Section 35 of the Consumer Protection Act has changed the landscape for suppliers who run customer loyalty programmes as part of their marketing strategy.
Loyalty credit or rewards under these programmes are deemed a legal medium of exchange when redeemed for goods or services offered in the loyalty programme. A supplier or service provider who accepts loyalty rewards or credits as an exchange for any goods or services may restrict the availability of the goods or services during a particular period if they have given adequate notice in writing to the participants at least 20 business days before the beginning of the expected period.
A supplier or service provider may not offer participation in a loyalty programme or offer loyalty rewards if the intention is not to provide it or provide it other than initially offered. A sponsor of a loyalty programme or supplier or service provider who will accept loyalty credits or awards as consideration must ensure that the supply of goods or services suffices to accommodate reasonably expected demands for those goods. Suppose there is an unexpected failure to comply with the aforementioned provision. In that case, the supplier or service provider will have a defence if they offer to supply the consumer with reasonably comparable goods or offer to engage another supplier to supply those goods at the advertised price and the consumer has accepted this or has unreasonably refused the offer.
The supplier may not restrict the capacity to supply those particular goods in exchange for such loyalty credit on any other basis than that it applies to such supply in exchange for any other form of consideration. A supplier or service provider must also not expect a consumer who tenders loyalty credits as consideration to accept inferior quality goods or services than those generally available to any other consumer who tenders an alternative form of consideration.
No additional monetary charge may be imposed for the administration, processing or handling of a loyalty transaction if the consumer is required to pay a periodic fee to remain a member of the programme and may also not demand that a consumer purchase any other goods or engage any other services in connection with a loyalty transaction.
Any document pertaining to a loyalty programme must clearly stipulate the following details:
- The goods or services to which the loyalty programme relates;
- The nature of the loyalty programme, award or credit being offered;
- Any person from whom, the date, time and place on or at which a consumer may gain access to participate in the programme or access the loyalty awards or credits; and
- The steps required to participate in the programme or receive any benefit in respect of the programme.
In conclusion, Section 35 of the Consumer Protection Act seeks to properly regulate the operation of loyalty programmes to protect the consumer from any abuse of such programmes and further seeks to ensure open and transparent dealings with consumers.
Want to know more? Contact your nearest SEESA Consumer Protection and POPI Legal Advisor. Alternatively, leave your details on our website and we will contact you.
About the author:
Carmen Ronne started her career at SEESA in 2011 and is currently a Consumer Protection and POPI Legal Advisor at SEESA’s Durban branch. Carmen was sworn in as an attorney on 17 August 2007 and has experience in the field of civil litigation.
Resources: The Consumer Protection Act 68 of 2008.