The CPA and small businesses: A broad overview

Deeply enshrined in the ethos of the Constitution of the Republic of South Africa, 1996 (Constitution), is the determined desire for the full realisation fundamental rights for all. In many ways, the Consumer Protection Act 68 of 2008 (CPA) echoes the Constitution, and is one of the statutes that were promulgated with the view of advancing this ethos in the commercial market. The CPA has been in force since 31 March 2011. One its overarching objectives is to address power imbalances in commercial transactions by promoting just, fair and reasonable conduct between persons who promote and supply goods and services, on the one hand, and consumers, on the other hand. To do this, the CPA embodies certain fundamental rights and provides for a specialised framework that regulates relationships between consumers and suppliers from pre-transactional through to post-transactional phase.

At the outset, it is important to note that in addition to natural persons, the CPA extends its protections to small businesses that are legally recognised entities with an asset value or annual turnover of less than R2 000 000.00. The focus of this Legal Insight will be on how the CPA generally applies to small businesses that fall within its definition of a “consumer”. In this respect, the definition of a “consumer” covers persons to whom goods or services are promoted or supplied in the ordinary course of the supplier’s business; the users, recipients or beneficiaries of such goods or services; as well as franchisees that fall within the scope of application of the CPA.

In very broad terms, the CPA outlines the fundamental rights that are bestowed upon consumers as well as the channels of redress that are available to aggrieved consumers.

In so far as fundamental consumer rights are concerned, small businesses that fall within the purview of the CPA are afforded fundamental rights, at various stages of a commercial transaction, such as: the right to equality in the consumer market; the right to privacy; the right to choose; the right to disclosure and information; the right to fair and responsible marketing; the right to accountability from suppliers; the right to fair value, good quality and safety; the right to fair, just and reasonable terms and conditions; and the right to fair and honest dealings.

The fundamental rights that are afforded to consumers in terms of the CPA apply to transactions that occur within the South African borders. These fundamental rights are protected in Chapter 3 of the CPA, which provides for the protection of consumer rights and the consumers’ voice. Broadly, the aim of Chapter 3 is: (i) to ensure that consumers that wish to enforce their fundamental rights are not prejudiced in any way for doing so; and (ii) that consumers are provided with a cost-effective and expedient redress mechanism for the enforcement of their rights.

Although the National Consumer Commission (NCC) and the National Consumer Tribunal (NCT) may be considered as the ultimate custodians of the fundamental rights afforded to consumers in terms of the CPA, section 69 of the CPA makes provision for what is generally accepted as an implied hierarchy that is to be followed by consumers that wish to enforce their rights. In terms of this implied hierarchy, alternative dispute resolution forums including statutory ombuds (such as the Banking Services Ombud and the FAIS Ombud), accredited industry ombuds (such as the Motor Industry Ombud of South Africa and the Consumer Goods and Services Ombud), and private alternative dispute resolution service providers (including various legal consultancies, law firms and advocates specialising in consumer matters) should be the first port of call in any attempt to resolve a consumer dispute. Thereafter the consumer dispute should be escalated to the NCC or the NCT. Save for certain limited instances, a consumer matter may not be directly referred to the ordinarily courts – this position has been confirmed by the Free State High Court in Joroy 4440 CC t/a Ubuntu Procurement v Potgieter N.O. and Another.

Over the next few fortnights, our Legal Insights will address how the CPA interacts with small businesses at various stages of commercial transactions and how it can be used to benefit your business.

Tshepiso Scott – Managing Director