LU 3 (3)

6.4 Consumer Protection

6.4.1 Introduction

• Growth of Mass Production: The 20th century saw increased availability and affordability of consumer goods due to mass production, marketing, and contracting.

• Strained Legal Concepts: Traditional contract and delict law concepts were challenged by these developments.

• Myth of Equal Bargaining: The idea of an arm's-length deal between equal parties became unrealistic for consumer contracts.

• Subordinate Consumers: Consumers faced misleading advertising, one-sided standard terms, and oppressive lending practices.

• Global Consumer Protection: Measures were adopted worldwide to address these issues, but their scope varies across jurisdictions.

• EU's Comprehensive Policy: The European Union has the most comprehensive consumer-protection policy and legislation.

• South Africa's Progress: South Africa initially lagged but caught up with the Consumer Protection Act 68 of 2008, comprehensively addressing consumer rights.

• Protection Areas: The Act protects against unfair terms, defective goods, questionable advertising, and establishes consumer protection institutions.

• Self-Regulation: Industry-specific codes like the Banking Code of Practice, WASPA Code of Conduct, and the Code of Advertising Standards offer non-statutory protection.

• American Perspective: Whaley's quote summarizes the attitude towards consumer law, often viewing consumer issues as petty and not respectable, with a laissez-faire attitude, citing principles like "caveat emptor" (buyer beware) and "de minimis non curat lex" (the law does not concern itself with trifles).

• Turning Tide in South Africa: Increased discussion and introduction of consumer-protection measures.

• ECT Act: The Electronic Communications and Transactions Act introduced protective measures for online consumers.

• European Distance Selling Directive: Measures largely adopted from the European Distance Selling Directive that have implications for South African webtraders regarding website construction, information, and transaction methods.

• Consumer Protection Act Augmentation: The Consumer Protection Act supplements the protection provided by the ECT Act.

• Online Consumer Protection: The ECT Act appropriately covers important aspects of online consumer transactions.

• ECT Act and Consumer Protection Act: The Consumer Protection Act did not repeal Chapter VII of the ECT Act; they must be considered jointly for online consumer transactions, with the Consumer Protection Act covering areas like unfair contract terms.

• Online Consumer Vulnerability: Online consumers are similar to mail-order customers, lacking the ability to physically inspect goods.

• Limited Protection: No legislative consumer-protection measures specifically for distance selling are in force in South Africa, although Chapter VII of the ECT Act offers some protection.

6.4.2 Chapter VII of the Electronic Communications and Transactions Act

6.4.2.1 Introduction

• Departure from Principles: Chapter VII departs from technological neutrality and functional equivalence, which aim to treat online and offline transactions equally.

• Additional Protection: The legislature recognized that online customers face unique risks and need extra protection.

• Similar Position: Customers of distance selling companies face similar risks but lack the same level of protection.

• ECT Act's Protective Measures: The ECT Act provides additional consumer-protection measures alongside existing laws and the Consumer Protection Act 68 of 2008 (CPA).

• ECT Act's Precedence: The ECT Act maintains its precedence in certain instances over the CPA. For example, the disclosure of the price of goods or services are only subject to the provisions of section 43 of the ECT Act.

• Conjunction with CPA: Consumer protection under the ECT Act must be considered alongside the CPA.

• Consumer Rights: Consumer rights covered: information, review, secure payment, withdrawal, protection against spam, prompt performance, and rights against avoidance.

6.4.2.2 The Scope of Chapter VII

• Section 42: Section 42 deals with the scope of the consumer-protection provisions contained in Chapter VII.

• Electronic Transactions: Chapter VII focuses on electronic transactions involving consumers.

• Definition of Consumer: The ECT Act defines a "consumer" as any natural person engaging in an electronic transaction with a supplier as the end-user of goods or services.

• Challenges in Defining Consumer: It can be challenging to define who should be regarded as 'consumers'.

• Small Businesses: Small businesses, corporations, or trusts may have similar bargaining disadvantages as consumers.

• Arbitrary Distinction: To overcome the difficulty in defining consumer transactions, an arbitrary distinction is used on policy grounds differentiating natural persons and legal persons based on their predominant use.

• Alignment with EU: The definition aligns with the European Union's but differs from the CPA, which includes some small juristic persons.

• Distance Selling Directive Definition: The Distance Selling Directive defines a consumer as any natural person acting for purposes outside his trade, business, craft, or profession.

• Transactions Outside Chapter VII: The following transactions do not qualify for protection under Chapter VII of the ECT Act:

  • Legal Persons: Transactions between legal or artificial persons.

  • Trusts: The position of a trust is problematic, but if the goods or services are for the benefit of the trust as an end-user, the transaction would likely fall within Chapter VII.

  • Non-End Users: Transactions between a webtrader and a natural person not procuring the goods or services as an end-user but for business purposes, such as on-selling.

  • End-User Status: Even if goods are used in an individual's business, they are considered an end-user (e.g., sole proprietors buying software). It is submitted that the onus of proving that a party is a consumer should be on that party.

• Electronic Transactions: The term "electronic transaction" is not defined in the ECT Act but is defined as a commercial or non-commercial transaction that includes the provision of information and e-government services.

• Scope of Definition: The definition seems to widen from the normal legal meaning by including non-commercial transactions.

• Meaning of Transaction: In the Compact Oxford English Dictionary a transaction is defined as "1 an instance of buying or selling. 2 the action of conducting business. 3 an exchange or interaction between people".

• Wider Meaning: The inclusion of non-commercial transactions indicates a wider meaning should be used.

• All Data Messages: An "electronic transaction" includes the exchange of all data messages between the webtrader and the consumer, whether of a contractual nature or not.

• Relevance: Consumer-protection provisions apply when a consumer is concluding a contract or wants to escape its negative consequences.

• Application Limited: Chapter VII applies only to electronic consumer transactions, not general consumer transactions.

• Problem with Partial Electronic Conclusion: A problem arises when a transaction is partly electronic and partly by other means. Buys proposes that Chapter VII should apply whenever part of the transaction is electronic.

• Definition of Consumer: A 'consumer' is a natural person who enters or intends to enter into an electronic transaction with a supplier as the end user of the goods or services offered by that supplier.

• Exclusions: Section 42(3) excludes transactions between a regulatory authority and consumers if the authority's establishing Act includes consumer-protection provisions for electronic transactions. Section 42(3) is poorly drafted and obscure and it will likely remain a dead lette rin the Act.

  • Transactions covered under that Act will not be subject to the provisions of the ECT Act.

• Cooling-off Period: Section 42(2) excludes certain transactions from the cooling-off period in section 44 and are dealt with in paragraph 6.4.2.5

6.4.2.3 Informational Duties of the Webtrader

• Section 43: Section 43 requires webtraders to supply certain information on their websites to ensure consumers have comprehensive details about the webtrader, goods/services, agreement terms, rights, returns policy, privacy policy, and security measures.

• Cancellation Right: The trader's failure to supply this information gives the consumer a right to cancel the agreement within 14 days of receiving the goods or services.

• Required Information:

  • Webtrader Identity: Full name, legal status, registration number (if applicable), names of office-bearers, and place of registration.

  • Contact Information: Physical address, telephone number, website address, and e-mail address of the webtrader, including the physical address for legal service of documents.

  • Legal Service: In terms of section $23(c)$, physical addresses given will be deemed to be the webtrader's usual place of business for the purposes of establishing jurisdiction, and a place for the conclusion of any contract and service of legal documents such as demands and summonses.

  • Membership Details: Membership of self-regulatory, accreditation or professional bodies and their contact details (e.g., Banking Council, Advertising Standards Authority, WASPA, professional bodies of attorneys, financial advisors, and estate agents).

  • Code of Conduct: Any code of conduct the webtrader follows and how consumers can access it electronically. Website address should be sufficient although a hyperlink is more user-friendly and meets the requirements of the Act (e.g., SA Insurance Association Code of Good Practice, Banking Code of Practice, WASPA).

  • Goods/Services Description: Adequate description of the main characteristics of the goods or services offered (measured by the consumer making an informed choice). This information should include all the characteristics and specifications of the product or service a reasonable consumer will usually consider when procuring those goods or services.

  • Price: Full price of goods/services, including transport costs, taxes, and any other fees, along with payment methods. The trader's failure to provide the consumer with the total price payable entitles the consumer to cancel the agreement within 14 days of receiving the goods or services.

  • Terms of Agreement: Terms of agreement, including guarantees, and how consumers can access, store, and reproduce them electronically. Webtraders should ensure that the version of the terms downloaded is identifiable. The contractual reference to or inclusion of these terms must comply with at least the general requirements for the incorporation of such terms otherwise they will not be deemed part of the contract.

  • Delivery Time: Estimated dispatch/delivery time for goods or services. Many webtraders will offer a package-tracking service. Usually webtraders will provide the date of dispatch with an estimated date of delivery as delivery may be subject to risks outside the control of the webtrader.

  • Transaction Record: How consumers can access and maintain a full record of the transaction: (a) downloading/printing details upon completion; (b) receiving details via e-mail; (c) storing details on the website with accessibility for the consumer with an indication of how long the transaction will be accessible in this manner.

  • Return Policy: Return, exchange, and refund policy (can be a separate policy or part of standard terms). If the trader's policy is not to accept returns or exchanges or make refunds, this must be clearly stated.

  • Dispute Resolution: Any alternative dispute-resolution code the webtrader subscribes to and how to access it electronically (e.g., Banking Council, Insurance Association). The decision of the body or person responsible is usually binding on the webtrader but not on the consumer, allowing the latter to resort to litigation or arbitration.

  • Security and Privacy: Security procedures and privacy policy regarding payment, payment information, and personal information (usually accessible via hyperlink). The webtrader is obliged to maintain a payment system that is sufficiently secure in the light of existing technology, and its privacy policy must indicate the manner in which the consumer's personal information will be stored and used and whether it will be made available to third parties.

  • Minimum Duration of Agreement: When appropriate, the minimum duration of the agreement in the case of agreements for the supply of products or services to be performed on an ongoing basis or recurrently. In addition, the website should provide for the termination of the ongoing service after the minimum period, should the consumer wish to terminate the agreement.

  • Consumers' Rights: Consumers' rights in terms of section 44, when applicable. It is submitted that this provision - section $43(1)(r)$ - requires the webtrader to indicate that section 44 is applicable whenever it is applicable and that the trader be bound by such indication.

• Consequences of Non-Compliance: If the supplier fails to comply with these informational duties, the consumer can terminate the agreement within 14 days of receiving the goods or services and the goods must be returned to the webtrader at the expense of the consumer. The webtrader must refund all payments made by the consumer, but is entitled to subtract the costs of returning the goods if the consumer has not paid those costs.

6.4.2.4 Transactional duties of the webtrader

A Transaction summary

• Review and Correction: During the electronic negotiation of the electronic transaction , the webtrader must give the consumer the opportunity to review the entire electronic transaction, to correct any mistakes and to withdraw from the transaction if he or she wish to do so.

• Consequences of Failure: Failure to give consumers this opportunity has consequences in terms of sections $43(2)$ and 20, the latter of which deals with automated transactions.

• Withdrawal Right: In terms of section $43(2)$ of the ECT Act, the consumer is entitled to withdraw from the transaction within 14 days of receiving the goods or services if the webtrader failed to give her or him the prescribed opportunity to review, correct and withdraw.

• Retrospective Cancellation: In terms of section 20 of the Act the agreement may be cancelled with retrospective effect by the consumer if the webtrader fails to give the consumer the opportunity to prevent or correct a mistake at the time of the consumer's interaction with the electronic agent, provided that the consumer made a material error, notifies the webtrader of the mistake as soon as possible after becoming aware of it, takes reasonable steps to return or destroy the goods (as instructed by the webtrader) and receives no material benefit from the goods. When the consumer (successfully) relies on section 20, he or she is under no duty to pay for