I had a very interesting conversation last week with someone about the effects the new Consumer Protection Act has with regards to Referral Commission – apparently it’s now illegal.
Basically, referral commission is a small fee you get paid for when you refer someone to a company. For example if you know a friend is looking for a house, and you give this person’s details to an estate-agent, the Agent will pay you a referral commission if that friend buys a place (it’s usually something like R1000.00 or so).
Now, I know many businesses that use the Referral Commission model as part of growing a business and client acquisition – we’ll pay you RX.XX if you refer us a client.
In 2010 the US passed a law requiring everyone to declare their interest in referring you – and this makes sense. A person is more likely to refer you to a company that pays the best commission, rather than the company that provides the best service.
But I think to make Referral Commissions now completely illegal is taking things too far. I know the premise of the CPA is to look after a society that is simply too stupid to think for themselves (yes, I will admit, I am anti-CPA or anything Nanny-State-like) but this is yet another move to make it more and more difficult for business in South Africa to actually do business.
As a small business owner, I’m expected to spend a fortune on legal-fees to ensure all my documentation is now in order for this crazy CPA and now they tell me I can’t pay for business referrals? Good heavens! (Actually I don’t use a referral model system, but I should have the right to choose one).
What are your thoughts on Referral Commissions and the CPA?