South Africa’s National Consumer Tribunal (NCT) has imposed a R1-million administrative fine against Vodacom for what it calls "unconscionable" and prohibited conduct by imposing terms and conditions that negated the consumers' right to cancel their fixed-term contracts.

The National Consumer Commission (NCC) on Wednesday welcomed the decision, while a Vodacom spokesperson said that the company notes the NCT ruling and is reviewing the decision.

“As at present, we are studying this determination and will, in due course, give our views on the matter,” the Vodacom spokesperson told Engineering News Online in an emailed response.

According to a statement issued by the NCC, the commission had received and investigated numerous complaints between the 2020/21 and 2021/22 financial years of alleged contravention by Vodacom of various sections of the Consumer Protection Act (CPA).

“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,” said acting National Consumer Commissioner Thezi Mabuza.

“The Commission’s investigation revealed that Vodacom had engaged in prohibited conduct by contravening Section 14 of the CPA read with Regulation 5.”

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, while 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.

The complaints included allegations that Vodacom denied consumers the right to cancel their fixed-term contracts by imposing a cancellation penalty of 75%; that Vodacom required payment of all outstanding fees and the cancellation penalty before contracts were terminated on request; and that consumers were coerced to sign the acceptance quotation letter, which was valid for 12 days, and return the letter to Vodacom with proof of payment.

“Vodacom’s imposition of a 75% cancellation penalty constituted a contravention of this section. 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 NCC noted in its statement outlining the decision.

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 contravenes Section 14(2)(b), while the failure to cancel consumers’ contracts within 20 business days of consumers’ notice of cancellation, and instead sending consumers quotation letters with a cancellation penalty of 75%, contravenes Section 14 (3) of the Act.

In addition, 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 NCC outlined that 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.

“The Tribunal also found that Vodacom’s conduct is unconscionable in that Vodacom 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. 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,” the statement noted.

Vodacom was ordered to pay an administrative fine of R1-million, with their conduct declared unconscionable and prohibited.

“The Commission welcomes this judgment as we believe that 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,” she concluded.