Chapter 1 - CPA

Question 1

Outline/Describe/Explain/Discuss the purpose of the CPA

Answer 1

• To protect consumers against unscrupulous businesses such as fly-by-night franchisors
• To protect consumers against contracts that included unfair terms which limits the liability of suppliers
• To promote a fair. Accessible and sustainable market place
• Establish national standards to protect consumers
• Provide guidelines for better consumer information and to prohibit unfair business practices
• Promote responsible consumer behaviour

Question 2

Discuss/Explain/Evaluate the impact of the CPA (advantages and/or disadvantages/negatives) on businesses

Answer 2

Advantages

Disadvantages

• Prevents larger businesses from undermining the smaller ones
• Provides laws that apply to all businesses
• Smaller businesses are protected as they are considered consumers
• Certain sections of the Act prevent competitors undermining the business through unfair or dishonest marketing and advertising
• Causes confusion among agents who are neither buyers nor sellers
• Consumer can cancel contracts too easily
• Onus is on the business to prove they comply with the CPA
• Companies are prohibited from contacting customers on Sundays and public holidays and this limited direct marketing
• Indemnity insurance must be increased as the customer is no longer required to prove negligence against the producer in damage claims

Question 3

Impact of CPA on consumers

Answer 3

Advantages

Disadvantages

• Greater certainty about consumers’ rights
• Greater fairness in transactions
• Better balance between the interest of business suppliers and consumers
• More effective means of redress for consumers
• Staff members must be trained to learn the responsibilities for the business
• Consumers must be educated about their rights
• Some goods or series nay cost more

Question 4

Suggest/Recommend ways in which businesses can comply with the CPA.

Answer 4

• Businesses must comply with the requirements of the law regarding promotional competitions
• Businesses must comply with requirements regarding the display of information on labels as set out by the Department of Trade and Industry (DTT)
• The name of the business must be displayed on business documents such as letterheads and invoices
• All packaging and labelling used by businesses must comply with the act
• Businesses have a duty to perform quality services and supply quality goods

Question 5

Outline/Discuss penalties/consequences for non compliance

Answer 5

• Failure to adhere to the CPA may result in a fine and even imprisonment in severe cases
• Fines may not exceed 10% or R1 million of the supplier’s annual turnover during the preceding financial year
• In special cases an employer will be held jointly and severally liable with its employee for contravening he CPA

Question 6

Outline/Explain actions regarded as discriminatory by the CPA

Answer 6

• Bundling of goods and services (i.e. packaged soap, face cloth and brush) are not allowed unless it is to the benefit or convenience of the consumer
• Unfair terms in written agreements such as penalties for late payments
• Failing to put price tags on all products
• Failing to display information on labels as set out by the Department of Trade and Industry
• Failing to give consumers the five-day cooling off period
• Any marketing that is discriminatory for any reason
• Prioritising aby consumer group over another when marketing or selling
• Charging unfair prices for the same goods and services

Question 7

Rights and responsibilities of the Businesses

Answer 7

Rights

Responsibilities

• A supplier may cancel a fixed-term agreement 20 days after giving the consumer notice of a material failure by the consumer
• Except on public holidays and Sundays a supplier may approach the consumer for direct marketing purposes between 8:00 and 20:00 on weekdays and between 9:00 and 13:00 on Saturdays
• Suppliers can only enforce consumer agreements if the agreement was in plain and understandable language
• A supplier can enforce consumer agreements that are in writing even if the agreement has not been sighed by the consumer
• Contracts must be in plain and understandable language
• Contractual terms must not be unfair. Unreasonable or unjust
• Some contractual terms are prohibited
• Suppliers may not make false or misleading representations
• Prices of goods or services must be displayed
• Sales records must be kept
• Customer loyalty programmes and promotional competitions are regulated
• Especially vulnerable consumers are protected
• Suppliers must perform according to their contracts

Question 8

Rights and responsibilities of consumers

Answer 8

Rights

Responsibilities

Consumer rights include the following

• The right to privacy
• The right to choose
• The right to information
• The right to accountability from suppliers
• The right to fair and responsible marketing
• The right to fair and reasonable terms and conditions
• In the case of direct marketing the consumer may cancel a contract within 5 business days after concluding a contract or receive the goods (cooling off period)
• The consumer may retain unsolicited goods without payment
• The consumer may cancel an advance booking reservation or order, subject to a reasonable cancellation charge
• The consumer must perform according to the contract