CONSUMER AFFAIRS COMMITTEE (CAFCOM)

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CONSUMER AFFAIRS COMMITTEE (CAFCOM)
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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.

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PURPOSE OF THE ACT

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

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FUNCTIONS OF THE COMMITTEE

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• 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.

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

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• 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.

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• 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.

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• 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.
•  

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

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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

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

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

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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

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

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• 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.

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• 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.

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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.

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• 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

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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.

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• 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.

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• 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.

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• 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.

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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.

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• 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.

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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.

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• 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.

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• 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.

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• 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.

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

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• 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.

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• 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

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• 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.

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• 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.

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• 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

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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

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• 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

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• 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

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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

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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

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• 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

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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

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• 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

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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

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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

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• 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

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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

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• 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.

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• OTHER CODES ENDORCED BY THE COMMITTEE ARE THE
  FOLLOWING

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

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

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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

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

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• 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

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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.

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• 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

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

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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

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THE END

• Amanda LotheringenCCRD DTITel(012) 310 9578