Entrepreneurship and the law

Trading under the influence – social media, small business and South African law.

Unleashing the potential of social media for emerging entrepreneurs: Navigating the legal landscape.

The remarkable triumph of major corporations in leveraging social media to connect with consumers and promote their brands has sparked a desire among aspiring entrepreneurs to claim their own share of the pie. In this era where social media platforms showcase everything from students selling vintage clothing to influencers selling aspirational lifestyles, having a solid understanding of the legalities surrounding grassroots entrepreneurship has become paramount.

When it comes to selling goods on social media, the Consumer Protection Act No. 68 of 2008 (“CPA”) generally applies, provided that commercial activities occur with sufficient regularity to be regarded as occurring “in the ordinary course of business.” Consequently, the CPA is applicable to the weekly sale of vintage clothing items on Instagram pages, but not to the occasional sale of a used cell phone on platforms like Facebook Marketplace. The CPA encompasses several provisions designed to safeguard consumers and also covers advertising. Pertinent provisions applicable in this context include:

1. Prohibition of misleading marketing: Section 29(b) of the CPA strictly forbids misleading, fraudulent, or deceptive marketing practices. This encompasses activities that mislead consumers regarding a product’s characteristics or benefits.
2. Implied supplier’s warranty: Sections 55(2) and 56(1) of the CPA establish an implied warranty by the supplier that goods are of good quality, reasonably fit for their intended purpose, and usable for a reasonable period of time.

Concurrently with the CPA, the consumer protection provisions of the Electronic Communications and Transactions Act No. 25 of 2002 (“ECTA”) come into effect when products are bought and sold on social media. Under section 44 of ECTA, consumers generally have a seven-day window from the receipt of a product to cancel a transaction. Additionally, section 46 of ECTA stipulates that orders must be fulfilled within 30 days unless otherwise agreed. Failure to adhere to this timeline enables the consumer to cancel the transaction with seven days’ written notice.

Moreover, if the goods being sold qualify as second-hand goods, as defined in the Second-Hand Goods Act No. 6 of 2009, the dealer may need to register in accordance with section 2(1) of the Act.

In order to maintain ethical practices in the realm of social media, the Advertising Regulatory Board’s Code of Advertising Practice includes the Social Media Code, which offers guidance to “brands, publishers, and influencers.” It emphasises the importance of transparency and disclosure. Advertisers should clearly indicate if their content is part of a social media advertising campaign, whilst publishers and influencers should disclose any goods or services they have received in exchange for media coverage. Influencers making claims about goods and services should adhere to the standards set forth in the Code, and the defence of fair comment is not considered valid if false claims are made.

Undoubtedly, social media has played a pivotal role in democratising entrepreneurship. It is evident that a comprehensive understanding of consumer law serves as a crucial tool for young South Africans seeking to grow their businesses fairly and sustainably using social media platforms.