Preventing the wool being pulled over consumers’ eyes: The consumer goods and services industry code of conduct and ombud

By Justine Krige

The draft consumer goods and services industry code of conduct was published for public comment on 3 October 2014. On 30 March, the final consumer goods and services industry code of conduct (code), including the Consumer Goods and Services Ombud (CGSO), was prescribed by the Minister. This code and the CGSO are intended to compliment consumers’ existing basket of rights under the Consumer Protection Act 68 of 2008 (CPA).

South African industry codes

In terms of s 82(2) of the CPA, the Minister may prescribe an industry code regulating the interaction between or among persons conducting business within an industry, or between an industry and consumers. To date, only two industries have issued codes of conduct in terms of this provision. The first is the automotive industry South African Automotive Industry Code of Conduct (SAAICC) and second is the consumer goods and services industry, which is addressed below.

The code and the CGSO

The code and the CGSO were established as a guide for the minimum standards of conduct expected of suppliers of goods and services when engaging with consumers, and to assist in resolving disputes that arise between consumers and industry members in terms of the CPA. It therefore, operates in addition to the CPA, rather than as an alternative. The code applies to all participants involved in the supply chains that provide, market and/or offer to supply goods and services to consumers, including, for example, importers, distributers and retailers in the clothing, food and beverage, tobacco, cosmetics, hospitality and leisure industries, as well as many others.

The code is premised on a self-funding model of regulation that requires industry participants to register and pay membership fees. While this will certainly solve any potential funding problems, the extent to which individuals and businesses buy into this model remains to be seen. In order for the objectives of the code to succeed it will be necessary for industry players and other stakeholders to become involved, and for a culture of participation to develop.

The code

The purpose of the code is to raise standards of good conduct in the industry and educate consumers as to their rights. The code, therefore, has a strong emphasis on transparency, effective process and education of suppliers and consumers, alike.

The code places an obligation on all participating individuals and businesses in the goods and services industry to, among other things –

•	establish an internal complaints handling process;
•	ensure that the relevant staff in their business have adequate knowledge of the CPA; and
•	to keep adequate records of complaints and how such complaints were addressed. 

This aims to highlight the importance of general compliance with the spirit and purport of the CPA by participants and their staff on a daily basis. This increased level of awareness is certainly a step in the right direction.

The CGSO

In terms of s 82(6) of the CPA, if an industry code provides for a scheme of alternative dispute resolution and the commission considers that the scheme is adequately suited to provide alternative dispute resolution services, the commission may recommend that the scheme be accredited as an ‘accredited industry ombud’. The code has done just that through the establishment of the CGSO (which will be funded by subscription fees payable).

The purpose of the CGSO is to provide a scheme of alternative dispute resolution that is specific to the goods and services industry. The code sets out the powers and functions of the CGSO, and the complaints process to be followed in laying a complaint with the CGSO. A clear process and strict time lines have been set out in the code which, if complied with, will hopefully lead to the swift resolution of consumer complaints. In simple terms, once a complaint has been laid with the CGSO, it will carry out the necessary investigation and make a recommendation. The CGSO may refer the matter for mediation. Neither the complainant nor the participant shall be bound to accept the recommendation. If the matter is resolved as a result of both parties accepting the recommendation, the CGSO may submit such findings to be made an order of court in order to add a layer of legal enforceability to the resolution. The CGSO is also mandated to keep comprehensive records of all complaints, and to compile an annual report including information on complaint types and businesses being complained about. This will hopefully assist in identifying systemic and recurring problems that participants need to address.

As the code was drafted for industry and by industry participants, it will hopefully be more relevant and effective for them than the general provisions of the CPA, particularly as one of the criteria to be used to resolve disputes by the statutory regulators is consideration of the applicable industry code and guidelines. In this regard, it is noteworthy that the code specifically states that the CGSO’s staff members conducting alternative dispute resolution should have, appropriate to the subject matter of the complaint and the level of the CGSO process: Qualifications and experience in law, commerce, industry and dispute resolution, knowledge of the technical aspects of the goods and services provided in the industry and an understanding of the CPA. This should provide participants and consumers alike with a level of comfort that the matter is being dealt with by a suitably qualified person who has the relevant technical expertise.

In terms of s 82(7) of the CPA, the National Consumer Commission still has an obligation to monitor the effectiveness of any industry code. This oversight mechanism is absolutely key in order to ensure that it functions effectively, and can be amended progressively as issues are identified that require attention.

Conclusion

It is likely that South Africa will have a greater number of industry codes in the future. As the code and CGSO are still in their infancy, no complaints have yet been laid and/or dispute resolution conducted following the outlined procedure to date. However, it is hoped that the code and the CGSO will assist in creating greater certainty for consumers and suppliers. In addition, the introduction of the CGSO as an alternative dispute resolution mechanism for the good and services industry may have the effect of alleviating the strain experienced by the already over-burdened Consumer Commission.

However, while, a far-reaching and empowering piece of legislation (from a consumer-perspective), as with many existing policies and dispute resolution mechanisms in South Africa, the powers and effects are only as good as the structures and people in place. The SAAICC has already had some success in resolving disputes arising in its industry at the appropriate level. Hopefully, the same will be said in due course for the code and the CGSO.

Justine Krige BSocSci LLM (UCT) is an attorney at Cliffe Dekker Hofmeyr Inc Cape Town.