and advisory services must have been
adequately consulted throughout the preparation
of the code
the competition commission must be consulted when
application for support is made

Cafcom is likely to satisfy itself that the terms
and conditions to be adhered to by members of
trade association -
are reasonably fair between parties
are not likely to mislead those who use them
do not exclude variations to meet special
circumstances

41
Content of the code

code must offer specific and worthwhile benefits
beyond those which might be expected as a result
of legal requirements and normal practice in the
industry
code should require high standards reflecting the
legitimate expectations of reasonable consumers
code should normally include measures directed at
the elimination or alleviation of consumer
concerns and undesirable practices

specific measures should be aimed at ensuring
that consumers are supplied with adequate
information
standards or requirements laid down by the code
should be clear, precise and unambiguous and
should be measurable
code should include requirement that members
indicate compliance with the code
code should include a requirement that staff or
complying organisations have access to a copy of
the code and be aware of the code's requirements

43
Complaints

Adequate machinery should be available for
dealing with complaints from the consumers, to
include
procedures for dealing with complaints
members should offer maximum co-operation to
other bodies consulted by the consumer
availability of effective conciliation services
availability of a low-cost, independent scheme of
redress as an alternative to action in the courts

44
Monitoring and publicity

the operation of the code must be regularly
monitored as follows
trade association must publish an annual report
on the operation of the code including the number
and type of complaints referred for conciliation
and to independent redress system
copies of reports must be submitted to the
committee

Association will recommend and require its
members to take action based on the information
in the reports to improve their service to
customers
Copies of the code should be available without
charge to customers, consumer advisers and to
others with legitimate interest
Trade associations should publicise the code so
that relevant members of the public are
adequately aware of it

46
Enforcement

Compliance with the code and procedures for
handling of complaints should be mandatory on
members
The code of articles or constitution of the trade
association should establish a procedure for
handling of complaints of non-compliance with the
code. The procedure should include time limits
for dealing with these complaints

The code or constitution of the trade association
should also set out the penalties for
non-compliance up to an including dismissal from
the association
Where appropriate the trade association should
ensure that mechanisms are in place to ensure the
trade association meets judgements made by courts
against that member.

OTHER CODES ENDORCED BY THE COMMITTEE ARE THE
FOLLOWING

Motor Vehicles
Advertising
Vehicle Recovery Services
Furniture
Portland Cements
Time-Sharing Industry
Debt Recovery Agents

Home Construction
Mail-order Marketing
Credit Bureaus
Travel Agents
Electronics Equipment
Public Property Syndication
Direct Selling

51
PROVINCIAL CONSUMER COURTS

The provincial consumer courts, are tasked with
similar functions as the Consumer Affairs
Committee to provide for the prohibition or
control of unfair business practices

The Committees jurisdiction is country-wide
whereas the application of the provincial
legislation is limited to the jurisdiction of the
relevant provinces

To ensure co-operation between the provincial and
national legislation, the national legislation
provides for the heads of the provincial consumer
offices to attend and participate in the meetings
of the Consumer Affairs Committee

54
LIAISON COMMITTEE

The chairperson may appoint one or more liaison
committees, which shall advise the committee on
such matters as the chairperson may determine and
refer to a liaison committee for advice.

A liaison committee shall consist of the number
of members determined by the chairperson.
A member of a liaison committee --(a)shall be
appointed for such period, but not exceeding
three years, as the chairperson may determine at
the time of his appointment

The chairperson and vice-chairperson of a liaison
committee shall be designated by the chairperson.

57
Functions of the Liaison Committee

The functions of the Liaison Committee is the
same as that of the Cafcom.
The Liaison Committee will report to the Cafcom
on matters referred to them by the Chair

58
THE END