Our firm gets regular complaints from tenants, renters of office equipment, members of gyms etc that their cancellation rights in section 14 of the Consumer Protection Act are being flouted. So it was with excitement that we read the judgment of 13 October 2023 by the National Consumer Tribunal against Vodacom finding them guilty of prohibited conduct and imposing a R1 million fine. This judgment is a wake-up call for the telephony industry, which has a reputation among consumer lawyers as being one of the least compliant with the Consumer Protection Act.
It centres around Vodacom’s erstwhile practice of sending a customer who notifies them that he or she wishes to cancel their contract with Vodacom, a letter with a quotation for a cancellation fee of 75% of fees for the remaining contract period, which the customer is supposed to sign and return to Vodacom with proof of payment and other documentation. The letter stated that the offer is valid for 12 days, and if the customer doesn’t send Vodacom proof of payment and the other documentation, the contract will remain inf force for the rest of the 24 month period and then continue on a month to month basis. This practice is completely illegal in terms of the Consumer Protection Act.
We learn from the judgment that:
- consumers cannot be held to ransom by a letter from the supplier requiring them to pay a hefty cancellation fee and agree to the supplier’s cancellation terms before they are willing to agree to cancellation of the contract
- consumer can’t be billed for monthly charges after cancellation- a consumer must give a month’s notice and pay for the notice period
- a supplier can charge a cancellation fee if the consumer was granted a discount, but the fact that those on contract pay less than on prepaid, is not regarded as a discount because Vodacom’s legal representative admitted that prepaid contracts are inflated to encourage or incentivise customers to enter into fixed-term contracts with Vodacom. In my view this is proof of shocking exploitation of the poor in South Africa by Vodacom.
- A supplier cannot charge a cancellation fee because they will lose future profits.
- A supplier is not entitled to charge a cancellation fee which “negates the consumer’s right to cancel” and the Tribunal found that Vodacom’s fee of 75% of the rest of the contract fee plus their insistence on payment before cancellation does negate the consumer’s right to cancel, and so is prohibited by law.
- A supplier is not entitled to refuse to cancel if a consumer is in arrears or cannot afford the cancellation fee.
- A supplier can’t hide behind unlawful conduct by its agents or contractors. Vodacom tried to blame their third-party call centre agents for not processing cancellation, but the Tribunal found that Vodacom is liable for the contraventions of the CPA by these agents.
- A supplier has breached the CPA if they do not inform each customer 40 to 80 days before the end of their contract period of the expiry and any material changes that would apply if the contract is to be renewed- Vodacom was found to have breached this requirement in respect of a customer.
- Vodacom’s actions in demanding payment when customers had cancelled, threatening legal action against them and blacklisting them were in breach of the CPA because the actions were used to coerce and pressurise the customers.
- The CPA prohibits suppliers form misleading consumers, and Vodacom was found to have breached this prohibition by selling a customer a 120 gig contract, which in fact did not exist.
- Vodacom has a responsibility to apply the CPA and not to exploit customers or disregard their rights and the protection they have under the CPA.
- These contraventions by Vodacom are serious and some of them are unconscionable, and so justify a fine. A fine of R1 million was imposed because this is regarded as Vodacom’s first offence.
Vodacom amended its cancellation penalty of its own accord in October 2022.
The judgment is a triumph for consumers, particularly as this is the first time the NCC has had a substantial success against a cell phone company, despite their reputation for flaunting consumer law. They have a history of raising technical defences, particularly focused on gaps in compliance by the NCC. This time, the Tribunal were not swayed by their technical defences, and the majority of their defences on the merit of the case were also found to hold no water. We watch with interest to see whether Vodacom will appeal the judgment.