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CONSUMER PROTECTION ACT

Tribunal schools Vodacom in consumer rights over its contract cancellation penalties

Tribunal schools Vodacom in consumer rights over its contract cancellation penalties
Vodacom headquarters on 19 September 2017 in Midrand, South Africa. (Photo: Gallo Images / Alet Pretorius)

If you’ve ever been told you can’t cancel a contract because it was in arrears, or couldn't afford the cancellation penalty before quitting a fixed-term agreement, there is some good news. The Tribunal has ruled against the network provider for breaching the Consumer Protection Act because it made quitting a contract very difficult for customers.

Vodacom has just been schooled in the Consumer Protection Act by the National Consumer Tribunal, which has upheld a finding by the National Consumer Commission (NCC) that the network provider was in breach of the law for making it difficult – if not impossible – to cancel a contract. 

The Tribunal has ruled Vodacom to be in breach of Section 14 of the Consumer Protection Act (CPA), which empower consumers to cancel any fixed-term contract on reasonable notice – i.e. 20 business days. 

A supplier may, however, charge a reasonable cancellation penalty. 

The matter rests on the reasonableness of that penalty.

The commission had originally received 21 consumer complaints, stemming from the 2020/21 and 2021/22 financial years about Vodacom imposing a hefty cancellation penalty of 75% for SIM-only contracts (Simo) – a violation of Section 14 of the CPA, which says penalties must be reasonable and not negate the consumer’s right to cancel.  

Vodacom had claimed that Simo customers enjoy significantly reduced tariff prices for their airtime (compared with prepaid customers), which it subsidises in exchange for the guaranteed period that the customer will remain subscribed.

In the end, because some consumers refused to accept the service of legal documents via email, the commission opted to hear only 11 cases.

In those matters, their investigation found Vodacom required payment of all outstanding fees, less 25%, and the cancellation penalty before contracts were terminated on request. 

Consumers further alleged that they were coerced to sign the acceptance quotation letter (valid for 12 days) and return the letter to Vodacom with proof of payment. The letter states that if the documentation and proof of payment are not received, the contract will remain in force for the remainder of the 24-month agreement, after which it will continue on a month-to-month basis until Vodacom is notified otherwise. 

This too is a violation of the CPA [Section 14(2)(c)], because the Act puts the onus on the supplier to notify the consumer of any material changes to the contract – such as expiration – not more than 80 days and not less than 40 business days before the date of expiry of the contract. 

Vodacom did not dispute that it required settlement payments from the consumers, but claimed it was entitled to require these payments before cancellation of the fixed-term contracts. 

The NCC also alleged that Vodacom contravened provisions under section 40(1), which reads: “A supplier or an agent of the supplier must not use physical force against a consumer, coercion, undue influence, pressure, duress or harassment, unfair tactics or any other similar conduct, in connection with any (a) marketing of any goods; (b) supply of goods or services to a consumer; (c) negotiation, conclusion, execution, or enforcement of an agreement to supply any goods or services to a consumer; (d) demand for, or collection of, payment for goods or services by a consumer; or (e) recovery of goods from a consumer.”

The tribunal found that demanding payment when consumers cancelled or attempted to cancel their contracts, threatening legal action against them and listing them at the credit bureaus, not only infringed their rights to cancel their fixed-term contracts but that these measures were used to coerce and pressure consumers.

Vodacom was therefore guilty of imposing unreasonable cancellation penalties; not timeously cancelling consumers’ contracts after having been duly notified to do so; refusing to cancel consumers’ contracts on request because of outstanding fees; not notifying a consumer in writing within the prescribed period that her contract was about to expire; of unconscionable conduct because it continued to bill consumers after they cancelled their contracts or attempted to do so, and by referring such consumers to debt collectors, listing them with credit bureaus, and threatening them with legal action; and for marketing a data bundle package to one consumer, which was not available and not provided. 

The NCC had asked that the tribunal interdicts Vodacom from engaging in the conduct in contravention of the CPA, but since Vodacom no longer charges a 75% cancellation penalty on Simo contracts, it was not concerned that there was a risk the conduct would be repeated. 

The commission had also requested an order that Vodacom be directed to refund the complainants all monies paid by them arising from the 75% cancellation penalty. However, since some of the complainants had been credited with certain amounts, the tribunal refused the request.

Finally, the NCC asked for an administrative fine equivalent to 10% of Vodacom’s annual turnover – not less than R20-million.

The tribunal has the discretion to impose a penalty and concluded that a fine of R1-million was more appropriate because, in respect of many of the complaints, Vodacom credited consumers and amended its cancellation policy.

The NCC has welcomed the tribunal’s decision. 

Acting National Consumer Commissioner Thezi Mabuza said the NCC had received most of these complaints during the peak of Covid, when many complainants lost their jobs or their salaries were cut, making it impossible for them to proceed with the Simo contracts.

“The commission welcomes this judgment as we believe that it is going to deter other suppliers or operators from engaging in the same conduct. We further see this as a victory for South African consumers who for the longest period were subjected to contracts that were in favour of the supplier.”

Vodacom, meanwhile, said it notes the ruling of the National Consumer Tribunal and was studying it. 

Consumer lawyer Trudie Broekmann hailed the judgment, calling it a wake-up call for the telephony industry, which has a reputation among consumer lawyers as being one of the least compliant with the CPA. 

“It centres [on] Vodacom’s 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 states 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 in force for the rest of the 24-month period and then continue on a month-to-month basis.”

She said the judgment was a triumph for consumers, particularly as it is the first time the NCC has had substantial success against a cellphone company. DM

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Comments - Please in order to comment.

  • Steven D says:

    Yes, well done, consumers and NCC! Vodacom’s scummy conduct earns it this three-letter acronym: GFY!

  • Pieter Rautenbach says:

    Fantastic, but this isn’t yet enough. On March 4th this year I received an email from Vodacom with their latest tariff update. It is my view that when the terms of your contract get changed by the other party, you must have the choice of a penalty-free exit, otherwise it is a unilateral change. I have reported this specific issue to the consumer ombud before without success (and needless to say to Vodacom before that). The terms of the contract should be honoured for the duration of the contract. Fundamentally, what is the point then of a long-term commitment by myself as a customer if I cannot enjoy that benefit for its full duration?

  • Elma Holt says:

    I have been trying to cancel a data only line on my contract since beginning of September. Actually been trying for at least 4 years. But it just gets re-contracted without any documentation or warning every 2 years. This year some agent called and told me I am paying too much and need an upgrade. I said yes, because you have 15 working days to cancel this. That was 6 Sept. Have been calling cancellations and customer care repeatedly to reverse upgrade and cancel contract…… still fighting. Its a war of exhaustion. They hope you get tired and just leave it for 2 more years.

  • Patricia Sidley says:

    I have found that quoting the Consumer Protection Act to them, and threatening to take them to the Consumer Commission, is greeted with derision and laughed off. That fine should have been that large one envisaged in the law.

  • Ebrahim Mohamed says:

    Congratulations Ms Mabuza and the NCC. It is most encouraging and admirable that consumer law is being developed by taking matters to the Consumer Tribunal to confirm and assert consumer rights. This is by far the most important work of the National Consumer Commission. I salute you
    Ebrahim Mohamed
    Retired Commissioner
    National Consumer Commission

  • MTN service providers are doing the same thing. When I created a contract with them at the store, they told me I should come directly to the lady who helped me if I wanted to cancel the contract. I went there, and they told me to call their agents, as at the store they do not cancel contracts. I called them, and they said I owe R600 as there was no money in my bank. This is not true. The contract Sim Card is no longer working. MTN is voilating the same provisons of the CPA that Vodacom has voiolated. A lot of people are complaing about MTN and we deseve justoce and we are being explolited

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