Business Practices Committee Report 70 Fitness Industry 1. Introduction

 

 

This report focuses on the fitness industry and for ease of reading a number of concepts used in this industry are defined.

 

"fitness centre" means a facility at which fitness services are provided, but does not include outdoor sport and recreation facilities or unsupervised activities.

 

"fitness Industry" includes any person or business that provides a fitness service;

 

"fitness service" means any service relating to a pre-exercise evaluation; an individual fitness programme; a group fitness programme and the provision of fitness equipment at a fitness centre for the use of consumers.

 

"membership agreement" means an agreement between a supplier and a consumer for membership of a fitness centre for a specified period;

 

"supplier" means a person or business, other than an employee, who offer services and equipment in fitness centres.

 

The Business Practices Committee (the BPC) (1) received a number of complaints from consumers against several and well-known fitness centres. The BPC received complaints from consumers about 5, 4 and 18 fitness centres respectively, during the calender years 1996, 1997 and 1998. In 1999, 30 complaints about six fitness centres were received. The complainants were from all walks of life and included pensioners, general practioners, clerks, executives and secretaries.

 

The complaints revolved around the selling of "life" memberships by centres that operated for a few months only, high pressure sales techniques, prizes that were won but were not awarded, and promises that memberships could be cancelled and money-back guarantees that did not materialise. Most of these complaints were resolved on an ad hoc basis.

 

The following is a typical example of the complaints received from acrimonious consumers. An elderly lady alleged that she Wet telephoned by a gentleman who introduced himself as "X" from fitness centre "V". He asked her why she did not turn up for "... last night’s prize giving". She had no idea what he was talking about. He then told her that she had won a prize but that she should visit the fitness centre to claim the prize. They arranged to meet the following day at the fitness centre.

 

When she arrived at the fitness centre, "X" took her on a tour of the centre which ended in a small sales office. He then started completing a number of forms and asked her various questions about her exercising habits. He then called the "manager" and requested him to confirm the prize that she had won. The "manager" made a call to the "head office". He then requested her account number which was apparently used in the selection of a "lucky number. The person on the line then evidently said that she had won a three-year membership of the centre. Those present congratulated her on her good fortune and made a big "fuss" about the prize. She was even congratulated by the person on the telephone line. The complainant said that she was confused and it felt like winning a million rand.

 

After the round of congratulations she was asked whether she was always so lucky. "X" then requested her credit card. She did not have a credit card and he allegedly said that a cheque account would work as well. He then confirmed that she had won a four-year contract for the small amount of R3 060. The complainant allegedly said that she would be back the following day but they refused and informed her that the "prize" would not be available the following day. "X" said that she could arrange with her bank for an overdraft. She proceeded to write out a cash cheque for R3 060, signed the contract and left.

 

"I realised what happened when I arrived home and immediately phoned "X". She explained to him that she could not really afford to pay the R3 060 and requested the return of her cheque. He said that this could not be done because the cheque was already processed in the system. She tried in vain to discuss the matter the following day with the management and owners of the fitness centre and then resolved to stop payment of the cheque at the bank. "I heard nothing from the fitness centre. Three months later I received a summons to pay the R3 060 plus legal costs". It would seem that the whole affair was merely a ruse in order to attract the unsuspecting party to the fitness centre in order for her to sign up as a member.

 

The unfortunate liquidation, in the late nineties, of two major groups that owned fitness centres located in the major cities impacted heavily and negatively on many consumers that were members of these centres. The BPC consequently resolved to undertake a section 8(1)(b) investigation in terms of the Act into the business practices of fitness centres.

 

The BPC [and now the Consumer Affairs Committee (the Committee)] could conduct two types of formal investigations. Firstly, in terms of section 8 of the Act, the BPC and Committee may on its own initiative, and shall on the directions of the Minister of Trade and Industry (the Minister), make such investigation as it may consider necessary into any harmful business practice of a particular entity which the BPC has reason to believe exists or may come into existence. Secondly, the BPC could make such investigation into any business practice in general which is commonly applied by entities for the purposes of creating or maintaining a harmful business practice. The first type of investigation is known as a section 8(1)(a) investigation in terms of the Act and the second is called a section 8(1)(b) investigation.

 

The BPC has to report to the Minister on the result of any investigation made by it in terms of section 8. if the BPC, after an investigation, is of the opinion that a harmful business practice exists, or may come into existence and is not satisfied that the harmful business practice is justified in the public interest, the BPC in its report recommends to the Minister the action that should be taken to ensure the discontinuance of the harmful business practice. The powers of the Minister are set out in section 12 of the Act. The ultimate power of the Minister is to close down an entity. The orders of the Minister are published in the Government Gazelle. A contravention of such an order is a criminal offence.

 

The following Notice, No 107 was published in Government Gazette No 16816 dated 23 January 1998.

 

"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 to undertake an investigation in terms of section 8(1)(b) of the said Act into the possible imposing of a cooling-off period when a contract is entered into between gymnasiums and/or health clubs and members of the public; which cooling-off period would allow the member to cancel the contract, within the specified time frame. The investigation will also focus on the possible prohibition of so called lifelong contracts entered into between such gymnasiums and/or health clubs and members, especially where a once off payment is required to obtain membership".

 

Publication of the notice resulted in the BPC receiving a deluge of further complaints. Most of these complaints were also resolved on an ad hoc basis.