'Share trading software' firms' dubious legal arguments
Moneyweb's investigations into the companies selling the controversial Optimal Market Systems share trading and analysis software have revealed how they rely on questionable interpretations of the law to frustrate clients.
Most of the complaints sent to Moneyweb by unsatisfied customers state that the companies do not honour their guarantees. Most particularly, the companies do not refund customers who return the product within the five-day cooling off period that is not only stipulated in the Consumer Protection Act (CPA), but is promised in their own contracts.
Three law experts have however told Moneyweb that the legal arguments put forward by the companies and their lawyers, Van der Merwe Inc, to justify these refusals don't appear to carry any weight.
As the companies employ direct marketing to sell the software, its sale is subject to specific clauses of the CPA. Under Section 16 of the act, a consumer may return any goods that were sold through direct marketing and receive a full refund, if they give notice to do so within five working days.
The companies are clearly aware of this legal obligation, as they put it into their contracts. However, Moneyweb is aware of a number of clients who have tried to exercise their rights, but their requests for refunds have all been refused. These refusals are based on two sub-clauses in the contract, which insist that the unopened and undamaged software must also be returned within these five days:
“Cancellation in terms of the Cooling off clause will ONLY be accepted if the Copyright is still intact (the package is unopened, not tampered with, installed or registered)”.
Prof Tjakie Naude from the Department of Private Law at the University of Cape Town however says these clauses are not consistent with the act. “The supplier is not allowed to require that the consumer return the goods within those five days,” she notes. “They only have to give notice and must then return the goods within 10 business days.”
She adds that the cooling-off right does not apply where the goods are “permanently installed”, but installed software can always be uninstalled.
Does using a credit card make it an electronic transaction?
The companies' lawyers Van der Merwe Inc, however argue that two other pieces of legislation override the CPA in their case.
A letter in Moneyweb's possession that was sent by Van der Merwe Inc to a customer's own lawyer states: “Please note that in terms of the provisions of the Electronic Communications and Transactions Act, Act 23 of 2002, more specifically section 44 thereof read together with section 42 and the Copyright Act, Act 98 of 1978, our client is not in a position to accept your client's cancellation and does the agreement remains intact”.
Moneyweb queried with Van der Merwe Inc what relevance the Electronic Communications and Transactions Act has, as the products are all sold in person. The firm replied that: “The Act is applicable in that the transaction was concluded by means of a credit card transaction.”
However, an expert on the Electronic Communications and Transactions Act disagrees. Dominic Cull of Ellipsis, which provides specialist legal advice on this and related pieces of legislation, told Moneyweb that just because there is a credit card involved does not make something an electronic transaction. “The part of the act they use was based on the European Union long-distance selling directives,” Cull said. “It affords additional consumer protections in cases where the consumer doesn't physically see the goods that they will be buying. It will not apply where the transaction was done in person but payment was made electronically, so I disagree with the interpretation.”
That leaves the question of copyright, and an expert in this field has told Moneyweb that the mere opening of a package cannot constitute a copyright infringement. Herman Blignaut, a partner at intellectual property specialists Spoor & Fisher, said that the Copyright Act states that there must be an unauthorised reproduction for the Copyright to be compromised, and this clearly is not the case when a software package has been legally purchased.
“If a valid, licensed product is purchased and given to a consumer who opens it, that would mean a proper licence has been afforded,” Blignaut said. “The mere fact that the consumer looked at the programme, perhaps even used it lawfully, clearly cannot constitute an infringement.”
He adds that if a consumer wants to return a software product, the company who sold it can certainly insist that it is uninstalled and not used again. However, it is not practical to insist that it could not have been opened, because otherwise how would the consumer know whether or not it worked and was in fact what they believed they were buying?
Having studied a contract, Prof Naude believes that these companies are likely to be in breach of a number of sections of the CPA. “There has allegedly been misleading representations about various things by the supplier, and clearly regarding the consumers' cooling off rights,” she notes. “That's prohibited conduct. There is also the possibility of this being unconscionable conduct under Section 40 of the CPA and misleading selling under Section 41, given that all kinds of unfair tactics appear to be used in the supply of the goods, according to customers.”
She believes that some terms in the contracts themselves are probably also unfair in terms of Section 48 of the act. “The supply of service agreement states that no warranty is given, which contravenes the act, as the CPA provides for remedies for services which are not of the quality that persons are generally entitled to expect,” Naude notes. “They also claim the right to make changes to the service fee as they deem appropriate, but under the CPA any price increase clause is presumed to be unfair if the consumer is not given the right to terminate the agreement in response.”
Van der Merwe Inc and the companies selling Optimal Market Systems were given a chance to respond to a draft of this article, but had not responded by the time of publishing.