Gift card changes: you can bank on it
Bank’s proposed new rules set to treat many gift cards more like financial products
By ANGELA ITZIKOWITZ, ERA GUNNING & AMELIA WARREN ENS
For more than a decade, South African gift cards have existed largely within the consumer protection space.
Section 63 of the Consumer Protection Act 68 of 2008 (CPA) treats a gift card as a pre-paid certificate, card, credit, voucher or similar device issued by a supplier that undertakes to provide goods or services up to the stored value. The CPA guarantees, among other things, a minimum three-year validity period and prohibits the early expiry of the residual balance. Crucially, however, the CPA s remit is limited: it was drafted on the assumption the same party that issues the voucher is also the merchant that ultimately redeems it. That assumption is increasingly out of step with modern payment architectures, and the South African Reserve Bank (Bank) has now signalled a decisive shift.
The regulatory fault line: ‘closed loop’ versus ‘payment activity’
A draft directive currently under consideration introduces the concept of a closed-loop payment system or payment activity”— a payment arrangement that is not interoperable with other payment systems and in which the service provider to the payer is the same entity (or group) as the service provider to the payee. Examples cited by the Bank include mobile money vouchers and store-of-value wallets products that are
A significant segment is poised to fall under direct Bank regulation. Issuers who wish to maintain the simplicity of a traditional gift certificate must keep their products genuinely single merchant and nontransferable
functionally indistinguishable from many retail gift cards. Under the proposed framework, no person may operate a closed-loop system unless registered by the Bank, and registration carries ongoing prudential, operational and risk management obligations.
Gift cards that operate in a multimerchant ecosystem (for example, shopping mall cards, airline alliance cards or network branded openloop prepaid cards) already fit squarely within the definition of “payment instruments” and will almost certainly be swept into the broader issuance of payment instruments activity contemplated by the Bank. Even traditional single-merchant vouchers risk regulatory capture if the Bank concludes that the issuer is providing a “store of value” or “money remittance” service by accepting funds in advance and facilitating later redemption.
Interaction with the Consumer Protection Act
Section 10(1) of the Financial Sector Regulation
Act 9 of 2017 stipulates that the CPA does not apply to any function or transaction that is “subject to the National Payment System Act or a financial sector law, and which is regulated by the Financial Sector Conduct Authority . Once the forthcoming payment system reforms are promulgated, gift cards that fall within a Bankregulated payment activity will migrate out of the CPA’s protective envelope.
In practice, two parallel regimes will emerge:
● Pure loyalty or single-merchant vouchers that do not constitute a payment activity (because the issuer remains the only accepting merchant and no transfer of funds occurs) will continue to be governed by section 63 of the CPA.
● Gift cards functioning as a payment instrument or store of value particularly those that allow redemption across multiple merchants, top-ups, peer-to-peer transfers or cash-out will trigger Bank registration, transaction caps (currently envisaged at R5,000 per day/R50,000 per month), and stringent segregation of client funds.
Implications for issuers and merchants
● Licensing and prudential compliance issuers of regulated gift cards will have to apply for authorisation as a payment institution , maintain ring-fenced trust or settlement accounts, and submit to Bank supervision.
● Fica obligations draft PCC 118A designates money- or value-transfer service providers, including issuers of payment instruments, as accountable institutions , triggering full customer due diligence, transaction monitoring and reporting duties.
● Business model redesign the ability to earn float interest, offer cash-out functionality or allow
multiple reloads may be curtailed unless issuers obtain additional permissions or restructure products to remain strictly within the CPA s gift card exemption.
The road ahead
The Bank’s Vision 2025 expressly targets fragmentation caused by closed-loop payment products. While not every voucher will require Bank authorisation, the regulatory perimeter is tightening. Stakeholders should therefore map each gift card programme against the Bank’s defined payment activities, assess whether funds are ever transferable beyond a single merchant and begin designing compliance frameworks that accommodate Bank registration, Financial Intelligence Centre onboarding and operational resilience standards.
A significant segment of the South African gift card market is poised to fall under direct Bank regulation. Issuers who wish to maintain the simplicity of a traditional gift certificate must keep their products genuinely single merchant and nontransferable; those who aspire to broader functionality must prepare for life as a regulated payment institution.
Gift cards functioning as a payment instrument or store of value will trigger Bank registration, transaction caps and stringent segregation of client funds
SCA confirms liq
By CHARLISE FINCH & WERNER LOTTER Herold Gie
In a recent judgment, the Supreme Court of Appeal (SCA) considered a payment made to Pick n Pay by attorneys acting for a franchisee under a sale of business agreement, after the business was placed in liquidation.
The high court held the payment was affected by the concursus creditorum (meeting of creditors) and ordered Pick n Pay to repay the liquidators. The SCA upheld this ruling, confirming that once a company is liquidated, only the liquidators may perform or enforce obligations under uncompleted contracts.
The liquidators had sought to set aside the payment as a voidable disposition and demanded repayment with interest and costs. Pick n Pay opposed the application, arguing the liquidators had not disclosed a valid cause of action, had used incorrect provisions of the Insolvency Act and should have brought an action, not an application. It also claimed the payment was made under an executory contract that the liquidators had accepted, making it immune to the concursus. The high court rejected these arguments.
Pick n Pay appealed, arguing the high court should have upheld its preliminary objections. It said the liquidators had admitted the contract was executory and they should be bound by it. It also argued it had enforceable rights under clause 6.
The liquidators maintained the contract had been completed upon payment and transfer of the business, and that clause 6’s mandate ended at liquidation. Any payment to Pick n Pay after that was unlawful.
The SCA held the affidavits did disclose a valid cause based on the concursus creditorum and found that liquidators are not bound to perform uncompleted contracts unless they elect to do so. The court stressed the purpose of the concursus: equal treatment of all creditors. Any contractual rights or obligations must be exercised by the liquidator, not other parties. Although Pick n Pay was not a party to the sale agreement, it had rights under it. However, the mandate given to the attorneys to issue payments lapsed upon liquidation. Pick n Pay s instruction was no longer valid, and the attorneys were not permitted to act on it.
The SCA held that the contract was not executory. The business had been transferred, and the attorneys role was limited to paying out proceeds. This did not amount to continued performance under an uncompleted contract. The payment to Pick n Pay after liquidation was therefore unlawful and had to be repaid.
This judgment is a warning to creditors and parties transacting with companies in financial distress. It reaffirms only liquidators can perform or enforce rights under uncompleted contracts post-liquidation. Payments made without their authority are vulnerable to challenge and reversal. Any mandate or instruction regarding payments from an insolvent estate lapses upon liquidation. Liquidators have sole control of the insolvent estate’s assets and liabilities. Creditors must engage with them directly and avoid unilateral action that may invalidate their claims.
The decision upholds fairness and transparency in the administration of insolvent estates and promotes legal certainty in dealings with companies under liquidation.
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Deliverables: the devil is in the detail
A precisely drafted and clearly worded Statement of Work is a critical backbone of any successful project
By ISAIVAN NAIDOO & ALEXANDER POWELL ENS
In the world of professional services, technology outsourcing and complex vendor relationships, the Statement of Work (SOW) is not just a formality, it is a critical backbone of any successful project.
A vague or poorly drafted SOW can introduce issues that will jeopardise a project, such as service quality degradation, scope creep, missed deadlines, disputes and cost overruns.
In this article, we set forth some key lessons learned from real-life engagements that highlight the importance of precisely and accurately drafting SOWs.
It is important to clearly understand the scope of services, technical requirements, assumptions and retained responsibilities. If these are not clearly articulated in the SOW, it can result in scope creep. An example is where a vague description of the software to be deployed or implemented is included with no specific functionality or software features listed. This could result in the deployment of the software in a manner which does not meet the customer’s business requirements. This could ultimately result in contractual disputes.
It is recommended to use exact and precise language to define the scope of the services and to avoid broad phrases such as “implementation” or “support” without further including further specific details of what is required technically and operationally. Further, clearly document deliverables, modules, tools, features and specifications.
It is also important to clarify assumptions, such as which third-party tools will be used, licencing requirements and so on.
Once the deliverables have been clearly documented, these should be linked to acceptance testing procedures, milestone dates and payments. In large and critical IT outsourcing contracts, it is a good practice to link deliverables to retained amounts which will only be paid to the service provider upon the deliverable successfully passing acceptance testing. An example of how this could become an issue is where payment obligations are
tied to specific dates with no retained amounts and acceptance testing, where the customer will be liable to pay even in the case of a nonfunctional deliverable or service. By linking deliverables to retained amounts, this protects the customer and incentivises the service provider to meet deadlines.
Both customer and service provider roles and responsibilities should be clearly delineated and documented in the SOW. Any customer retained responsibilities should be specified in the SOW and linked to specific deliverables. This will prevent the situation where a service provider claims that it cannot deliver a specific deliverable as the customer was required to perform a specific action, such as procure a specific third-party licence or to provide access to client systems. In complex IT projects, it is recommended to include a RACI Matrix (responsible, accountable, consulted, informed) to document each party’s roles and responsibilities.
Change control procedure
IT projects often evolve. There could be regulatory changes or other changes which necessitate a change to specific functionality of software, software modules or pricing, or there could be an increase or reduction in the scope of services. A change management process is key to governing any contractual changes and any changes to pricing, contractual terms and the scope of services should follow a formal change control procedure. Therefore, a robust change control
SOW templates are helpful starting points; however, every SOW must be tailored to the specific project in question
procedure must be included which addresses, inter alia, how changes are proposed, reviewed, approved and billed.
Change control is critical to avoid unforeseen costs where a service provider performs additional work and invoices the customer claiming that the additional work formed part of the scope of the services. This will ultimately prevent payment disputes down the line. Every deliverable and service component must have clearly defined and documented acceptance testing criteria and procedures. Customers should avoid “deemed acceptance” provisions where a deliverable will automatically be deemed to be accepted by the customer after a certain period of time. The risk for the customer is that deficient deliverables could be deemed to be accepted and, once accepted, there may be little to no contractual recourse available for remediation or reperformance of the deficient deliverable.
Legal terms
In reality, most contractual disputes do not occur under a master services agreement (which contains key legal clauses) but rather under an SOW (which contains commercial and servicespecific clauses). Customers should ensure that SOWs do not contain overarching legal provisions which overwrite key master services agreement clauses such as warranties, indemnities and liability provisions.
SOW templates are helpful starting points, especially for consistency across projects; however, every SOW must be tailored to the specific project in question. This entails removing irrelevant clauses, updating terminology and including project timelines and deadlines. Ultimately, the SOW should be treated as a bespoke document and not a fill-in-the-blank template. Therefore, a precisely drafted SOW is more than a mere project document, it is a service and commercial document which is key to any successful project. It is important to ensure SOWs contain key clauses including, but not limited to, acceptance testing, deliverables, service-specific terms, project and delivery plan and so on.
Why SA’s small businesses fail when founders exit
handover gracefully.
By ANGIE DA SILVA COO of PKF SA
SA stands at a crossroads its small business sector is its engine of job creation and innovation, yet many enterprises sputter and die before reaching their prime.
As founders exit without a plan, the consequences echo through communities and the economy at large.
Failure by the numbers
Some 70%-80% of SMMEs collapse within five years, according to University of the Western Cape research markedly higher than the global average.
A growing 49% of people globally now say they would not start a business for fear it might fail, up from 44% in 2019, as per the GEM 2024/25 report.
This mounting fear of failure creates a vicious cycle: fewer startups, fewer resilient successors and fewer thriving legacies.
Why succession planning is critical and overlooked
● Valuation blind spots without clarity on the business’s market value, founders struggle to
negotiate fair exits or to plan for smooth transitions.
● Founder dependence SMEs often collapse when the founder steps away, due to a lack of delegation, systems or cultural roots that outlive the individual. As UWC research highlights, success lies in the person of the entrepreneur”— 40% of outcomes depend on founder traits such as proactivity and planning.
● Legacy in limbo without proper transfer mechanisms, businesses lose strategic focus and erode stakeholder confidence post-exit.
● Regulatory drag the VAT threshold has not moved for well over a decade (still R1m), adding costs and complexity that hamper sustainability and succession readiness. Stringent labour laws and red tape are seen as significant obstacles, making it difficult for SMMEs to manage and comply with regulations, especially during challenging economic times.
Legal pitfalls to avoid
● Blurry ownership structure without clearly defined shareholding and exit terms, succession can trigger disputes.
● Tax overload on exit capital gains tax (CGT) planning is critical; failure to structure properly
can make exits prohibitively expensive.
● Noncompliance risk unresolved labour or tax issues carry forward and threaten continuity.
● No successor training without mentorship or defined roles for successors, leadership transfer often fails.
● Debt traps and guarantees founders need to unravel personal guarantees and settle liabilities before stepping back.
Sound advice for sustainable succession
● Start valuation early get independent valuations now to frame fair transitions and ensure transparency.
● Build systems and culture transfer the business beyond your personality. Institutionalise daily operations.
● Mentor successors prepare internal leaders through mentorship, clear documentation and ownership clarity.
● Use tax tools smartly explore entrepreneurial relief and CGT deferral strategies to shield founders and successors.
● Simplify structure use holding companies, clear board structures or trusts to manage power
● Lobby for compliance reform advocate for policies like a VAT threshold increase. It’s time the compliance burden reflects economic realities.
The bigger picture: why thriving SMEs matter
● Thriving SMEs are jobs engines, especially in previously marginalised communities. SMMEs in SA, however, are not creating enough jobs. The target should be as high as 70% of employment created in a low- to middle-income country, yet SA remains well below this level of job creation.
● Succession means continuity jobs, innovation and economic equity must outlast founders.
● Reducing the fear of failure through tangible support and legal clarity will unlock more entrepreneurial potential.
SA s SME crisis isn t just about business failures it’s about broken legacies. Without succession planning, founder departures become death knells. It s time to reframe: supporting SMEs to survive and thrive is both sound economics and social justice. With better valuation, legal foresight and streamlined compliance, we can build resilient legacies not just ventures.
Trump’s tariffs and their African implications
hen former US President Donald Trump imposed sweeping tariffs on steel, aluminium and a wide range of Chinese imports, the global trade system was jolted into a period of turbulence from which it has not fully recovered.
For Africa, the knock-on effects were indirect but significant: rising compliance risks, fractured supply chains and a weakening of the rulesbased trade order on which emerging markets depend.
The interplay between what the law says, and the practical impact, is a key topic across boardrooms and legal chambers in Africa. At the end of the day, the very fabric of trade law is under threat.
For Africa, this instability is especially damaging. African economies rely heavily on a rulesbased framework to shield smaller markets from the brute force of power politics. Retaliatory spirals and selective enforcement of rules increase costs for exporters, complicate compliance and disrupt the certainty that underpins investment decisions.
Moreover, as the African Continental Free Trade Area (AfCFTA) takes root, African negotiators must grapple with the possibility that geopolitical tariffs will become the new normal
demanding stronger legal safeguards in contracts and treaties.
Two key statutes formed the backbone of the Trump administration’s tariff policies.
Section 232 of the Trade Expansion Act of 1962 authorises the president to impose tariffs or quotas if the US Department of Commerce finds that imports threaten to impair national security. Historically, this provision was reserved for narrowly defined defencerelated concerns, such as oil imports during the Cold War. Trump expanded its scope dramatically by applying it to steel and aluminium on the grounds of “economic security”, arguing that domestic industries vital to national resilience were at risk.
Section 301 of the Trade Act of 1974 empowers the US Trade Representative (USTR) to investigate and respond to foreign trade practices deemed unfair or discriminatory. Traditionally used to secure negotiated settlements, s301 became the legal justification for imposing tariffs on hundreds of billions of dollars’ worth of Chinese goods. The justification was China s alleged theft of intellectual property and forced technology transfer practices.
Both provisions were deployed aggressively and both triggered a host of legal and systemic challenges that resonate globally. Within the US the most pressing legal risk has been whether section 232
EVAN PICKWORTH EDITOR LAW & TAX REVIEW
The greatest risk lies in the erosion of confidence in US trade law and the multilateral system
represents an unconstitutional delegation of Congress s authority over trade and tariffs. The US Constitution grants Congress exclusive power to “lay and collect duties”. By allowing the president to act almost unilaterally under the banner of national security, critics argue, s232 tips the balance too far towards the executive.
Lawsuits such as American Institute for International Steel v United States raised this concern. While US courts upheld the tariffs, relying on longstanding Supreme Court precedent, the challenge underscored the fragility of the legal architecture. Future cases,
particularly if presidential discretion continues to expand, could reopen the constitutional debate and potentially curtail executive authority.
At the multilateral level, Trump’s tariffs ran headlong into the discipline of the World Trade Organisation (WTO). In 2020, a WTO panel found that Section 301 tariffs on China violated the Most Favoured Nation principle and US tariff commitments under the General Agreement on Tariffs and Trade (GATT). Similarly, Section 232 tariffs were challenged as inconsistent with WTO rules, with the US invoking the GATT Article XXI national security exception.
The WTO has begun to clarify that the national security exception is not limitless. In Russia Traffic in Transit, a panel ruled that members cannot simply self-declare any measure as national security-related without scrutiny. Trump s expansive interpretation risks setting a precedent where economic protectionism is cloaked as security a move that could undermine the very predictability and trust that global trade law was designed to protect.
Beyond the courtroom, the greatest risk lies in the erosion of confidence in both US trade law and the multilateral system. If the US, the architect of the WTO, is willing to stretch or sidestep the rules, other countries may feel emboldened to do the same. The result
is a weakening of dispute settlement, an escalation of retaliatory tariffs and the spread of legal uncertainty for businesses.
Implications for Africa’s legal community
For African lawyers and policymakers, the Trump tariff era is more than a US trade story; it is a cautionary tale about the fragility of the legal order. Three lessons stand out:
● Watch the US courts closely. Any curtailment of s232 powers could reshape executive authority over trade, with global ripple effects.
● Engage actively in WTO processes. African voices must be present in shaping the evolving interpretation of national security exceptions.
● Future-proof AfCFTA and investment treaties. Contracts should anticipate geopolitical shocks and build in dispute resolution mechanisms that reduce exposure.
Trump s tariffs may have been aimed at protecting US industries and countering Chinese practices, but their most lasting effect may be the legal uncertainty they unleashed worldwide. For Africa, a continent seeking to expand trade and attract investment, the lesson is clear: vigilance in defending the rules-based system, combined with forward-looking legal frameworks, is not optional. It is essential for sustainable growth.
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CONSUMER BILLS
PATRICK BRACHER COLUMNIST
What kind of superperson is today’s technology?
When I grew up there were a number of cartoon characters endowed with superpowers and good intentions to save humanity from domination. For consumers, superpowers are now vested in artificial intelligence (AI) technology.
On the one hand there are advocates of what is known as the abundance movement. The abundance movement seeks a state in which there is enough of what we need to create lives better than we have. The suggestion is that, if governments do away with regulation, the powers of the market and of technology will provide cheap and plentiful healthcare, affordable housing and higher earnings.
While I have written many times about less regulation, it is hard to believe that the modern market and technology, dominated by the few, is the likely solution to social problems.
The real situation is inequality of access to markets and technology. It seems unlikely that those people who control, and more particularly those people who own, the technology will be driven by altruistic motives for redistribution of resources in a world of mass consumption. Any such vision requires government regulation which is aimed at treating consumers fairly while at the same time not destroying entrepreneurship.
The distribution of resources cannot be left either to markets or to politics. Markets must be prevented from being driven only by profit. Politics must be driven by justice, equality and the rule of law
Regulations need to be sufficiently clear and sufficiently brief so that they do not overburden not only providers and consumers but also the regulators themselves, to play an effective role. The distribution of resources cannot be left either to markets or to politics. Markets must be prevented from being driven only by profit. Politics must be driven by justice, equality and the rule of law.
The problem is that open-ended budgets are not being given to superheroes intent on saving humanity. They are being given by governments to develop the most sophisticated forms of data surveillance and the most sophisticated forms of military application of AI.
One thing the technological age has taught us is the person who controls access to and use of information, especially personal information, has almost unlimited power over those whose information is controlled and used.
In developed country after developed country, politics is being dominated by demands to control, and get rid of, anyone seen as an undesirable immigrant. Who is undesirable according to the politics in these countries is not based on talent, dignity and equality.
The latest technology has the power to compile lists of personal information on hundreds of millions of people that provide untold surveillance powers which can be used to advance a narrow political agenda, including the punishment of critics of that agenda. There are technology companies that criticise AI expertise being used for the larger public good instead of being used to protect countries against anything seen as foreign or holding different views.
Major technology companies suggest their mission is to turn war fighters into technomancers. The talents of technology engineers are being recruited to the aim of domination achieved by giving governments and their war fighters superhuman powers.
It all proves the point that where there are superprofits to be made, some of the best minds will pursue the profits for superpower outcomes for their own benefit. The ever-waning appeal of human rights values needs to be resisted.
-Patrick
Bracher (@PBracher1) is a director at Norton Rose Fulbright.
It is hard to believe that the modern market and technology, dominated by the few, is the likely solution to social problems
Amendments signal policy shift
The release of the Draft Taxation Laws Amendment Bills marks a key moment in the tax calendar. For most South Africans, it passes quietly, but for tax practitioners, investors and businesses, it signals the possible contours of the tax landscape for the year ahead.
This year s draft legislation has attracted particular attention, not only for the seismic changes proposed, but for their structural impact on the Income Tax Act.
It has been some time since we have seen such sweeping and structural amendments. While the amendments are still subject to consultation before implementation, several highlights and anomalies stand out.
Broader definition of equity share
The definition of an equity share has been expanded to include references to foreign dividends and foreign return of capital”. This appears to address the fact that, under the current definition, certain shares in a foreign company may not qualify as equity shares. If that interpretation is correct, the inference is that taxpayers could not previously rely on the relief provisions in section 10B or paragraph 64B of the Eighth Schedule, both of which require at least a 10% holding in the foreign company’s equity shares. The amendment seeks to remedy this but, in doing so, it highlights a peculiar gap in the existing law.
That notwithstanding, it is submitted that National Treasury’s
comments ought to be regarded as clarificatory in nature, rather than constituting any substantive amendment. In this regard, it would be both helpful and appropriate for the legislature to reflect such clarification in its customary response document, so as to avoid any potential uncertainty.
Narrower bona fide inadvertent error defence
Following the Coronation and Thistle judgments, the scope of the bona fide inadvertent error defence has been limited. It will now apply only in cases of substantial understatement penalties and no longer extends to the behavioural elements of the understatement penalty regime. This narrowing places a greater responsibility on taxpayers to ensure accuracy in their filings, with less room for error being excused.
Foreign pensions brought into the net
The long-standing exemption for foreign service pensions has been
removed. Going forward, such pensions will be taxable in SA, unless relief is provided under an applicable double taxation agreement. The effect of the above amendments is that all payments received from foreign pension funds, to the extent that they constitute consideration for past employment rendered outside SA, are now subject to income tax.
The purpose of the original exemption was to encourage foreign nationals to retire in SA, on the premise that they would bring their economic wealth into the country, thereby contributing to the domestic economy. Moreover, by Treasury s own admission, the exemption was introduced to ensure such amounts were taxed fairly and consistently. The removal of this exemption, therefore, appears to be at odds with these foundational policy objectives.
Long-standing reliefs are being closed and defences are being narrowed
End of CIS rollover relief
The tax treatment of collective investment schemes (CIS) has also been addressed. The longstanding section 42 rollover relief, which allowed investors to transfer listed securities into a CIS on a tax-neutral basis, will be withdrawn. This mechanism was frequently used to achieve portfolio diversification without triggering immediate capital gains. As a result, taxpayers seeking to rebalance or diversify an
unequally weighted portfolio will no longer be able to rely on this relief. Withdrawn proposal to the hybrid equity instrument definition Government had considered recasting the definition of a hybrid equity instruments to link it directly to International Financial Reporting Standards. Under the proposed amendments, the classification of an instrument under accounting standards would have directly dictated its tax treatment. While references to accounting principles are not new in tax legislation, the proposed approach raised concerns about potentially blurring the line between tax policy, determined by Treasury, and accounting standards, set by independent boards. However, government has since withdrawn these proposed amendments and will no longer be pursuing the changes. Should any amendments be considered in the future, a comprehensive consultation process will be undertaken prior to implementation
Changing environment
Taken together, these proposed amendments point to a significant policy shift. Long-standing reliefs are being closed and defences are being narrowed.
While further debate is expected during the consultative process, one message is already clear. If promulgated as drafted, these amendments will require taxpayers and their advisers to re-evaluate existing positions and adapt to a changing legislative environment. -Bobby Wessels is a Senior Associate at tax and advisory specialists AJM.
Commemorating the 30th Anniversary of the Labour Relations Act of 1995, South Africa
Dealing with trademark infringement under US law
By RUAL GROBLER (ASSOCIATE) & SHAMIN RAGHUNANDAN Spoor & Fisher
The unauthorised use of a registered trademark is dealt with in Section 32 of the Lanham Act, which prohibits use that is likely to cause confusion, mistake or deception.
For this cause of action, in its case against Lady Gaga, surf brand Lost is relying on its rights in its word trademark registration no 4790623 MAYHEM, for beanies; caps; jackets; pants; sandals; shorts; T-shirts; tank tops . However, there are several other trademarks on the US Register owned by different proprietors that also incorporate the word MAYHEM for similar goods.
As a result, the exclusivity of the rights that Lost claims in the MAYHEM mark may be more limited than it at first appears.
This opens up some defences for Lady Gaga, the most obvious one being the possibility of the MAYHEM trademark having become generic for apparel in class 25, as multiple trademarks have gone through to registration in class 25, all incorporating the word MAYHEM.
Under California common law, like most common law systems, a trademark owner can enforce rights based on prior use, even without a trademark registration, to take action against infringing use by others. The MAYHEM logo is not registered in the US by Lost. As such, its only recourse would be a passing off claim. Lost must prove that it has acquired common law rights, which would prohibit Lady Gaga from using a confusingly similar trademark in relation to similar goods.
Lost alleges common law rights through the continuous and exclusive use of MAYHEM since 1988. The logo forms a major part of this use. With Lady Gaga s logo also written in a melting, crescent shape, it will be interesting to see what defences her legal team will bring to the table.
One argument could be that there is no likelihood of confusion between the marks. This will be judged from the eye of the reasonable consumer. Lady Gaga s preferred course of action may be to rely on the differences in trade channels and assert that no likelihood of confusion exists by showing that the sales of Lady Gaga s merchandise have almost exclusively taken place through her website. It would be difficult for Lost to counter that someone who made it as far as the tour and merchandise pages on the official Lady Gaga website would have confused the site with Lost s own website.
The limited platform for sale of Lady Gaga s merchandise significantly closes the trading circles in which to create confusion, and restricts the opportunity to argue that the trade channel for Lady Gaga s merchandise was not specialised.
Is Lady Gaga facing music or is surf giant causing waves?
Trademark battle reveals importance of taking proactive steps to protect your brand
By RUAL GROBLER (ASSOCIATE) & SHAMIN
RAGHUNANDAN Spoor & Fisher
Trademark owners across the globe often wonder why they need to register their trade name or logo, especially when they are unclear about its worth. This is the $100m question that pop icon Lady Gaga and surf brand LOST have to face in 2025.
In March, the global superstar and regular feature in many a carpool sing-alongs, launched her new album and announced her new tour, both titled “MAYHEM”. Alongside record-breaking album sales came a merchandising opportunity, mostly consisting of articles of clothing depicting a MAYHEM logo.
Enter Lost International, LLC, a Californiabased lifestyle brand which cemented itself in surfing culture since its inception in 1985. It was late March when Lost instituted legal proceedings in the US District Court for the Central District of California against Lady Gaga for alleged trademark infringement.
Lost is seeking a staggering $100m in damages, along with a prohibitive interdict preventing Lady Gaga from using the MAYHEM trademark.
Lost s claims revolve around the alleged infringement of its MAYHEM trademark. Lost alleges that it has developed and built its brand around its MAYHEM trademark since 1988, and holds a US trademark registration for the word mark MAYHEM.
Lost sported its MAYHEM trademark on apparel, accessories and other lifestyle products and took issue with Lady Gaga’s merchandising campaign, arguing that she has been trading in related goods under a confusingly similar trademark directed towards a shared consumer demographic.
Lost alleges the MAYHEM logo used by Lady Gaga is confusingly similar to its own. Lost argued that the close similarities amplified the likelihood of consumer confusion, particularly among the perceived demographic overlap between fashionforward music fans and lifestyle brand consumers.
The crux of the matter from a trademark perspective is not the use of the MAYHEM word mark on Gaga s music album, or even her products, but rather the merchandising of an allegedly confusingly similar logo on identical products, which Lost feels is detrimental to the rights it claims to have established in its trademark.
While the outcome of this trademark dispute is still pending, it has drawn global attention and has raised interesting points. Notably, it highlights two important considerations for those who want to build a brand of value in the globalised economy, be it a corporation, a new artist or a seasoned
international superstar.
● The importance of securing trademark registrations for your logos
Many trademark proprietors protect their word trademarks and fail to consider the ramifications of not securing trademark registrations for their logos.
To enjoy the full extent of protection of the law, a brand should be protected comprehensively. A registered trademark is an intangible asset with its own market value and provides a presumption of ownership and exclusive right to the use of a mark.
Brand holders and aspiring faces of international brands are encouraged not to proceed under the notion that a word mark will provide sufficient cover for brand identity, or that a mark will be protected because it has international presence and is “well known”. Proof of use of a trademark for a prolonged period is usually required to establish rights in that trademark.
While unregistered well-known trademarks are usually afforded some key protections, establishing whether a trademark is well known carries its own strenuous evidential burden.
● The importance of conducting trademark clearance searches
This case highlights the importance of conducting a trademark clearance search before using a trademark, to check for similar marks in every country of interest, whether you intend to apply
for the registration of such a mark or simply use it in trade without a registration.
A clearance search a could inform you of potential risks or potential defences for your use and registration. Confusion among consumers dramatically decreases as the difference between the products and services offered increases. This means that a registered trademark being used in relation to computer hardware may not necessarily bar you from using a similar or identical trademark in relation to your dance studio or your latest podcast.
This epic battle between an immovable, longcemented brand and an unstoppable pop culture icon will be closely followed by trademark practitioners, business owners and entertainment industry professionals. On the one hand, the true value of decades of trademark use and the building of a recognisable brand will be revealed. On the other, the ability to mix artistic ventures with commercial opportunity could be limited. What this case reveals is the value of a registered trademark, the consequences of not covering all possible bases of protection and the importance of taking proactive steps to protect your brand.
Not paying attention to these risks carries serious financial consequences. Will we witness an icon’s merchandising success being washed away by a tide of punitive financial awards? It sa case that will have to be monitored closely.
Managing workplace relationships in SA
By JONATHAN GOLDBERG & JOHN BOTHA Global Business Solutions
South African labour law does not specifically prohibit romantic or personal relationships at work.
However, judicial precedent and codes of conduct clarify when and how such relationships may be managed, especially if they threaten operational integrity, fairness or staff wellbeing.
Case law illustrates that an employee cannot be dismissed merely for having a relationship unless it genuinely disrupts the working environment or creates intolerable conditions. However, employers are justified in regulating workplace relationships through robust policy, especially where power dynamics, conflicts of interest or risk of harassment exist.
The constitution guarantees privacy and dignity to all, which extends into the workplace. The Labour Relations Act and Codes of Good Practice emphasise procedural and substantive fairness: dismissal or discipline must follow a fair procedure and be based on a fair reason. Employers may intervene when a relationship causes demonstrable harm such as loss of trust, reputational damage, favouritism or exposure to harassment claims.
In Zabala v Gold Reef City Casino 1 BLLR 94 (LC), the labour court found that dismissals motivated purely by disapproval of personal relationships, such as extra-marital affairs, are automatically unfair. However, this protection is not absolute. The court clarified that dismissal may be justified if the conduct genuinely disrupts business operations or undermines the essential element of trust between employer and employee.
Similarly, in Humphries & Jewel (Pty) Ltd vs FEDCRAW (2006) the labour appeal court emphasised that the employment relationship is fundamentally based on trust and confidence. The judgment highlighted that discipline or dismissal is only warranted where misconduct makes continued employment intolerable. In other words, mere knowledge of a personal relationship is not, on its own, a sufficient basis for disciplinary action.
More recently, disciplinary actions have tended to focus on cases involving nondisclosure of vertical relationships. That is, situations where one partner has direct authority over the other. In such cases, employers have been found justified in
imposing disciplinary measures, particularly where the relationship gives rise to actual or perceived bias, conflicts of interest or breaches of governance and reporting obligations.
In the Nestlé case CEO Laurent Freixe maintained an undisclosed romantic relationship with a direct subordinate, violating the company s code of business conduct. He failed to declare the conflict of interest, denied it when first investigated and was ultimately found to have breached transparency, disclosure and governance standards.
The Coldplay concert incident, where a CEO and HR executive were filmed in an extra-marital moment on a “kiss cam” demonstrates how offduty behaviour can still create liability at work.
Under South African labour law, discipline for conduct outside work is only justified if there sa clear nexus to workplace impact such as reputational harm, loss of trust or brand damage.
Should employers have a workplace relationship policy?
A company should have a workplace relationship policy. Such a policy provides clarity, ensures fairness and protects both the business and its employees from conflicts of interest, allegations of favouritism or reputational harm. Policies foster a culture of respect, manage risk and guarantee due process in the event of a workplace romance.
Clear workplace relationship policies enable businesses to uphold fairness, protect employees’ dignity and privacy and maintain trust, operational excellence and legal compliance.
Key principles for a workplace relationship policy
Principle: Disclosure requirements
Details: Employees in a romantic relationship, particularly across reporting lines (vertical relationships), must disclose the relationship to HR or management to allow for proper safeguards.
Principle: Management of conflicts
Details: Steps may be defined for dealing with perceived or actual conflicts of interest such as adjusting reporting structures or removing one party from decision-making over the other s career.
Principle: Prohibition of favouritism
Details: The policy must prevent favouritism, bias or unfair treatment, especially where career progression, remuneration or rewards could be influenced by the relationship.
Principle: Confidentiality
Details: Information relating to the relationship should be treated confidentially, except as necessary, to manage risks.
Principle: Conduct boundaries
Details: The expected standard of professional behaviour at work, including what constitutes inappropriate displays of affection or harassment, must be clearly outlined.
Principle: Harassment and abuse safeguards
Details: The policy should address the difference between consensual relationships and potential abuse of power or sexual harassment, integrated into existing harassment policies.
Principle: Termination or changes
Details: Guidelines for changes when a relationship ends, including support mechanisms to maintain team productivity and harmony.
Far left: Lady Gaga’s Mayhem apparel. Left: Lost s apparel bearing the Mayhem mark. Far left: Lady Gaga s Mayhem logo. Left: Lost s Mayhem mark.
Cloud vs professional services: getting it wrong could cost you
By ISAIVAN NAIDOO & SHAAISTA TAYOB ENS
In today s digital economy, where businesses rely more heavily than ever on technology to operate, the distinction between cloud services and professional services has become one of the most overlooked but critical issues in contracting.
It is tempting to treat them as interchangeable labels, to slot them together into a legacy template and to assume the difference is obvious. Yet the reality is that failing to draw a clear line between the two can leave organisations exposed to spiralling costs, mismatched legal protections and even regulatory breaches. In an environment where governance is under the microscope and compliance failures can cost millions, this is a risk no organisation should be willing to take.
Cloud services and professional services may often be procured together, but they are fundamentally different. Cloud services refer mainly to subscription models, remote hosting and standardised service levels a one-to-many offering with limited room for negotiation. Professional services, on the other hand, are project-based, customised and built around scope, deliverables, timelines and acceptance criteria.
Confusing these categories may result in real consequences. Imagine being charged an ongoing subscription for what should have been a once-off migration project, or attempting to enforce performance warranties against a provider who insists you accepted the services “as is”. This is not just a matter of neat legal drafting. It is about protecting the organisation’s budget, safeguarding its compliance and ensuring the value it expected from a contract is actually delivered.
The commercial implications alone make this separation essential. When services are poorly defined, transparency around costs disappears.
Customers can end up paying recurring fees for project work or miss out on cost reductions that should arise when vendors introduce efficiencies such as AI-driven automation into their delivery models.
Why should a business continue paying the same fee if the vendor’s costs have dropped substantially thanks to AI? Without clarity in the contract, those savings remain hidden, and the customer is left overpaying. At a time when every organisation is under pressure to do more with less, that lack of transparency undermines the purpose of effective procurement.
Stark legal risks
The legal risks are just as stark. Cloud services typically come with limited warranties, standard SLAs and tight liability caps. Professional services demand something more robust: performance warranties, milestone-based acceptance and liability aligned with the risk of failure. If these distinctions are not written into the contract, the balance tips squarely in favour of the provider. Customers may find themselves unable to reject defective work, unable to enforce accountability and unable to claim appropriate remedies.
Providers, in turn, may suddenly shoulder risks they never intended to accept. A well-drafted contract does not just allocate risk fairly it also makes clear who is responsible when things go wrong, which in technology services is not a small question.
Cloud services involve continuous data hosting, cross-border transfers and regulatory obligations such as localisation requirements. Professional services may only involve temporary access to personal information during a migration or testing exercise. Treating both in the same way either leaves gaps that create compliance failures or imposes unnecessary and costly obligations.
In SA, for instance, the Protection of Personal Information Act (Popia) requires organisations to apply safeguards that are appropriate to the context. If a provider is hosting sensitive data in the cloud, that means ongoing obligations, breach notifications and security audits. If the provider is simply assisting with a one-off system integration, the obligations are different. The law demands nuance, and contracts must reflect that nuance.
embedded into both cloud platforms and professional engagements, ignoring these risks leaves organisations dangerously exposed.
So, what should organisations do?
The starting point is clarity. Definitions matter, but so do the structures that sit beneath them.
Contracts should create separate schedules or statements of work for cloud and professional services, each with their own performance standards, liability regimes and compliance obligations. They should demand disclosure of AI usage and require human oversight where appropriate.
These issues are only magnified by the rise of artificial intelligence (AI). Legacy contracts, many drafted long before AI entered mainstream service delivery, simply do not account for the risks it introduces. They lack provisions on disclosure of AI usage, acceptance criteria for AI-generated outputs and liability for errors, biases or hallucinations. Without these safeguards, customers have no visibility into whether their service provider is quietly substituting human effort with automated tools, nor any recourse if those tools create faulty results. As AI becomes
They should refresh outdated MSAs and procurement templates that still reflect an era before cloud and AI reshaped the service landscape. In other words, they should be written for the reality of today, not the assumptions of a decade ago.
Ultimately, contracts are not just about legal protection; they are about operational resilience and commercial fairness. By drawing a clear distinction between cloud and professional services, organisations take control of their budgets, sharpen their legal protections and align with evolving compliance demands.
In a world where technology is advancing faster than regulation, this clarity is not a luxury it is a strategic necessity. Contracts must be clearly written for the reality of today
Compliance adds another layer of complexity.
LEGAL SCOOP
AI surveillance and privacy: a balancing act
It is evident that due to its usefulness, artificial intelligence (AI) and machine learning tools are becoming more popular and being integrated more frequently into the workplace.
There is a growing trend of employers using AI tools to monitor employees’ productivity, enhance security and manage other matters such as remote working of employees.
The question, then, that often arises is how far can an employer go before it crosses the line into infringing an employee’s right to privacy?
The right to privacy is enshrined in the constitution of SA. However, like all rights, such rights can be limited if it is justifiable and reasonable to do so.
This article will explore the tension between employers’ use of AI tools in the workplace and employee privacy.
Employers may introduce AI surveillance tools in the workplace including, but not limited to:
● Keyboard and screen monitoring;
● Webcam-based attendance systems;
● Automated email and message scanning;
● Facial recognition and biometric clock-in systems; and
● Productivity analysis for performance rating/monitoring.
These tools can provide an employer with unique and useful insights into its employees’ productivity but often contains large amounts of sensitive and personal information. The monitoring may even in limited circumstances be extended to the monitoring of certain telephone calls made by an employee during work hours on the employer’s premises, as seen in the case of Protea Technology Ltd v Wainer 1997 0551
(W) (Protea Technology).
Constitutional right to privacy
Section 14 of the constitution guarantees the right to privacy, which has been interpreted to include the workplace. However, this right is not absolute and must be balanced against the employer’s legitimate business interests, such as productivity, data security and asset protection. In the case of NUMSA v Rafee NO (2016) 37 ILJ 2122 (LC), after an employee captured photographs of a production process without permission and later refused to surrender his personal phone with those photographs, the labour court held that the employee s right to privacy is not absolute and may be limited to uphold legitimate business security, particularly where confidential information or a breach of trust is involved.
Protection of Personal Information Act 4 OF 2013 (Popia) and the processing of employee information
Under Popia, and particularly section 71 which deals with automated decision making which may have a legal impact on an employee, employers must comply with various conditions to lawfully process employee information. This includes, but is not limited to:
● Processing only with consent or legitimate justification;
● Limiting collection of personal information to only the information that is necessary;
● Providing transparency about how data will be used; and
● Ensuring security safeguards for collected data.
Employers should have a policy that outlines the nature of the AI tools they intend to use
AI tools that monitor employees must fall within the boundaries of Popia. Accordingly, using AI tools that secretly gather and process employees information without the employees’ knowledge would breach Popia.
Employment contracts and workplace policies
Employers should explicitly have a policy that outlines the nature of the AI tools which they intend to use, the purpose for the collection of the data, the reason for the monitoring and a clause that the employee consents to such intrusions. This could be clearly set out in workplace policies or employment contracts where consent is sought from the employee prior to implementing such tools.
Surveillance and remote work During Covid and following the
pandemic many employers implemented a hybrid remote working model, and therefore the use of digital AI surveillance has increased.
Employers may use AI surveillance tools in order to monitor, inter alia, logins, meetings, mouse movement or time spent on various applications by their employees. However, excessive intrusion into an employee’s home environment, even during work hours, may constitute a violation of dignity and privacy unless clear policies and guidelines are in place.
In SA Transport & Allied Workers Union on behalf of Assegai v Autopax (2001) 22 ILJ 2773 (BCA), the employer made use of a private investigator to video record the actions of an employee, and the arbitrator weighed the employee’s right to privacy against the employer s right to protect its property and economic interests. Based on the facts of this case, the arbitrator ruled in favour of the employer. The arbitrator held that “what he [the employee] said to a passenger who wanted to buy a ticket cannot be regarded as confidential or private
In the case of Afrox Ltd v Laka (1999) 20 ILJ 1732 (LC) which dealt with the admission of video evidence which went to the heart of the employee s defence, Zondo J set aside the arbitration award on the basis that the arbitrator’s refusal to admit such footage constituted a gross irregularity in the proceedings.
Accordingly, while surveillance of employees in certain circumstances may be permissible, there are a number of factors which must be weighed up including, but not limited to, the reason for the surveillance and
the employer s right to protect its property and economic interests. Importantly, when an employer intends to rely on video footage/surveillance of an employee, the employer must ensure that such material is authentic.
As per the case of NUMSA obo Ngxande v PFG Building Glass (Pty) Ltd [2020] ZALCCT 40, it was held that the employer failed to prove on a balance of probability that the video material it introduced was authentic, resulting in the evidence being rejected.
The Commission for Conciliation, Mediation and Arbitration (CCMA) and labour courts may scrutinise how AI surveillance evidence is used in disciplinary proceedings. If AI surveillance is excessive or conducted secretly without justification, such evidence may be deemed inadmissible, and the process could be found to be procedurally unfair.
For an employer to remain compliant while using AI tools an employer should:
● Conduct a privacy impact assessment before implementing surveillance;
● Consult employees and obtain informed consent where required;
● Use proportionate and transparent methods;
● Update privacy and disciplinary policies; and
● Limit access to the data and keep it secure.
While the use of AI surveillance tools in the workplace can be useful and is not inherently unlawful, it must be balanced proportionately with the employees’ rights.
-Bronwyn Marques is a Director at Fluxmans Attorneys