With thanks to Elizebeth De Stadler The Consumer Protection Act Referral selling is prohibited. This means that is very important for suppliers to determine whether their marketing strategy falls within the definition of referral selling in the CPA or not. Section 38 provides that a supplier cannot offer a consumer a ‘rebate, commission or other benefit’ for giving the supplier the names of other consumers or if the consumer ‘otherwise assists the supplier to supply goods or services to other consumers’. However, this is only prohibited if ‘that rebate commission or other benefit is contingent upon an event occurring after the consumer agrees to the transaction.’ This means that there are three requirements before a supplier will be engaging in illegal referral selling. (a) There must be a rebate, commission or other benefit given In order for there to be referral selling the consumer must be offered something in exchange for assisting the supplier. The wording of the section is wide. It includes the rebates, commissions or any other benefit. Examples include discounts, additional free products, vouchers for future purchases etc. The point is that it includes any other benefit, not just the obvious ones. (b) In exchange for names of consumers or other assistance The consumer must qualify for the benefit by either giving the supplier the names of other consumers or ‘otherwise assist[ing] the supplier to supply goods or services to other consumers’. This means that referral selling not only refers to the supply of names but also any other information which assists the supplier in supplying its products. (c) The benefit must be ‘contingent upon an event’ which takes place after the consumer agrees to the transaction The third requirement is the hardest to interpret. A strategy will not be referral selling (and will therefore be legal) if the benefit is not ‘contingent upon an event occurring after the consumer agrees to the transaction.’ The events described here are buying a product or opening an account. So if a new sale has to take place before the consumer qualifies for the benefit, the marketing strategy qualifies as referral selling and is illegal. If all the consumer has to do is to provide the details of other persons to qualify, the practice is not referral selling and is legal in terms of the CPA. However, this is not the end of the story, as the practice of collecting personal information will soon be governed by the Protection of Personal Information Bill. cpacompliant.co.za
Posted on: Mon, 02 Sep 2013 09:02:35 +0000
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