One of the key purposes of the Consumer Protection Act 2008 (“the Act”) is “improving consumer awareness and information and encouraging responsible and informed consumer choice and behaviour.”

The right of the consumer to make an informed choice translates into obligations on the supplier to provide the consumer with meaningful choices regarding the supply of goods or services. The choices available must comply with the provisions of the Act. This is particularly important for franchised businesses and businesses which supply or promote branded and non branded products and/or specialised services.

In terms of section 13 (1) (a) to (c) of the Act, a supplier or franchisor cannot make its offering for provision or supply of goods or services conditional upon the consumer:

• purchasing any other particular goods or services of that supplier;
• entering into an additional agreement or transaction with that same supplier or a designated third party; or
• agreeing to purchase any particular goods or services from a designated third party.

This provision is significant for franchisors or suppliers who, as part of their business system, require consumers and franchisees to buy stock exclusively from them, or their designated suppliers, in a bundling arrangement. (i.e. purchase branded and non branded stock together). For example, where Vodacom sells or promotes a cell phone package where the contract is with Vodacom, the phone is a Nokia and the headset and blue tooth device are from Sansui. The consumer purchasing from the retailer is obliged to purchase a particular phone and headset as part of the bundle/ package. The consumer may wish to purchase different goods and unless the supplier can rely on one of the saving provisions, this would be a contravention of the Act.

Section 13 prohibits bundling, unless the supplier/franchisor can show that:

1. the convenience to the consumer or franchisee in having those goods or services bundled outweighs the limitation of the consumer’s right to choice;
2. the bundling results in an economic benefit for the consumer; or
3. the bundled goods or services are offered separately and at individual prices.

There is an additional saving (arguably an exemption) for franchisors which can require franchisees to purchase goods or services from them if such goods or services are reasonably related to the branded products or services that are the subject of the franchise agreement. This makes sense from a brand protection point of view. MacDonalds can therefore require its franchisees to purchase meat patties, buns and chips from its designated or preferred supplier due to the distinctiveness and quality of these products. However Macdonalds cannot require its franchisees to buy Coca Cola from a specific source unless it can satisfy at least one of the requirements set out in section 13 (1) (i), (ii) or (iii) and outlined in items 1 to 3 above.

In reviewing or drafting agreements care should be taken to ensure that consumer selection is not limited in contravention of the Act.