27 January 2023
Certain businesses are required by law to be registered and compliant with the Consumer Goods and Services Ombud (CGSO), and failure to do so may lead to severe financial penalties. To understand if your business is required to be registered, we first need a brief understanding of the Consumer Protection Act.
What is the Consumer Protection Act?
The Consumer Protection Act (CPA) was enacted to protect consumers against suppliers of goods and services who may have misled a consumer about the quality of the goods and services and or offered their goods and services on irrational terms. Supplier includes government, businesses, trade unions, associations, municipalities etc. Before the Act was enacted, consumers had little to no recourse against a supplier.
To whom does the CPA apply?
The CPA applies to all agreements concluded between a consumer and a supplier in the ordinary course of business, save for the following exclusions: If the consumer is the State; or where the Consumer is a juristic person whose annual turnover or asset value exceeds or equals R2 million; if it relates to labour law (i.e., a contract of employment or a collective agreement); amounts to a credit agreement in terms of the National Credit Act (i.e., a loan); an agreement concluded outside of South Africa; if the agreement falls outside the ordinary course of business of the supplier, or the CPA exempts it.
Who regulates the CPA?
The CPA is governed and administered by the National Consumer Commission (NCC), whose aim is to encourage and enforce compliance with the provisions of the CPA, ensure fair business practice and uphold customers' social and economic welfare.
The Office of the Consumer Goods and Services Ombud (CGSO) is the industry’s compulsory Ombud scheme which was established in line with the CPA. The CGSO enforces the Consumer Goods and Services Industry Code of Conduct by receiving and dealing with complaints received by a customer completely free of charge.
Who must be registered with the CGSO?
It is compulsory for all Participants and/or entities involved in the Supply Chain that provides, markets and/or offers to supply Goods and Services to Consumers.
‘‘Supply Chain’’, concerning any particular goods or services, means the Collective 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. It is required for all Participants to register with the CGSO to contribute towards its funding by paying a joining fee and an annual fee. Participants must be in full compliance with the Code.
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).
Who is excluded from registering with the CGSO?
Clause 4.4 of the Code excludes transactions that are not covered by the CPA and/or that are governed by other public regulation; the automotive industry, Electronic Communication Service as defined in section 1 of the Electronic Communications Act, 2005 (Act No. 36 of 2005) and transactions with organs of state or financial institutions.
What will happen if a Participant does not register or comply with the Code?
The participant will be in contravention of section 82(8) of the CPA, and his/her or its non-participation may be considered an aggravating factor should the company appear before the NCC, which has the power to levy fines of up to 10% of annual turnover. The Code also empowers the CGSO to sue companies that refuse to pay their participation fees.
Please contact our offices at 0861 737 263 if you have any queries or require assistance regarding CGSO and implementing the necessary agreements and policies.
