The Act prohibits unfair marketing practices, which includes bait marketing, negative option marketing, catalogue marketing, referral selling, sets standards for customer loyalty programmes and regulates promotional competitions.
The obligations set out in Sections 29 to 39 on suppliers apply equally to a producer, importer, distributor, retailer or service provider.
Section 29: General standards for marketing goods or services:
- Section 41 – the marketing must not be false or misleading.
- Fraudulent or deceptive, or unlawful.
- Thus the nature and use of, and the conditions on which the goods and services may be acquired cannot be distorted.
- Puffery will most likely not be allowed.
- Refer to Sections 30 and 31 for information on the prohibitions against bait marketing (advertising particular goods or services as being available at a specified price in a way that misleads the consumer in regard to the actual availability of those goods or services from the supplier at the advertised price) and negative option marketing (where a supplier promotes any goods or services, or offers to enter into an agreement for them, or induces a person to accept them on the basis that they are to be supplied or will automatically come into existence unless the consumer declines such an offer or inducement). Such an agreement is unlawful and accordingly void.
Section 32: Direct marketing to consumers:
- Refer to Section 16, a supplier is obliged to notify the consumer of his or her right to rescind a direct marketing agreement (within five business days), and if a person who has marketed such goods and left them with the consumer without requiring or arranging payment for them, they may become unsolicited goods to which Section 21 applies.
Section 33: Catalogue or Electronic marketing:
- Does not apply to a franchise agreement or to a transaction if Chapter 7 of the Electronic Communications and Transaction Act applies to it;
- It applies where a consumer has entered a transaction either telephonically, via the internet, or by postal order or fax, and in any other way where the consumer has not had a chance to inspect the goods before concluding the agreement;
- The supplier is required to disclose certain information prior to concluding the agreement or transaction, which information is contained in Section 33(3)(a) to (h). A copy of the agreement must be given to the consumer within ten business days after its conclusion. If such a copy is not delivered within this time period, the consumer may terminate the agreement without penalty.
Section 34 deals with trade coupons, sets out the obligations of suppliers and rights of consumers relating thereto.
Section 35 sets standards for customer loyalty programmes.
Section 36: Regulates promotional competitions:
- The Act restricts the way in which promotional competitions are conducted;
- A prize includes a gift, reward, free goods or services, a price reduction or other free benefit;
- One may not inform another person that he or she has won a competition or a prize if no competition was conducted, or he or she did not win, or the prize was generally made available, or the prize is subject to a previously undisclosed condition, or the person is required to buy or pay for something for the prize (similar to an “administration fee”);
- A reasonable cost of electronically transmitting an entry to a promotional competition shall not exceed R 1.50, this includes the total cost for all subsequent electronic communication to the consumer regarding that entry;
- Promoters must arrange that an independent accountant, registered auditor, attorney or advocate oversees and certifies the conducting of the competition and such a person must report this through the promoter’s internal audit reporting, or other appropriate validation or verification procedures.
Section 37 regulates alternative work schemes – work from home schemes are still legally permissible, however the promoters of such schemes are not allowed to charge a person a fee for getting work, business, activity or investment, unless the person charged has actually been assigned and performed the work. An advert promoting a scheme of this nature must contain a warning about the uncertainty of the extent of the work or income, full details of the promoter and the nature of the work being offered.
Section 38 referral selling is still permissible in terms of the Act, provided it is not conditional upon an event occurring after the consumer agrees to enter into the transaction. In other words, a person must not promote, offer, supply or agree to supply or induce a consumer to accept any goods or services on the representation that the consumer will receive a rebate, commission or benefit if the consumer subsequently gives the supplier the names of other consumers, or otherwise assists the supplier to supply goods or services to other consumers, and that the rebate or commission is contingent on the event occurring after the consumer agrees to the transaction.
Section 39 protects those persons who lack legal capacity to contract. A supplier cannot enter into a transaction or agreement with a mentally unfit customer or unemancipated minor, who was not assisted by his/her parent or guardian.