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Vodacom fined R1m for denying contract cancellations

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 18 Oct 2023
Vodacom's head office in Midrand.
Vodacom's head office in Midrand.

Mobile operator Vodacom has been fined R1 million by the National Consumer Tribunal for contravening some sections of the Consumer Protection Act (CPA).

In a statement, the tribunal says it found Vodacom’s conduct was “unconscionable” by imposing terms and conditions that negated consumers’ right to cancel their fixed-term contracts.

It says between the 2020/21 and 2021/22 financial years, the National Consumer Commission (NCC) received and investigated numerous complaints of alleged contravention of various sections of the CPA by Vodacom.

The consumers alleged Vodacom denied them the right to cancel their fixed-term contracts by imposing a cancellation penalty of 75%.

Speaking to SABC today, acting national consumer commissioner Thezi Mabuza said the authority revealed about 700 complaints on the matter. However, she said only 27 cases were sampled for the probe.

Moreover, the regulator says Vodacom required payment of all outstanding fees and the cancellation penalty before contracts were terminated on request.

The consumers further alleged they were coerced to sign the acceptance quotation letter (that was valid for 12 days) and return the letter to Vodacom with proof of payment.

Mabuza says the tribunal’s investigation revealed Vodacom had engaged in prohibited conduct by contravening Section 14 of the CPA read with Regulation 5.

“The NCC received the bulk of these complaints during the peak of COVID-19, when many complainants lost their jobs or their salaries were cut, making it impossible for them to proceed with the SIM-only contracts,” says Mabuza.

According to the NCC, section 14 (3) (b) (i) provides that the supplier may impose a reasonable cancellation penalty with respect to any goods or services supplied to the consumer.

It adds that Regulation 5(2) lists the relevant considerations in deciding on a reasonable cancellation penalty, and Regulation 5 (3) of the CPA states that a supplier may not impose a cancellation penalty that has the effect of negating the consumer’s right to cancel. Vodacom’s imposition of a 75% cancellation penalty constituted a contravention of this section.

A matter of time

It notes Vodacom failed to cancel consumers’ contracts timeously after having been notified by consumers and as required by the CPA, thus contravening Section 14(2) (b)(i)(bb).

“The refusal to cancel consumers’ contracts on the basis that any cancellation is subject to payment of a cancellation fee before the cancellation can be effected constituted a contravention of section 14(2) (b),” it says.

It adds Vodacom failed to cancel consumers’ contracts within 20 business days of consumers’ notice of cancellation. Instead, the supplier sent consumers quotation letters with a cancellation penalty of 75%, contravening Sec 14 (3) of the Act.

Section 14(2)(c) provides that, in the case of a fixed-term consumer agreement, the supplier must inform the consumer in writing or other recordable form not more than 80, nor less than 40 business days before the expiry of the contract of the impending expiry date, including any material changes that would apply if the agreement is to be renewed or may otherwise continue beyond the expiry date and the options available to the consumer.

“Vodacom’s failure to inform consumers that their contracts were about to expire and to advise them of their options contravened section 14 (2)(c),” the regulator says.

“Vodacom unconscionably imposed an unreasonable cancellation penalty of 75% negating consumers from cancelling the contracts. Moreover, Vodacom required payment of all outstanding fees and the cancellation penalty before contracts were terminated on request, exacerbating the consumers’ financial wellbeing at that time. This conduct is not in the spirit of the promotion of the CPA.”

Imposing consequences

The tribunal also found Vodacom’s conduct is unconscionable in that it continued to bill consumers after they duly cancelled their contracts or attempted to do so, and by referring such consumers to debt collectors, blacklisting them with credit bureaus and threatening them with legal action.

By repeatedly denying consumers the right to cancel the contracts, Vodacom contravened section 40(1)(b) and (d) of the Act, it adds.

Lastly, the supplier contravened section 29(b)(i)(ii) and (v) read with section 41(3) by marketing a data bundle package that was not available and not provided.

Vodacom was ordered to pay an administrative fine of R1 million, as its conduct was declared unconscionable and prohibited.

“The commission welcomes this judgement as we believe it is going to deter other suppliers/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,” Mabuza notes.

In an e-mail to ITWeb, Vodacom says: "Vodacom notes the ruling of the National Consumer Tribunal. As at present, we are studying this determination and will, in due course, give our views on the matter.”