How does the Consumer Goods and Services Ombud affect transport operators?

The Consumer Goods and Services Industry Code and accreditation of the Alternative Dispute Resolution Scheme are somewhat complicated. How do they affect your business and how is this scheme funded?

Recently, the Road Freight Association (RFA) was approached by operator members with questions about the Consumer Goods and Services Ombud (CGSO). This requires companies supplying or offering transport (operators) to comply with the Consumer Goods and Services Industry Code. As “Participants” according to the Code’s definitions, operators must register with the CGSO and contribute towards costs of the CGSO by paying an annual fee, which is based on the annual turnover of the company.

These are the annual fees you will be paying to the CGSO:

WHO IS REQUIRED TO PARTICIPATE?

On 30 March 2015, Government Gazette No 38637 was published in terms of Section 82 of the Consumer Protection Act, Act 68 of 2008, having been authorised by Rob Davies, then Minister of Trade and Industry, on 13 March. The Gazette came into effect 30 days after publication, on 29 April 2015.

The Consumer Goods and Services Code of Conduct is accredited in terms of Section 82 of the Consumer Protection Act, Act 68 of 2008 (CPA) to guide industry as to what is considered the minimum standard of conduct expected when engaging with consumers and to assist in resolving disputes between consumers and industry. Because the Code is recognised in terms of the CPA it is enforceable against Consumer Goods and Services Industry participants. A failure to comply with the Code is considered a contravention of Section 82(8) of the CPA, which states that a supplier must not, in the ordinary course of business, contravene an applicable industry code. One of the main objectives of the scheme is to provide an alternative dispute resolution mechanism as described in Section 82(6) of the CPA.

The Code applies to a “Participant” as defined. Any entity operating within the Consumer Goods and Services Industry is bound by the Code, unless expressly excluded by Clause 4.1. This reads: “The Code applies to all Participants, unless they are regulated elsewhere by other public regulation, a Code prescribed by the Minister in terms of Section 82 of the CPA and/or where a complaint falls within the Jurisdiction of an Ombud with Jurisdiction, or an Industry Ombud accredited in terms of Section 82(6) of the CPA.”

In cases where a consumer has a complaint against a financial institution, the FAIS Ombud would have jurisdiction and the CGSO would not have the capacity/jurisdiction to act.

In terms of Clause 4.2 it is mandatory for all Participants above to comply with the Provisions of the Code, to register with the CGSO in accordance with the procedures provided on the CGSO website from time to time, and to contribute towards the funding of the CGSO in accordance with the funding model as set out in Clause 6.2. This clause requires Participants to pay a joining fee, an annual levy, and a special levy as determined from time to time by the CGSO Board. 

The CGSO is entitled to take legal action to recover any outstanding fees or levies owed by a Participant.

In Clause 4.4 this Code excludes transactions that are not covered by the CPA and/or that are governed by other public regulation; the automotive industry; any Electronic Communication Service as defined in section 1 of the Electronic Communications Act, Act 36 of 2005; and transactions with organs of state or financial institutions.

Any provision of this Code that is inconsistent with the CPA is invalid. If one were to read the definition of service at paragraph “d”, it is clear that the transportation of goods as a component of supply chain services would make an operator a Participant and thereby require compliance with the Code, registration with the CGSO, and contribution towards the funding of the CGSO.

COURT CHALLENGE

It is noteworthy that mandatory compliance with the Code; registration with the CGSO; and payment of joining fees, annual fees, and special fees/levies from time to time have been challenged in the Gauteng Division of the High Court in Pretoria before Acting Judge JJ Strijdom, on 3 February 2021, with the judgement date being 26 March 2021. 

In case number 18096/2017, the full parties were the Consumer Goods and Services Ombud NPC (First applicant) and the Consumer Goods and Services Ombudsman (Second applicant), versus Voltex (Pty) Ltd (First respondent), Minister of Trade and Industry (Second respondent), The Consumer Goods Council (Third respondent), and Astral Operations (Ltd) (Fourth respondent).

This is an interesting case and makes for good reading. You can find the judgement here.

FAILURE TO COMPLY CAN BE COSTLY

Failure to comply with and register for the Code could result in Late Joining Penalties.

In a December 2021 CGSO press release, participants (eligible suppliers of consumer goods and services) were given until 1 March 2022 to join the scheme. At the time, the Board of the CGSO had approved a late joining fee at 25% of the annual Participant fee.

The CPA provides for penalties and administrative fines as follows:

PENALTIES

(1) Any person convicted of an offence in terms of this Act is liable:

  (a) in the case of a contravention of section 107 (1), to a fine or to imprisonment for a period not exceeding 10 years, or to both a fine and imprisonment; or

  (b) in any other case, to a fine or to imprisonment for a period not exceeding 12 months, or to both a fine and imprisonment.

(2) Despite anything to the contrary contained in any other law, a Magistrate’s Court has jurisdiction to impose any penalty provided for in subsection (1).

ADMINISTRATIVE FINES

(1) The Tribunal may impose an administrative fine in respect of prohibited or required conduct.

(2) An administrative fine imposed in terms of this Act may not exceed the greater of:

  (a) 10% of the respondent’s annual turnover during the preceding financial year; or

  (b) R1,000,000.

(3) When determining an appropriate administrative fine, the Tribunal must consider the following factors:

  (a) The nature, duration, gravity, and extent of the contravention.

  (b) Any loss or damage suffered as a result of the contravention.

  (c) The behaviour of the respondent.

  (d) The market circumstances in which the contravention took place.

  (e) The level of profit derived from the contravention.

  (f) The degree to which the respondent has cooperated with the Commission and the Tribunal.

  (g) Whether the respondent has previously been found in contravention of this Act.

(4) For the purpose of this section, the annual turnover of a supplier at the time when an administrative fine is assessed, is the total income of that supplier during the immediately preceding year, as determined in the prescribed manner.

(5) A fine payable in terms of this section must be paid into the National Revenue Fund referred to in section 213 of the Constitution.

DEFINITIONS

The following definitions in terms of the Consumer Protection Act are relevant. This clarifies the meaning of terms and words used:

“Consumer Goods and Services Industry” means all Participants and/or entities involved in the Supply Chain
that provide, market, and/or offer to supply Goods and Services to consumers, unless excluded in terms of Clause 4.4 hereof.

“Participant” means any entity operating within the industry bound by the Code unless expressly excluded by Clause 4.1 hereof.

‘‘Supply chain’’, with respect to any particular goods or services, means the collectivity of all suppliers who directly or indirectly contribute in turn to the ultimate supply of those goods or services to a consumer, whether as a producer, importer, distributor, or retailer of goods, or as a service provider.

‘‘Service provider’’ means a person who promotes, supplies, or offers to supply any service.

“CGSO” means the Consumer Goods and Services Ombud, an Ombud Scheme set in accordance with and accredited in terms of section 82(6) of the CPA which is enforceable against Participants.

“Code” means this accredited Industry Code for the Consumer Goods and Services Industry as amended from time to time.

‘‘Consumer’’, in respect of any particular goods or services, means:

(a) a person to whom those particular goods or services are marketed in the ordinary course of the supplier’s business.

(b) a person who has entered into a transaction with a supplier in the ordinary course of the supplier’s business, unless the transaction is exempt from the application of this Act by section 5(2) or in terms of section 5(3).

(c) if the context so requires or permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether that user, recipient, or beneficiary was a party to a transaction concerning the supply of those particular goods or services.

(d) a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5(6)(b) to (e).

“CPA” means the Consumer Protection Act, 2008 (Act No. 68 of 2008), the Regulations thereto, and any amendments that are effected from time to time.

‘‘Goods’’ includes:

(a) anything marketed for human consumption.

(b) any tangible object not otherwise contemplated in paragraph (a), including any medium on which anything is or may be written or encoded.

(c) any literature, music, photograph, motion picture, game, information, data, software, code, or other intangible product written or encoded on any medium, or a licence to use any such intangible product.

(d) a legal interest in land or any other immovable property, other than an interest that falls within the definition of ‘service’ in this section.

(e) gas, water, and electricity.

‘‘Service’’ includes, but is not limited to:

(a) any work or undertaking performed by one person for the direct or indirect benefit of another.

(b) the provision of any education, information, advice, or consultation, except advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002).

(c) any banking services or related or similar financial services, or the undertaking, underwriting, or assumption of any risk by one person on behalf of another, except to the extent that any such service:

  (i) constitutes advice or intermediary services subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); or

  (ii) is regulated in terms of the Long-term Insurance Act, 1998 (Act No. 52 of 1998), or the Short-term Insurance Act, 1998 (Act No. 53 of 1998).

(d) the transportation of an individual or any goods.

(e) the provision of:

  (i) any accommodation or sustenance.

  (ii) any entertainment or similar intangible product, or access to any such entertainment or intangible product.

  (iii) access to any electronic communication infrastructure.

  (iv) access, or a right of access, to an event or to any premises, activity, or facility.

  (v) access to or use of any premises or other property in terms of a rental.

(f) a right of occupancy of, or power or privilege over or in connection with, any land or other immovable property, other than in terms of a rental.

(g) rights of a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5(6)(b) to (e), irrespective of whether the person promoting, offering, or providing the services participates in, supervises, or engages directly or indirectly in the service.

Contacting the Consumer Goods and Services Ombud to register as a Participant

Log onto the CGSO website, email your enquiry to info@cgso.org.za, or call 011 781 2607 / 08600 00 272 (Share Call). On the CGSO webpage you can select the “Participants” tab (5^th from left) and the dropdown menu will provide you with a “Register” tab that will enable you to register online or download a Registration Form.