July 2014
Consumer rights are protected by the Fair Trading Act 1986 (the FTA) and the Consumer Guarantees Act 1993 (the CGA). The purpose of this legislation is to ensure consumers receive the goods and services they pay for, and to ensure that the goods and services received are of reasonable quality.
There are many different ways of selling goods and services online. This includes through online auctions such as Trade Me, Daily Deal websites like One Day, and via social media, text message or email. Despite this wide marketplace, the internet is not the proverbial “free for all” where anything goes. Recent changes to consumer law that came into effect on 17 June 2014 have seen amendments made to the FTA and CGA, with the aim of better protecting online consumers. These changes and how they relate to existing consumer law provisions are described below.
Section 28B of the FTA provides that where goods and services are offered for sale to consumers on the internet, and that offer is capable of acceptance via the internet, the seller must clearly identify to potential consumers whether or not it is in trade. This allows consumers to recognise whether or not they are protected by the provisions of the FTA and CGA.
Where the offer and any resulting sale is managed through an intermediary who is not a party to the sale, that intermediary must still take reasonable steps to ensure the seller complies with the FTA. For example, Trade Me now offers sellers the option of having an ‘In Trade’ banner appear on their profile, thereby allowing both parties to satisfy their new obligations.
If a seller is in trade and does not make this fact known to the consumer, the seller can be liable to a fine from the Commerce Commission.
While “in trade” is not defined in the FTA, or the CGA for that matter, “trade” under both means any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services. In determining whether someone is in trade, factors to consider include whether the seller:
Sellers are unable to avoid their obligations under the FTA or the CGA by using a third party to make offers or to sell goods and services on their behalf. Where this occurs, the principal seller will still be considered to be in trade, with their agent also facing potential liability.
However, the exception to the rule is where goods are sold that were initially bought or acquired for personal use. If this is the case, then the seller will not be considered to be in trade.
Other obligations that a seller must comply with under the FTA when selling goods online include:
The CGA applies to goods and services purchased for personal or domestic use. This includes sales that are made through online bidding using websites such as Trade Me. The CGA sets out several warranties a seller makes when selling goods and services, which include that the goods and services:
Under the new changes, sellers must ensure that any goods sold online that are sent or delivered to the consumer arrive in acceptable condition and on time.
Businesses cannot contract out of the FTA as a whole in dealings with individual consumers. However, section 5D of the FTA provides that certain provisions of the FTA can be contracted out of where:
Section 43 of the CGA allows parties to contract out of the provisions of the CGA where:
In determining whether it is fair and reasonable to contract out of the relevant FTA or CGA provisions, the court will take into account the circumstances of the agreement, which include:
While the Commerce Commission cannot enforce the CGA, if a seller breaches the CGA, then that seller may also be in breach of the FTA, over which the Commerce Commission does have authority.
The Commerce Commission is New Zealand’s primary competition enforcement and regulatory agency. Set up by the Commerce Act 1986, it enforces the legislation that prohibits misleading and deceptive conduct by traders and the promotion of competition in New Zealand markets. Part of the Commerce Commission’s role is to investigate complaints and bring Court claims against parties who breach the FTA.
A company breaching the FTA can be fined up to $600,000 and an individual up to $200,000.
Conclusion
The ultimate aim of consumer law legislation is to protect non-business savvy consumers from being ripped off. In the event of a complaint or claim, the particular facts of the matter in question will always be relevant. As a consumer, you can protect yourself by:
If you would like further information please contact Jonathan Acquilina on 07 958 7460.