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Home > Lectures > Lecture 5. Advertising & Marketing > Fair & Responsible Marketing
Lecture 5. Advertising & Marketing

Fair & Responsible Marketing

The CPA provides comprehensively for other aspects of marketing. As stated above, these provisions are applicable to electronic transactions, unless expressly excluded. Some of the provisions that are applicable to electronic transactions are summarised or listed below.

CPA section 29: right to fair & responsible marketing
This section provides that a producer, importer, distributor, retailer or service provider must not market any goods or services—

(a) in a manner that is reasonably likely to imply a false or misleading representation concerning those goods or services, as contemplated in section 41; or

(b) in a manner that is misleading, fraudulent or deceptive in any way, including in respect of—

(i) the nature, properties, advantages or uses of the goods or services;

(ii) the manner in or conditions on which those goods or services may be supplied;

(iii) the price at which the goods may be supplied, or the existence of, or relationship of the price to, any previous price or competitor’s price for comparable or similar goods or services;

(iv) the sponsoring of any event; or

(v) any other material aspect of the goods or services.”

CPA section 30: bait marketing
A supplier is prohibited from advertising goods or services and alleging that they are available at a specified price in a manner that may mislead or conceive about the actual availability at the advertised price. If a supplier advertises particular goods or services, states a price and the advert states there is a limitation in respect of availability (e.g. “while stocks last”), the supplier must make those goods or services available at that price, to the extent of the expressed limits.

CPA section 31: negative option marketing
This section prohibits suppliers from using negative option marketing. This type of marketing occurs where suppliers offer goods or services to consumers and then regard the goods or services as being automatically sold unless the consumer declines the offer. Section 31 provides that any contracts which are purported to have arisen by failure of a consumer to decline an offer made by a supplier are invalid.

Section 34: Trade coupons and similar promotions
This section is directed at promotional offers and does not apply to franchise agreements; loyalty programmes, loyalty credit or award regulated in terms of section 35; or promotional competitions, as defined and regulated in terms of section 36.

The section defines a promotional offer as “an offer or promise, expressed in any manner, of any prize, reward, gift, free good or service, price reduction or concession, enhancement of quantity or quality of goods or services, irrespective of whether or not acceptance of the offer is conditional on the offeree entering into any other transaction”.

Promotional offers are prohibited where there is no intention of fulfilling the offer (section 34(3)). The sponsor of the offer must ensure that there is enough of the particular prize or reward being offered to meet demand (section 34(5)). No administration, processing or handling fee can be charged to a consumer who is using a trade coupon to make a purchase (section 34(5)(d)). Limitations or restrictions cannot be introduced after the offer has been accepted by a consumer (section 34(6)).

Section 34(4) provides that promotional offers must clearly state the following information

a) the nature of the prize, reward, gift, free good or service, price reduction or concession being offered;

b) the goods or services to which the offer relates;

c) the steps required by a consumer to accept the offer or to receive the benefit of the offer; and

d) the particulars of any person from whom, any place where, and any date and time on or at which, the consumer may receive the prize etc.

Section 35: Customer loyalty programmes
Customer loyalty programs are permitted and loyalty credits/points are a legal form of payment for goods or services offered in the program for purposes of the CPA even if they are not recognised as such by any provision in any other law, agreement or notice (section 35(1)). However a person must not offer participation in a loyalty programme, or offer any loyalty credit or award with the intention of not providing it; or providing it in a manner other than as offered (section 35(2)).

Section 35(3) provides that any document in which a loyalty program is offered must clearly state the following information:

a) the nature of the program, credit or award being offered;

b) the goods or services to which the offer relates;

c) the steps required by a consumer to participate in the program or to receive any benefit in terms of the program.

Section 35 (4) provides that the sponsor of a loyalty program must provide the loyalty awards offered and must ensure that enough of the particular goods or services offered are available. If they are not, the sponsor of the program must notify all members. They are allowed to offer comparable goods or services of the same kind at no additional charge.

Section 36: Promotional competitions

Promotional competitions are defined as

“any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance if—

(i) it is conducted in the ordinary course of business for the purpose of promoting a producer, distributor, supplier, or association of any such persons, or the sale of any goods or services; and

(ii) any prize offered exceeds the threshold prescribed in terms of subsection (11), irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize”.

Section 36(2) prohibits promotions, where a consumer is informed that they have won a competition, where no competition was held, or that person didn’t win, or winning is subject to additional conditions.

 

In terms of section 36 the following rules apply to promotional competitions:

a) Consumers cannot be charged anything for entering a promotional competition.

b) No prize can be awarded to a consumer where it is unlawful to do so.

c) Prizes cannot be awarded to someone related to the promoter or the supplier of the goods or services linked to the competition.

d) Competition rules must be prepared and made available to participants before the beginning of the competition.

e) An offer to participate in a promotional competition must clearly state:

(i) the benefit or competition to which the offer relates;

(ii) the steps required by a person to accept the offer or to participate in the competition;

(iii) the basis on which the results of the competition will be determined;

(iv) the closing date for the competition;

(v) the medium through or by which the results of the competition will be made known; and

(vi) where and how the consumer can obtain a copy of the competition rules and a successful participant can claim their prize.

f) No further conditions or payments requirements can be imposed to claim a prize.

Section 37: Alternative work schemes.
No false representations about the availability of work or the actual profitability of that work can be made when promoting a “work from home” scheme (section 37(1)). The advert for such schemes must include a caution that there is uncertainty as to the extent of work available and the income to be earned (section 37(2) (a)).

The advert for work from home schemes must include the following information (section 37(2) (b)):

a) The full name, or registered business name, of the person promoting the scheme;

b) The address and contact numbers of that person’s primary place of conducting the business; and

c) the nature of the work, business, activity or investment.

No fee may be charged by the promoter of the scheme except to the extent that the person charged has been assigned and performed work or made or received the investment (section 37(4)).

Section 38: Referral selling
Section 38 does not apply to franchise agreements (section 38(3)). Section 38(1) provides that a person must not promote any goods or services on the representation that the consumer will receive a rebate, commission or other benefit if the consumer subsequently gives the supplier the names of consumers; or otherwise assists the supplier to supply goods or services to other consumers; and that rebate, commission or other benefit is contingent upon an event occurring after the consumer agrees to the transaction. A statement by a consumer, whether in an agreement or otherwise, to the effect that the consumer was motivated to enter into a transaction based on referral selling predominately for the value of the goods or services, rather than for the rebate, commission or benefit, is not a defence to an allegation that a person has contravened section 38(1).