Business Practices Committee Report 75Alpha Club11. Further Events |
On 27 August 27 the Committee received a fax from Lawrence, who was based in Salt Lake City, and counsel to Alpha Club in its world wide operations. He inter alia said:
"With hind sight, Alpha Club's entry into South Africa by means of a negotiated transaction with Newport Business Club, utilizing the sales personnel of Newport Business Club and extending memberships to Newport Business Club members was a mistake. I believe it has caused Alpha Club tremendous difficulty, not only with the Business Practices Committee, but also with Alpha Club's operations in South Africa. There is no question in my mind that the Business Practices Committee's view of Alpha Club has been damaged and distorted as a result of the prior activities of the Newport Business Club".
and
"it is also my understanding from reading this prior correspondence, that Marketing for Success has provided the Committee with ample evidence that:
| 1. | the sale of Alpha Club memberships do not constitute the sale of time share interests. |
| 2. | the commissions paid to the marketing executives are a reasonable marketing expense. |
| 3. | Alpha Club members have access to discounts at a significant number of hotels. |
| 4. | there are no misrepresentations or dishonesty in the sale of Alpha Club memberships. |
| 5. | the price for Alpha Club membership is reasonable and fair". |
"I would be grateful if you could confirm to me in writing that the Committee is now satisfied on these issues".
On 2 September 1998 the Committee informed Sealey that it considered the response by Lawrence at its meeting on 1 September 1998 and that the Committee resolved to undertake a section 8(1)(a) investigation into the business practices of Marketing for Success (Pty) Ltd trading as Alpha Club and any director, and any employee, agent and/or representative of any of the aforementioned in respect op the activities of Marketing for Success (Pty) Ltd, trading as Alpha Club.
On 3 September 1998 the Committee again received a fax from Lawrence in which he said that, provided the Committee withdraws its resolution of 1 September 1998 with respect to Marketing for Success and Alpha Club, and does not publish the proposed notice the Government Gazette, Alpha Club would immediately instruct Marketing for Success to voluntarily suspend sales of Alpha Club memberships in South Africa.
The Committee received another fax from Lawrence on 9 September 1998. He confirmed that Marketing for Success, trading as Alpha Club, would immediately suspend the sales of Alpha Club memberships for such time it is necessary for the Committee to complete its investigation or to have come to an agreement with Marketing for Success which in the opinion of the Committee would ensure the discontinuance of a possible harmful business practice.
After a meeting of the Committee on 10 September 1998, it wrote to Sealey on 15 September:
" At the meeting of the Committee on 10 September 1998 you indicated that, should the Committee find that a harmful business practices exists and the Committee does not come to an agreement with Marketing for Success, it wouId immediately cease the sales of Alpha Club memberships in South Africa.
The Committee deliberated the business practices of Marketing for Success (Pty) Ltd, trading as Alpha Club, and resolved that:
| a) | an arrangement with Marketing for Success (Pty) Ltd that would be acceptable to the Committee would be that Marketing for Success (Pty) Ltd cease the marketing practice whereby existing members of Alpha Club and/or the management of Marketing for Success (Pty) Ltd are remunerated, directly or indirectly, to canvass new members for Alpha Club; |
| b) | the Committee regards the business practice of Marketing for Success (Pty) Ltd, whereby existing members of Alpha Club and/or the management of Marketing for Success (Pty) Ltd are remunerated, directly or indirectly, to canvass new members for Alpha Club, a harmful business practice in terms of section 1 of the Harmful Business Practices Act, 71 of 1988; |
| c) | Marketing for Success (Pty) Ltd be afforded the opportunity to accept an arrangement with the Committee, in terms of section 9 of the Act, whereby Marketing for Success (Pty) Ltd will undertake to immediately cease the marketing strategy whereby existing members of Alpha Club and/or the management of Marketing for Success (Pty) Ltd are remunerated, directly or indirectly, to canvass new members for Alpha Club in South Africa; |
| d) | the arrangement set out in the preceding paragraph will be published in the Government Gazette; and |
| e) | should Marketing for Success (Pty) Ltd fail to agree to the arrangement set out above, the Committee will continue with the publication of the notice of the section 8(1)(a) investigation into the business practices of Marketing for Success (Pty) Ltd, trading as Alpha Club. |
Should Marketing for Success (Pty) Ltd accept the proposed arrangement, it is required that it be accepted in writing by a person duly authorised by Marketing for Success (Pty) Ltd to do so. The acceptance of the arrangement before 12h00 on 23 September 1998 is essential. Failing to do so will result in the publication of the notice of the investigation, as set out in (a) above".
On 28 October 1998 Lawrence advised the Committee by fax:
"Under the present circumstances it is neither possible nor practical to continue to sell Alpha Club membership in South Africa. According we have as today's date rescinded our licence agreement with MSF. In taking this action we have actively and immediately resolved the issue before the Committee. No Alpha Club memberships will be sold in South Africa.
As MFS is no longer a licencee of Alpha Club, neither MFS, its directors, officers ad legal advisers are authorized to make any representations, give any undertakings or any commitments on behalf of Alpha Club. Alpha Club will continue to operate a service office as reservation office in South Africa to service the need's of the existing Alpha Club members in South Africa.
At such time as Alpha Club shall determine that it wished to resume sales of memberships in South Africa, I will contact the Committee to review any sales practices before any sale begin".
On 19 November 1998 the Committee responded to the fax or Lawrence dated 28 October 1998. Lawrence was referred to his statements that "... we have as at today's date rescinded our license agreement with MSF. In taking this action we have effectively and immediately resolved the issue before the Committee. No further Alpha Club memberships will be sold in South Africa". The Committee further wrote:
"You are aware that the Committee is undertaking a section 4(1)(c) investigation in terms of the Harmful Business Practices Act, 71 of 1988 (the Act), into the business practices of Marketing for Success trading as Alpha Club. In terms of section 9 of the Act, when the Committee had decided to undertake a section 4(1)(c) investigation, it may at any time thereafter negotiate with any person or body, corporate or unincorporated, with a view to making an arrangement which in the opinion of the Committee will ensure the discontinuance of a harmful business practice which exists or may come into existence and which is the subject to the investigation.
Unfortunately the Committee is not of the opinion that, as you put it, the issue is effectively and immediately resolved. The Committee is concerned that Alpha Club could be revived in South Africa under the guise of another entity and continue the alleged harmful business practice (read in conjunction with section 9 - or may come into existence). There seem to be two options. Either the Committee enters into an agreement with the "international" Alpha Club (IAC) or it continues its investigation under strength of a section 8(1)(a) investigation in terms of the Act into the business practices of Marketing for Success trading as Alpha Club.
An agreement in terms of section 9 of the Act.
You said that "As MFS is no longer a licensee of Alpha Club, neither MFS, it's directors, officers or legal advisers are authorized to make any representation, give any undertakings or any commitments on behalf of Alpha Club".
This sentence precludes the Committee in entering into an agreement with MFS (Ms Sullner) or Mr Peter Sealey (legal advisor). It is thus apparent that the Committee need to enter into an agreement with IAC to the effect that no further memberships will be sold in South Africa now or in future, either in its present form or in a modified form under the guise of another entity. The detail of such an agreement would obviously be agreed upon should this alternative be acceptable. Agreements in terms of section 9 of the Act are published in the Government Gazette.
The Committee continues its investigation in terms of section 8(1)(a) of the Act.
The Act specifies that a report be presented to the Minister or Trade and Industry after the completion of a section 8(1)(a) investigation. After completion of the investigation the Committee would recommend, if it is of the opinion that a harmful business practice exists or may come into existence, to the Minister which powers he should exercise to ensure the discontinuance of a particular harmful business practice. The powers of the Minister are set out in section 12 of the Act. Reports of investigations in terms of section 8(1)(a) of the Act are published in the Government Gazette.
It would be appreciated if you could indicate, on or before 30 November 1998, whether IAC is desirous to enter into an agreement with the Committee or whether the Committee should continue its investigation in terms of section 8(1)(a) of the Act. It stands to reason that the Committee requires documentary evidence from IAC that it has "... as at today's date rescinded our license agreement with MSF".
On 30 November 1998 Lawrence informed the Committee that "Alpha has never done business in SA. An agreement with the Committee could be 'viewed as some admission' on the part of Alpha Club that it has in fact conducted business in SA".
Because of other urgent matters and also because Alpha stated that "No further Alpha Club memberships will be sold in South Africa", the Committee did not have time to again discuss MFS or Alpha before 8 March 1999. On 8 March 1999 the Committee confirmed its resolution taken on 1 September 1998 to proceed with the investigation in terms of section 8(1)(a) of the Act into the business practices of Marketing for Success, trading as Alpha Club. Lawrence was informed about this decision.