Think before you click — Consumer ombudsman warns against pitfalls of doing business online

6 Aug 2024

In the Consumer Goods and Services Ombudsman’s latest annual report, e-commerce was yet again the biggest source of consumer complaints.

Of the 11,282 complaints that the Consumer Goods and Services Ombudsman (CGSO) released over the past year, online transactions and retailers loom large. It’s a pattern that the office has observed over the past four years and a cause for concern.

Since the onset of the pandemic in 2020, e-commerce has been the biggest source of consumer complaints. The ombud’s latest annual report, for the financial year ending 29 February 2024, shows the proportion of complaints related to online shopping decreased from 34% in 2023 to 26%.

This decline could be attributed to improved e-commerce services, a resurgence in brick-and-mortar shopping, or consumers seeking alternative dispute resolution channels, such as chargebacks.

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Overall, goods, services and agreements comprised 89% of the 11,282 complaints received, a decrease from 94% in the prior year. Within this category, online transactions, appliance manufacturers and retailers, and satellite and communications companies were responsible for 74% of complaints, up from 63% in the previous financial year.

The office responded to 33,467 queries, which is an average of 127 per day, and captured 11,282 complaints (an increase from the previous year’s 10,562 complaints), referring 1,885 out-of-jurisdiction complaints to other entities. More than 2,300 were unable to be pursued because 1,885 cases had been referred elsewhere and 179 were being dealt with in parallel legal processes. It also facilitated refunds worth a total of R12.1-million (down from last year’s R12.9-million).

Most of these complaints relate to items not being delivered on time (or at all), defective goods, or purchases not in line with customer expectations. Ombudsman Lee Soobrathi says in brick-and-mortar stores, customers have a chance to inspect goods and – except for furniture or large appliances – generally do not rely on the supplier to deliver.

“When goods are defective, the return and refund process is often handled in-store. This is not to say that this is an inevitable state of affairs. South African-based vendors and marketplaces have clear duties and responsibilities with respect to how they may conduct online businesses, as set out in the Electronic Communications and Transactions Act 25 of 2002 (Ecta).”

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By law, Ecta compels vendors to treat consumers transparently and fairly. But when vendors are not locally based, the CGSO has no jurisdiction so it cannot force offshore e-commerce platforms such as Shein and Temu to abide by the CPA or Ecta, which guides online purchases.

Soobrathi told Daily Maverick: “We have tried to reach out to these organisations but there is no way of signing them up. As e-commerce continues to grow on all platforms — and it’s not only from goods and services but also advertising — we are concerned about these international companies, although we haven’t received many complaints relating to them yet. Complaints about these platforms we refer to the National Consumer Commission, to stir a bigger discussion.”

Instead, the ombud is focusing on creating awareness of the pitfalls of doing business with these sites, helping consumers identify rogue sites and poor practices, and educating consumers about their rights and responsibilities regarding refunds and returns.

“This year, as part of our education and outreach activities, we also teamed up with the Ombudsman for Banking Services (under the auspices of the newly created National Financial Ombud Scheme) to educate consumers on the options available when online purchases go wrong.”

Soobrathi says although e-commerce only makes up about 5% of total retail sales in South Africa, it’s a growing concern. His office derives membership from the consumer goods industry.

While the CGSO has a wide scope, it excludes sectors already covered by specific consumer protection regulations, such as banking, credit and the automotive industry.

Soobrathi has previously said consumers often misunderstand online shopping models. In essence, there are two: direct-to-consumer retailers (the online stores owned and operated by retailers, offering direct sales and delivery to customers) and online marketplaces, which host multiple sellers, such as Amazon, Takealot and Snatcher.

While marketplaces benefit the economy by empowering small businesses, it’s crucial to understand consumer rights when dealing with these platforms, he says, because marketplaces primarily act as intermediaries, connecting buyers and sellers. And they typically disclaim responsibility for transactions between third-party sellers and customers.

“The relationship the customer has is with that third party: the platform, essentially, just fulfils the delivery, but your ultimate contractual liability lies with that third party, which has the decision whether or not to return, to refund or to replace. It’s something consumers have to be cognisant of because they might have difficulty when it comes to exercising their rights.”

However, marketplaces cannot evade responsibility for consumer rights and dispute resolution. As such, the ombud considers them active participants in the transaction and holds them accountable for their role.

Consumers who wish to lodge a complaint can do so by downloading the CGSO mobile complaints app from the App Store or Android, calling 0860 000 272, or visiting www.cgso.org.za. DM

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