Fair Trading Amendment Act

Enacted in 1986, the purpose of the Fair Trading Act is to encourage competition in trade, while protecting consumers from misleading and deceptive trade practices.  2014 saw a number of significant changes in New Zealand consumer law, specifically, the introduction of the Fair Trading Amendment Act 2013 (“the Act”).

We set out the changes below.

Unsubstantiated representations

The new Act has introduced a provision that prohibits traders from making unsubstantiated representations.  The purpose of this change is to discourage traders from making claims that are untrue.  A Business must be able to ‘back up’ its claims before its product goes to a consumer.  A representation is unsubstantiated if the person making the representation does not, when the representation is made, have reasonable grounds for the representation, irrespective of whether the representation is false or misleading. 

Contracting out of the Act

Previously, a business was unable to enforce any agreement that was contrary to its obligations under the Fair Trading Act.  The new Act gives businesses the ability to contract out of certain Fair Trading Act obligations in their dealings with other businesses.  Businesses may only contract out of the provisions relating to misleading and deceptive conduct, and representations.  Both parties must agree to contract out of the provisions, and the agreement must be in writing.

Unfair contract terms

In March 2015, the Court, on application by the Commerce Commission, will be able to declare terms in some consumer contracts to be unfair contract terms.  For further information on this change, please see our article on the new section 26A.

Product safety

The Act now includes a provision for voluntary recalls of products that are found to be unsafe and increases the powers of the Commission relating to this.  The Minister of Consumer Affairs may require a supplier to recall goods, disclose information or provide a repair, replacement or refund, if it was reasonably foreseeable that use or misuse of a good could cause injury. 

Unsolicited goods or services

Under the Act, it is an offence for a person to assert or appear to assert that they have any right for payment for unsolicited goods or services.  An unsolicited good or service is a good or service provided to a person when that person has not asked for that good or service.  A sender of unsolicited goods must inform the recipient of their rights and obligations.  The recipient is not obliged to pay for unsolicited goods, his or her only obligation is to make the goods available for collection by the sender within 10 working days after the goods are delivered.  If the goods are not collected within that period, the recipient takes the goods as an unconditional gift. 

Layby sales

The Act now regulates layby sales, however these new provisions only apply to agreements entered into after 17 June 2014.  The Act provides that a layby sale must be in writing, and a copy of this is to be given to the consumer.  Information relating to cancellation of the sale, including any fee to be charged and how this is calculated must be also be provided.

Uninvited direct sales

An uninvited direct sale is when a business, or their agent, approaches a consumer uninvited at their home, workplace, or over the telephone.  The Act replaces the Door to Door Sales Act 1986 which previously regulated door-to-door and telemarketing sales.  Under the  Act, a consumer has  a five working day period from receipt of the sale agreement (or at any time if no agreement is given) in which the consumer may cancel the contract.  The consumer must be given oral notice of the cancellation provision and a written copy of the sale agreement before agreeing to the transaction.  

Extended warranties

Regulation relating to extended warranties has been introduced to allow for greater consumer protection.  When offering extended warranties, suppliers must set out the existing rights of the consumer and what extra rights the extended warranty will provide.  There is also a regulated cooling off period and liability for the actual warranty provider as well as the supplier who arranged the extended warranty. 

Auctions

The auction process is now specifically regulated under the Act.  Auctions, for the purpose of this section, are conducted by auctioneers and a fee or commission is charged.  Online auction-style sites, such as TradeMe are excluded.  This section makes it clear how auctions are to be run and introduces new rules relating to vendor bidding.  The Consumer Guarantees Act 1993 will now also apply to goods and services sold at auctions and by tender.

Conclusion

The Fair Trading Amendment Act is a key development in New Zealand consumer law and seeks to modernise the legislation relating to the sale and purchase of consumer products.  It will also align our consumer standards with similar Australian legislation as many of our goods and services cross the Tasman. 

The Act is a positive change to consumer law, it has not only strengthened consumer rights and created bold new obligations on businesses in trade, it has also provided the Commerce Commission with the tools needed to successfully enforce the Act. 

The Fair Trading Amendment Act will significantly impact most businesses.  We suggest that all businesses review their current procedures to ensure that they comply with the changes.  Please contact one of our Team for assistance should you have any queries.  

If you would like further information please contact Laura Monahan on 07 958 7479.