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Advisory Note 2: Disclosure of Price Of Goods Or Services: Pricing Errors

 

 

This note is provided by the office of the Consumer Goods and Services Ombudsman to guide suppliers and consumers of their rights and obligations under the Consumer Protection Act with regard to pricing errors. [1]

 

 

CONTENTS

ADVISORY NOTE 2: INCORRECT PRICING............................................... 1

SUMMARY................................................................................................ 1

1.           The law.............................................................................................. 2

Common Law............................................................................................. 2

Consumer Protection Act: Applicable provisions........................................... 2

2.           Analysis of the law.............................................................................. 4

When the agreement is concluded...................................... Error! Bookmark not defined.

3.           Conclusion......................................................................................... 6

 

 

1.       Introduction

 

1.1    Pricing error complaints are commonplace and have become more prevalent, especially with the advent of online shopping. Most of the complaints received by the CGSO relates to prices that are not as per display, not as per advertisement or misleading. An error in the price in South Africa prior to the CPA would not be binding as it would have been considered to be an invitation to treat. The provisions of the CPA and the common relating to pricing are discussed below.

 

2.           The law

 

2.1      The Common Law:

 

2.1.1    Prior to the CPA, an error in the price in South Africa would not be binding as it would have been considered to be an “invitation to treat”. The “invitation to treat” rule came from the English case of Crawley v Rex[2], in which a shopkeeper advertised on a placard outside his shop a particular brand of tobacco at a cheap price to attract the public. One customer refused to leave the premises when the shopkeeper declined to sell more of the tobacco to him after he returned on a second occasion. In his defence to a subsequent charge of statutory trespass, the customer claimed he was entitled to be in the shop as he was accepting the shopkeeper’s offer.

 

2.1.2    The court held that no contract had arisen because the advertisement did not constitute a binding offer that the customer could accept but was merely an announcement of the shopkeeper’s intention to sell at the advertised price (this is known as an invitation to treat (do business)).

 

2.1.3    The common law has, in effect, been overruled by section 23(6) of the CPA, which prohibits a supplier from charging more than the lowest price displayed and makes the displayed price a binding offer that converts to a binding contract once accepted by the consumer tendering payment. This rule is mitigated to the benefit of the supplier in the case where the price as displayed contains an inadvertent and obvious error (section 23(9)).

 

3.           The Consumer Protection Act: Applicable Provisions

 

3.1    When interpreting the CPA, it is important to pay attention to section 2(2):

Interpretation:

 

2(2) When interpreting or applying this Act, a person, court or Tribunal or the Commission may consider—

 

(a) appropriate foreign and international law;

 

4(3) If any provision of this Act, read in its context, can reasonably be construed to have more than one meaning, the Tribunal or court must prefer the meaning that best promotes the spirit and purposes of this Act, and will best improve the realisation and enjoyment of consumer rights generally, and in particular by persons contemplated in section 3(1)(b).

 

4.           Disclosure of Price of Goods or Services

 

4.1    Section 23 of the CPA deals with the display of prices as well as the rights of consumers when there is an incorrect display of a price. It is important to note that section 23 does not apply in the following instances:

 

23.    (1) This section does not apply to a transaction if—

 

(a)     a supplier has provided an estimate pertaining to that transaction, or the consumer has waived such an estimate, as contemplated in section 15; or

 

(b)     section 43 of the Electronic Communications and Transactions Act applies to that transaction.

 

4.2   In general section 23 makes it compulsory for prices to be displayed where a retailer has displayed any goods for sale to the public except where the goods are displayed predominantly as a form of advertisement of the supplier or the goods are in an area, within the suppliers’ premises to which the public does not ordinarily have access. In this advisory note we will focus on pricing errors.

 

4.3 Below are the key sections relating to pricing errors:

 

23(6) Subject to subsections (7) to (10), a supplier must not require a consumer to pay a price for any goods or services—

 

(a)     higher than the displayed price for those goods or services; or

(b)     if more than one price is concurrently displayed, higher than the lower or lowest of the prices so displayed…

 

23(7) Subsection (6) does not apply in respect of the price of any goods or services if the price of those goods or services is determined by or in terms of any public regulation.

 

23(9) If a price as displayed contains an inadvertent and obvious error, the supplier is not bound by it after—

 

(a)         correcting the error in the displayed price; and

(b)         taking reasonable steps in the circumstances to inform consumers to whom the erroneous price may have been displayed of the error and the correct price.

 

23(10) A supplier is not bound by a price displayed in relationship to any goods or services if an unauthorised person has altered, defaced, covered, removed or obscured the price displayed or authorised by the supplier.

 

5.           It is important for section 23 to be read with section 30, which deals with bait marketing.

 

 30(1) A supplier must not advertise any particular goods or services as being available at a specified price in a manner that may result in consumers being misled or deceived in any respect relating to the actual availability of those goods or services from that supplier, at that advertised price.

 

30(2) If a supplier advertises particular goods or services as being available at a specified price, and the advertisement expressly states a limitation in respect of the availability of those goods or services from that supplier at that price, the supplier must make those goods or services available at that price, to the extent of the expressed limits.

 

5.1       The conflict between the two sections will be addressed later in this advisory note.

 

6.           Analysis of the law

 

6.1    Section 23(6) outlined above, in effect overrules the common law and makes the displayed price a binding offer that converts to a binding contract once accepted by the consumer through tendering payment. It is essential to be able to establish the exact point of a transaction the agreement is concluded because, before then, the supplier can still correct an inadvertent pricing error.

 

6.2    In practice, the supplier or its agent, the till operator, would only become aware of the error in the price at the point when it is rung up at the till. If it was sufficient for the purpose of the first proviso to section 23(9) for the till operator to say “The correct price is R…”, that would mean that the supplier would never be bound by an obvious error in price, rendering the section redundant. This would be contrary to the presumption that legislation does not contain futile or nugatory provisions.

 

6.3    Under the common law, a contract normally comes into effect where there is an offer that is accepted: Estate Breet v Peri-Urban Areas Health Board 1955 3 SA 523 (A). An offer occurs when someone puts forward a proposal with the intention that if it is accepted, a contract will come into existence.

 

6.4    The publication of an advertisement offering goods for sale at a stated price is not an offer to all who may read the advertisement but merely an invitation to make offers: Bird v Summerville 1960 4 SA 395(N) 401D. This is referred to as an invitation to treat.

 

6.5    After conducting a survey of local and international law, Melville and Woker concluded that the transaction reaches the stage of perfecta or conclusion when the consumer places the goods on the check-out counter and at that point the sale at the advertised price is binding even  if the price is an inadvertent and obvious error, but not if it was altered without authorisation or wholly obscured with a new price.[3]

 

6.6     The exception is when the price displayed contains an inadvertent and obvious error (section 23(9)) which, upon discovering the error, the supplier:

 

a)       corrects the error; and

b)      takes reasonable steps in the circumstances to inform consumers of the errorand the correct price.[4]

 

6.7   In the case of displayed price errors, the supplier is bound until the consumer is informed of the pricing error. If the consumer acts in a manner consistent with buying the item prior to being informed of the error, the consumer is entitled to pay the error price e.g. the consumer takes the item (or the product details if to be delivered or collected from dispatch) to the till with the intention of paying for it or places the order with the sales assistant and the cashier/ sales assistant then informs the consumer of the error;

 

6.8    Reasonable steps may include:

 

a)       In the case of a display error: Withdrawing the product from sale, fixing the pricing error price or label on a shelf, and then making the product available for sale again;

b)      In the case where the incorrect price has been placed online, in a newspaper advertisement, email, sms, catalogue or pamphlet:

 

i.         replacing the advert/ readvertising with a notification alerting consumers to the error and correct price or notifying them via email or sms;

ii.       putting up notices at the stores affected and keeping suitable proof (including photographs with time/ date indicated) of the form of the notices, who put them up and when;

iii.     offering to compensate customers for wasted trips by means of cash or vouchers.

 

6.9    Suppliers should also:

 

a)       ensure that goods and services have one displayed price;

b)      ensure that tills are capable of ringing up displayed prices and are updated as prices advertised and displayed change;

c)       appoint a specific employee to be responsible to check for price errors in displays at regular intervals and advertisements before they are approved;

 

7.           Pricing Errors and Bait Marketing

 

7.1    Sections 23 and 30 appear to be contradictory with regard to errors unless section 23 is taken only to refer to displayed prices in the store and section 30 is taken to refer to advertisements in the media/ online. This is something only the Tribunal or the Courts can pronounce on.

 

7.2    Section 30 refers to adverts, while section 23 applies to displayed prices. Unlike section 23, section 30 does not provide how errors are to be dealt with nor what the position is if a limit was not placed on the numbers available.

 

7.3    On a plain interpretation of section 30, if an advertisement specified a limitation on the number available, a supplier would be bound to provide the item advertised at the advertised price up to the limit advertised, irrespective of any notice subsequently placed in the store. A failure to comply may lead to the imposition of an administrative fine.

 

7.4    Suppliers can limit the extent of their risk by stipulating the number of items available at a given price or the period for which the offer is valid in adverts and by correcting the error and taking reasonable steps in the case of displayed prices.

 

8.         Conclusion

 

8.1    The following principles emerge from this survey of the law:

 

8.1.1        Suppliers are bound to provide goods at the lowest advertised or displayed price i.e. they bear the risk and costs associated with errors, unless they have taken the steps outlined in section 23(9);

 

8.1.2        Suppliers must keep contemporaneous records of incidents of customers claiming goods at advertised prices and conversations that take place.

 

8.1.3        Suppliers need to bear in mind that in addition to allowing consumers to buy at lower prices or compensating them, the suppliers run the risk of having to pay administrative fines for incorrectly advertising prices.

 

 

Please direct any requests for clarification to info@cgso.org.za Consumer Goods and Services Ombudsman

 

Revised March 2021

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