Business Practices Committee Report 61 Goldex CC 4. Events leading to the investigation

 

 

In a newsletter dated 11 April 1996 send by Cawood to franchisees, it was stated inter alia that the former Transvaal Education Department (TED) approved two "Spellchecker" models, namely the Franklin DMQ 440 Bookman and the Franklin SMQ 100 Spellmaster. It was also stated in the newsletter that a "Rapid Aids Test" would soon be available to franchisees. These products were an extension of the product range offered by Cawood to franchisees. No approval to the spell checkers from the TED existed. It merely approved that the spell checkers could be listed in its Media Guide. Consumers were misled into believing that the TED approved the spell checkers.

 

An advertisement was placed by Cawood in the Daily News of 23 and 24 April 1996. This advertisement stated:

 

"BUSINESS OPPORTUNITY OF THE YEAR NOW FINALLY IN KWAZULU-NATAL. Become part of a Multi-Million Rand Industry! The latest trends in sportwear, T-shirts and more from the USA and Europe is now available. Including famous American trend-setters in the clothing industry. Exciting Revolutionary Pharmaceutical ranges (First in the world) Spellmasters (Awaiting approval by relevant Government Departments) Telephone associated systems (With generous corporate savings) a part of the package. Become part of this dynamic undertaking, valued at more than R100 000.00 at a one-time cost of only R27 000.00 (Stock included). Agencies available: KwaZulu Natal. Transvaal and Free State totally sold out. BE FIRST AND CALL! Rampage. 665 Moreletta Str. Silverton 0184, Pretoria. Senior Partner-Jess Cawood. HEADOFFICE: (012) 86-211312114/9556. FAX: 082 414 2742. CEL: 082 892 3590.".

 

The exaggerated claims in this advertisement speak for itself. The use of the word "headoffice" implied that there were at least regional offices. The head office was in a residential area in Silverton.

 

In a letter dated 15 May 1996 the Committee brought the complaints to the attention of Cawood and he was asked to respond to the allegations. Cawood responded on 29 May 1996 and stated:

 

"We are unable to understand what is meant by the exclusive right to manufacture. Our product is not manufactured and we have never represented in any way that "manufacture" is involved. Our agreement gives Franchisees the exclusivity to the process and for the Heat Presses for operation in designated areas.

 

There are numerous manufacturers of transfers throughout the world. We claim only that we have the largest selection available in SA and have exclusivity to Impulse Wear, the newly introduced range. Certain of the other ranges are available.

 

The clothing, fashion and T-shirt industry is a Multi Million Rand Industry and we and our franchisees are part of that industry.

 

We enclose approval from the Department of Education.

 

We trust that the aforegoing clarifies your concerns but would be willing to assist in any further queries which you may have

 

(Signed) Jess Cawood.".

 

On 29 January 1997 two officials of the Committee visited Cawood at his office/home in Silverton. During the meeting Cawood undertook to furnish the Committee with a number of documents. An official later called Cawood on several occasions to enquire when the documents would be put at the disposal of the Committee, but he was never available. Eventually the official arranged to collect the required information at the Rampage offices on 25 February 1997. On 24 February 1997 the official received a call from Mr J. Rosen (Rosen), the financial manager of Rampage. Rosen asked the official which documents the Committee required. This was somewhat strange because three days previously Cawood indicated that the documentation would be available.

 

On 27 February 1997 the Committee again wrote to Cawood. The following is an excerpt from this letter:

 

"On page 2 of the agreements entered into between Rampage and franchisees, it is stated inter alia:

 

Whereas the Franchisor has a Business System of Heat Pressed and Pre-Printed Transfer Designs as well as a Unique Range of Clothes branded and Labelled as "Coed Naked" and other similar ranges of clothes--

 

And Whereas the franchiser is the owner of certain intellectual property rights used in conjunction with the Business System--...".

 

The Committee would appreciate written evidence as to:

 

In a letter dated 29 May 1996 to the Committee you stated:

 

"Our agreement gives Franchisees the exclusivity to the process and for the Heat Presses for operation in designated areas . . . There are numerous manufacturers of transfers throughout the world. We claim only that we have the largest selection available in SA and have exclusivity to Impulse Wear, the newly introduced range ... We enclose approval from the Department of Education".

 

The Committee would appreciate written evidence to-

 

By 12 March 1997 Cawood had not yet furnished the required information and he was reminded by fax about the consequences of a section 8 (1) (a) investigation in terms of the Act. On the same date Rosen fared a letter to the Committee and apologised for not responding to the letter of the Committee dated 27 February 1997. He said that the " . .. files have been misplaced and I need to replace certain of the documentation required ". He begged the Committee's indulgence for at least two weeks because he was leaving for the United States of America on the same day.

 

On 1 April 1997 Rosen was again asked to supply the required information. This request was ignored. On 21 April 1997 an attorney of Rampage visited the offices of the Committee. He said that the required information would be available by 28 April 1997. On 5 May 1997 an official again called the attorney. He then said that he "... will come back to the Committee within two days". On 7 May 1997 the attorney again visited the offices of the Committee and promised to ". . . get back to us next week ". He responded on 16 May 1997 but failed to supply the required information. During the discussions with the attorney, the officials were led to believe that the complainants would be refunded. This never materialised.

 

On 2 June 1997 the Committee wrote the following letter to Cawood:

 

"I refer to previous correspondence and discussions about this matter. On 29 January 1997 two officials of the Committee held discussions with you at 665 Moreletta Street, Silverton. During this meeting you undertook to furnish the Committee with a number of documents and written answers to questions put to you during the meeting.

 

In a letter dated 27 February 1997 to you, the Committee expressed its concern with your apparent reluctance to furnish it with the required information. On 12 March 1997 the Committee again reminded you that the information was still outstanding. On the same date the Committee received a letter from Mr Rosen, your financial manager. He stated that he would be away for two weeks and that he would respond to the letter of the Committee on his return. He did not do so.

 

On 1 April 1997 the Committee again fared a letter to Mr Rosen. This letter was ignored. On 21 April 1997 your attorney, Mr Opperman, visited the offices of the Committee. He said that he would come back to the Committee with an answer on 28 April 1997. On 5 May 1997 an official again spoke to Mr Opperman who then said that he.

... will get back to the Committee within two days". Mr Opperman again visited the offices of the Committee on 7 May 1997 with the promise to "... get back to us next week.".

 

You would agree that the Committee have given you ample time and opportunity to furnish the required information. The Committee resolved at its meeting held on 29 May 1997 to conduct a formal investigation into the business practices of yourself and Goldex CC trading as Rampage.

 

The following notice will appear in the Government Gazette to be published on 13 June 1997:

 

"in terms of the provisions of section 8 (4) of the Harmful Business Practices Act, 1988 (Act No. 71 of 1988), notice is herewith given that the Business Practices Committee intends undertaking an investigation in terms of section 8 (1) (a) of the said Act into the business practices of J. Cawood and Goldex CC trading as Rampage, and any promoter or member (as applicable), of the named Goldex and any employee, agent and/or representative of any of the aforementioned.

 

Any person may within a period of 14 (fourteen) days from the date of this notice make written representations regarding the above-mentioned investigation to the Secretary, Business Practices Committee, Private Bag X84, Pretoria, 0001. Tel. (012) 310-9570. Fax (012) 322-8489. Ref. H101/20/10/18(96)".

 

The Chairman of the Committee would also issue a press statement about the impending investigation.

 

There was no response from Cawood before or after publication of the notice of the section 8 (1) (a) investigation. J. de Lange's involvement with the marketing of the franchises could not be proven during the investigation.