Going, going, gone! Auction exclusion to be removed from Consumer Guarantees Act

The Consumer Law Reform Bill (Bill) has passed its first reading and has been referred to the Commerce Select Committee. The Bill is an "omnibus" bill and amends several consumer-related Acts including the Consumer Guarantees Act, the Fair Trading Act and Auctioneers Act 1928. If passed, the Bill will, amongst other things, amend the law applying to the sale of goods through online websites such as TradeMe.  

The Consumer Guarantees Act (CGA) sets out a suite of guarantees that apply to consumer purchases of goods and services, with the objective of protecting consumer's rights. These guarantees include that the item being purchased is of acceptable quality, complies with the relevant description or sample and is fit for purpose. Currently, auctions and competitive tenders are excluded from the ambit of the CGA (section 41(3)). This means that guarantees under the CGA generally apply to an item when it is purchased in a bricks and mortar store but will not apply when the same item is sold over TradeMe.

The Bill removes this exclusion so that the CGA will apply to sales made through TradeMe in the same way that it applies to sales made through a brick and mortar store (ie provided that the seller is "in trade" they will be subject to the guarantees set out in the CGA). This means that "one off" or casual TradeMe sellers who are not "in trade" will remain exempt from the CGA.  

Therefore, the distinction between sellers "in trade" (ie professional traders) and casual sellers will become crucial to understanding what guarantees apply to purchases made from sellers on TradeMe and the consumers' rights of recourse against those traders. However, the distinction between a casual trader and professional trader is often much harder to make in an online context than it is in a bricks and mortar context and it is challenging to find a solution to this issue.  

One solution may be to amend the Bill to require people "in trade" to identify themselves as such. Such a requirement would make the CGA position clear in the vast majority of circumstances – but would not be enough to compel a truly unscrupulous trader to identify him or herself, and there does not seem to be a clear way to resolve this issue. We look forward to seeing the impact this Bill will have on TradeMe activity and how people will tackle the age old problem of how to distinguish between the sheep and the wolves.