Hahn & hahn attorneys at law ATTORNEYS - NOTARIES - CONVEYANCERS Consumer Protection Act: Impact on...

hahn & hahnattorneys at law

ATTORNEYS - NOTARIES - CONVEYANCERS

Consumer Protection Act:Impact on Auction Industry

12 March 2011By

Janusz F Luterek, Esq.Pr.Eng, Attorney, Patent Attorney

Partner at Hahn & Hahn Attorneys


Delayed Implementation

The implementation of most of the Sections of the CPA, with the exception of the Strict Liability for defective or unsafe goods, has been delayed to 1 April 2011 1 April 2011 to allow for the promulgation of regulations

Strict Liability is in place since 24 April 201024 April 2010


Intention of the Act: to protect all consumers, focusing on the previously disadvantaged, the poor, the poorly literate, the uninformed, and all S.M.M.E.’s, against the uneven balance of power when dealing with business (applicable even to small businesses).

Consumer ≠purchaser – even if got for freeApplicable to all transactions in South Africa in South Africa except◦ Where state is consumer◦ Where the consumer has a turnover in excess of R 3 million

i.e. big business is not a consumer protected by this Act◦ Where specific exemption by Minister – none for now

Strict liability applicable even to exempted transactions!

Purpose of CPA


1. Right to equality in the consumer market and protection against discriminatory marketing practices

2. Right to privacy• Right to restrict unwanted direct marketing• Right to discontinue receipt of direct marketing at any time3. Right to choose• Selection of goods• Selection of suppliers• Examine goods before purchase is final

Consumer Rights


4. Right to disclosure of information by producer, retailer, caterer etc• Right to information in plain and understandable language

– Specific regulations on advertising etc by auctioneers

• Right to disclosure of prices of goods and services– Reserve price must be disclosed prior to auction

• Right to sales records• Right to identification of deliverers, installers and others

Consumer Rights


Consumer Rights• Information in Plain and Understandable Language

– Plain language is required on packaging and inserts– Ordinary person of the class of intended consumer with average literacy skills, but

no special skills as a consumer, must understand its significance and importance– Layout, use of vocabulary, use of images, etc all considered– Guidelines will be published– Especially important for advertising and marketing, terms and conditions, waivers

and disclaimers, warnings of hazards, description of goods!


5. Right to fair and responsible marketing• Right to protection against bait marketing

– Out of hand sales at an auctioneers premises is not an auction!

• Truthfull and honest descriptions and explanations6. Right to fair and honest dealing• Right to protection against unconscionable conduct• Right to protection against false, misleading info or deception• Right to assume that suppliers are entitled to sell goods• Procedure for sales by auction defined in the Regulations

– Owner or auctioneer bidding – MUST state this upfront

• Right to refuse changes and substitution of goods

Consumer Rights


7. Right to fair, just and reasonable terms and conditions• Right to protection against unfair, unreasonable or unjust contract

terms e.g. Requiring a consumer or restaurant to waive claims• Right to obtain notice for certain terms and conditions• Right to obtain free copies of agreements/contracts• Right to refuse prohibited transactions, agreements and terms or

conditions• Right to approach the Court to ensure fair and just conduct, terms

and conditions• Right to have a sale by auction declared void if owner or auctioneer

bids without prior notice to all bidders

Consumer Rights


8. Right to fair value, good quality and safety• Right to demand quality service – auctioneering is a service!auctioneering is a service!

– Refund of fees chargedRefund of fees charged

• Right to safe, good quality goods – goods sold on auction do not carry the mandatory quality warrantees and are sold “VOETSTOOTS” but beware of out of hand sales at an auction as these are NOT protected in the same way and then the warranty on goods, including the right to return or have repaired for 6 months will apply regardless!

• Right to receive warnings on the fact and nature of riskswarnings on the fact and nature of risks• Right to claim damages for injuries caused by unsafe/defective goods

against the seller (beware of out of hand sales)• Principal is jointly liable with an agent for liability, not criminal!

Consumer Rights


Auctions and the CPA• Auctions seen as particularly problematic and industry needs to be Auctions seen as particularly problematic and industry needs to be

cleaned up – Minister of Justice - March 2010 at Gallagher Estatecleaned up – Minister of Justice - March 2010 at Gallagher Estate• Section 45 and Regulations – extensive• ECT Act also applies for internet transactions BUT auctions are excluded

from the right of return under the ECT Act• Definition: “auction” includes a sale in execution of or pursuant to

a court order, to the extent that the order contemplates that the sale is to be conducted by an auction.

• Each lot is a separate transaction• Sale complete on fall of hammer fall of hammer or other customary manner - bid can - bid can

be retracted until thenbe retracted until then!


Movable and Immovable PropertyDraft regulations make very little distinction between movable and immovable property

Draft Regulation 24 (7), states the selling of immovable property must also adhere to other applicable laws

activities of estate agents

Deeds registry – transfer of property and thus conclusion on registration not fall of hammer!


Various Provisions• Must first advertise the auction, print or

electronically, before the auction is held:– At least 24 hours before movable property auction– A minimum of 5 days before immovable property

auction– Onus on auctioneer to prove auction was advertised

beforehand


Various Provisions• Despite the rules and rulings of any advertising standards

body, all advertising of auctions must -

(a) be accurate; and

(b) provide sufficient information for a reasonable consumer to-

(i) understand that it relates to an auction; and

(ii) be able to find the place where the auction is to be held.


Sale in Execution Ads• An auction may not be advertised as a "sale in execution" or use similar

wording implying court action unless -(a) at least 75% of the items or lots in the auction are being offered pursuant to a court order;(b) the items or lots were clearly not purchased or attained for the purpose of resale at auction;(c) the advertising contains an explanation of the court order includingidentification of the court.

• If not all “in execution” then advertising must indicate that the auction is "with additions", "supplemented" or use similar wording.

• Same rules for an insolvency auction, deceased estate auctions, divorce auctions


Absolute Auctions• no liens or encumbrances on the goods, except property tax obligations,

easements, or restrictions of record, in favour of any person other than the seller, or unless each and every holder of each and every lien and encumbrance has in writing agreed to the unqualified acceptance of the highest bid for the property

• bona fide intention at the time of the advertising and at the time of the auction to transfer ownership of the goods, regardless of the amount of the highest and last bid – CANNOT refer back to seller - no reserve

• Secured party (not lien holder or seller) may bid, a spouse of a divorce may bid, heir may bid

• If both reserve and unreserved lots at same auction then MUST be advertised VERY CLEARLY – not be misleading


Rules of Auction• An auctioneer must provide SIGNED rules:

(a) in writing compile the rules of auction; and(b) except in the case of a livestock or game auction or a closed auction, makethe document available to the general public at least 24 hours prior to thecommencement of the auction.(2) The rules of auction must, as a minimum -- large letters display the words "rules of auction", and immediately beneath that the date, place and time of the auction;- contain the full names, physical address and contact details of the auctioneer, and where applicable, of the auction house;- contain all mandatory information required by these regulations the Act and confirm that they do comply


Rules of Auction- contain the text of subsection (1), (2) and (3) of section 45 of the Act;- auction will commence at the published time and not be delayed to enable anyone to bid - a person who attends at the auction to bid on behalf of another person must produce a letter of authority- state that the auctioneer has a trust account into which all moneys will be paid for the benefit of the seller, minus the agreed commission;- state that the auctioneer will during the auction announce the reason for the auction unless normal and voluntary disposal of goods by the owner;

- provide that a person who intends to bid at the auction must register prior - provide that the bidders' record and the vendor roll are available for inspection

during normal hours without the charge of a fee.


Rules of Auction• The rules of auction may not –- exclude liability in respect of inaccurate information provided in the

advertising of the auction;- exclude liability in respect of the rules of auction not meeting the

requirements of these regulations; or- contain any qualification, reservation or diminution of the requirements

of these regulations unless expressly provided for.• The auctioneer who conducts the auction will be deemed to have so

certified the rules of auction.• An auctioneer is personally accountable and liable auctioneer is personally accountable and liable for the contents of the

rules of auction applicable to a specific auction.


Responsibilities of Auctioneer or Auction House

• Auctioneer must:-Be the agent of the owner of the goods for all aspects of an auction-Must follow all lawful and reasonable request of owner-perform his/her duties to highest of most favourable offer-Perform duties with highest standards-keep abreast of current market conditions of goods at all times to be in position to advise and perform services to best his/her ability


Prohibitions• Auctioneer – guilty of a crime, insolvent• Charging fee or commission for sale of goods unless:

-goods delivered to purchaser-goods registered in purchaser’s name-purchaser has agreed to an arrangement which will ensure delivery of the goods.

• Accepting a bid unless registered in Bidders Record• Setting minimum/reserve price without sellers written permission.• Remove an item or lot without sellers written permission.• Allow bidding if auction has not been advertised.


Prohibitions• Misrepresent item in anyway.• Deviate from advertised sequence• Prevent any person from viewing the advertisement/ rules of auction or

vendors roll• Pay any other person to be appointed as auctioneer. • Auctioneer may not, knowingly, enter any false information in auction record• Auction any property unless the owner has signed a declaration that he/she is

rightful owner of the goods.• Prescribed information not entered in vendor’s role.• Consumers must be afforded reasonable time to inspect goods prior to

auction, no fee charged


Mock AuctionsWhen:

-part of purchase price repaid or credited to purchaser-right to bid restricted to people who have bought or agreed to by other goods-goods given away as gift

No person may promote, take part of conduct a mock auction.

- If proved reduction in purchase price or repayment credit due to defect, which auctioneer came aware only after highest bid made, auction not considered a mock auction.


Internet Auctions• CPA and ECT Acts apply but the cooling off period of online transactions

does not apply• all requirements in respect of an auction must be met

-the relevant electronic medium is available to anyone over the age of 18 any time of the day.-high standards of security are provided for electronic transactions.-the relevant electronic medium provides easy access to all records prescribed in the Regulations.-the internet auction provider provides, in writing, the existence of any circumstance or personal interest in the relevant goods which may give rise to conflict of interest, or perception of conflict of interest.


Vehicle Auctions• name and business of auctioneer

-if auctioneer or auction house conducting sale on his own, auctioneer or auction house liable to discharge the duty of repair.-If auctioneer conducting on behalf of motor vehicle dealer, full details of that dealer, and bank or entity of that dealer.- If auctioneer conducting on behalf of another person, statement that there will be no duty to repair and details of last owner of vehicle.-If owner leased vehicle, statement of that persons name and address.-vehicle’s year of manufacture, first year of registration, manufacturer and model designation, registration number, -vehicle’s engine number, VIN- statement whether or not the reading of the odometer of that vehicle is guaranteed and the reason for the disposal

=


CPA – Penalties and Administrative fines

Consumer Commission may issue “compliance notice” and set deadline for compliance

Non-compliance can be referred to TribunalFine greater of R 1,000,000 or 10% of total turnoverOffences in terms of the Act ◦ Disclosure of confidential information by inspector,

complainant, or any party to proceedings can lead to a 10 year prison sentence

◦ Any other offence can lead to a 12 month prison sentence e.g. ignore compliance notice


REDRESS MECHANISM• Simplified redress mechanism for consumers

– No or very little cost to consumer to pursue claims!• Industry code and Ombud – in process at the moment• ADR Agents – similar to www.getclosure.co.za• Consumer Commission – investigative and prosecutorial• Consumer Court – as already exists in Gauteng and WC• Consumer Tribunal – same one as from NCA• Investigators with powers of search and seizure• Dawn raids by Commission – similar to Competition Act


Consumer Complaint Lodging• Complaints Process (according to DTI pamphlet)• Complaints can be lodged in person, by telephone or in writing.

Remember the following tips before lodging a complaint:• Be clear about the fault/s in the goods you have bought.• It is important to contact the seller as soon as possible with some form of

proof of purchase, explaining the problem and telling the seller what• should be done about it and by when (set a fixed deadline).• Complaining in person can be more effective and Ask to speak to the

person in charge to discuss any concerns. Always keep in mind that there is no point in losing your temper or getting angry, especially if the person is not in a position to authorise a refund. Rather be assertive, without

• being aggressive and be clear about what is wanted, while remaining polite.


Consumer Complaint Lodging• When complaining telephonically, create a complaint diary and use it to list

what happened, when it happened and with whom you spoke, as this will help as a reminder when discussing the complaint. Always follow up your call with a letter.

• Written complaints should be directed to the manager or customer services, confirming your visit and any promise or response made.

• Keep records of communication with the seller, including copies of all receipts, letters, e-mails and notes from telephone conversations (including the dates, times and what was discussed).Never send original documents – send photocopies.

• If you are unsure about where you stand, enquire about your legal rights before confronting the seller/business.


Consumer Complaint Handling• Protocols and procedures required• Document every step or record every call (inform consumer of this)• Do not make admissions of liability or apologies, merely record the

facts to start with• Allow consumer to vent – tell their whole story as they see it

uninterrupted and do not correct them• Afterwards, ask a specific list of questions to get clarity on certain

issues• GET BACK TO CLIENT WITHIN PROMISED TIME AND KEEP THEM

INFORMED OF UNEXPECTED DELAYS – LABS ETC• Quick turnaround time is essential


Industry Codes• Section 82 allows for an industry to write a code and have an ombud• Industry to draft code and submit to Commission for consultation,

public comment – regs have process for this!• Code approved by Minister – binds whole industry, not just those

industry members who wrote it – REGULATES INDUSTRY• Paid for by industry?• Investigators employed• Ombud makes a recommendation, not a ruling• Escalate to Consumer Commission


Conclusion• Compliance is not optional and there are extremely sever consequences for

non-compliance

• Product liability section already in effect as from 24 April 2010

• Most likely the rest of the Act will come into effect on 1 April 2011 from which time compliance with the rest of the Act will be mandatory and thus steps should be taken NOW to ensure compliance

• Review and revise existing practices and documents as doing more of the same simply won’t be good enough.


Thank You

Questions?

862 Church Street P.O. Box 55675Cnr Church & Lisdogan Strs Arcadia 0007Lisdogan Park, Pretoria Republic of South AfricaRepublic of South Africa

Tel: +27 12 342 0563Fax: +27 12 349 9459

Email: [email protected]: www.hahnlaw.co.za

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