Going to Market - consumer law update - June 2016

Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 3 Australian Competition and Consumer Commission 4 Financial Conduct Authority (UK) 5 1 | June 2016 G ing to Market Consumer law update Cases NEW ZEALAND COURTS Supreme Court confirms “transaction specific” approach to credit fee reasonableness Motor Trade Finances Ltd (MTF) has lost its appeal in the Supreme Court in the long-running credit fee litigation of Sportzone v Commerce Commission. MTF argued that the Credit Contracts and Consumer Finance Act (CCCFA) was designed to allow creditors the flexibility to allocate costs between fees and the interest rate, and that the test of reasonableness should take into account a variety of factors including fees charged by other lenders. However the Supreme Court agreed with the High Court that the wording of the CCCFA indicates a “transaction-specific approach” in which any non-direct costs have to be recovered in the interest rate. The Supreme Court acknowledged that the “reasonableness” standard is imprecise and difficult to apply to particular situations. Link: Decision Going to Market is a monthly publication tracking developments in consumer legislation, regulation and case law. The risks for organisations from breaching consumer law are high with increased penalties, new fair trading and consumer credit regimes and more intensive regulatory activity. Our team of consumer law specialists can assist you in all areas of consumer law, including advice on product liability and recall, compliance programmes, contracts review, defending regulatory investigations and prosecutions as well as commercial litigation focusing on consumer law. Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 3 Australian Competition and Consumer Commission 4 Financial Conduct Authority (UK) 5 2 | June 2016 G ing to Market Consumer law update $1.25 million penalty imposed for price-fixing by real estate agency The High Court has ordered Unique Realty Limited (Unique) to pay $1.25 million for entering into and giving effect to a price-fixing agreement. The Commerce Commission alleged that Unique agreed with other Manawatu real estate agencies to pass on to vendors the whole of an increase by Trade Me in its listing price. Unique then gave effect to that agreement over a six-month period. The case is the first of several brought by the Commerce Commission alleging price-fixing in response to the Trade Me increase. The parties jointly recommended that the Court impose a penalty of $1.25 million, and Unique also agreed to contribute $25,000 towards the Commission’s investigation costs. The Court noted that Unique had not initiated the conduct and was unlikely to have made more than minimal gain from it. However, the arrangement may have deterred some vendors from listing on TradeMe thereby reducing competition in the market. The starting range for the penalty was reduced by 25-30% to account for Unique’s early acceptance of responsibility. Link: Commerce Commission media release “New Zealand manufactured” is not necessarily “New Zealand made” The High Court has granted declarations under the Fair Trading Act 1986 (FTA) that labels representing dietary supplements as “100% New Zealand made” were misleading because the primary ingredient was imported. New Zealand Nutritionals argued that the labelling on its Vitafit Goats’ Milk Powder and Pro-life Goats’ Milk and Calcium Tablets was not misleading because the manufacture had taken place in New Zealand. But the Court said it was unrealistic to suggest that consumers would “deconstruct the process in their mind” and that a reasonable person would infer that the product was made from local milk powders. Link: Commerce Commission media release AUSTRALIAN COURTS “Free range egg” labelling misleading The Federal Court has found that Snowdale Holdings Limited made false or misleading representations that its eggs were “free range” when in fact the hens were held in conditions which significantly inhibited their movement. The case follows several previous investigations by the ACCC into egg producers. The Commonwealth, State and Territory Consumer Affairs Ministers have agreed to the introduction of a national information standard under the Australian Consumer Law that would require “free range” eggs to have been laid by hens with meaningful and regular access to the outdoors. Link: ACCC media release Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 3 Australian Competition and Consumer Commission 4 Financial Conduct Authority (UK) 5 3 | June 2016 G ing to Market Consumer law update Commerce Commission Commission concludes investigation After investigating 29 complaints against failed telecommunications firm Intagr8 Limited, the Commission has concluded that there is sufficient evidence that it breached the FTA. However, it will not be filing court proceedings as Intagr8 is in liquidation. Intagr8 implied that it would provide services itself then entered customers into long term rental agreements with third party finance companies. Some complainants also alleged that salespeople pressured them into signing contracts without any opportunity to consider the contents, or physically obscured elements of the documents during the signing process. The Commission has sent formal warnings to Intagr8’s sole director and shareholder, and to its former sales manager. Link: Commerce Commission media release Commission files proceedings against Vodafone The Commerce Commission has issued proceedings claiming that Vodafone New Zealand Limited breached the FTA by making false representations about the price of its ‘Red Essentials’ mobile plan. The price at launch was $79 a month but it was later reduced to $69 in response to market competition. The Commission alleges that Vodafone did not accurately apply this $10 discount and that misleading invoices were sent to approximately 15,000 customers, overcharging just over $90,000. Vodafone has issued refunds to approximately 98% of affected customers following the Commission’s investigation. Link: Commerce Commission media release Advertising Standards Authority (ASA) Flight Centre advertisement deemed misleading The ASA has upheld a complaint against Flight Centre, determining that a website advertisement stating “No Fees, No Commissions and a Best Rate Guarantee!” was misleading. The Best Rate Guarantee was in fact separate to the No Fees and No Commissions deal and did involve customers paying a commission. The Complaints Board concluded that the wording was likely to mislead and that it needed to be clearer that the offers were separate. Link: ASA decision Long term ‘limited time’ offer removed Trade Tested has removed two promotional statements from its website in response to an ASA complaint – one advertising up to 40% off shed sales for a six month period and the other that the offer was available “for a limited time”. Trade Tested said the first message should have been changed earlier and that the second was automatically generated according to an old formula. No further action is being taken. Link: ASA decision Wicked Campers refuses to engage with regulator over controversial van slogans The ASA has upheld another two complaints in May against controversial vehicle hire company Wicked Campers, bringing the total to four. The Complaints Board ruled that the slogans on the vans failed to comply with Basic Principle 4, requiring advertisements to be prepared with a due sense of social responsibility to consumers and to society, and Rules 4 and 5 of the Code of Ethics, which prevent material that offends against generally prevailing community standards. Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 3 Australian Competition and Consumer Commission 4 Financial Conduct Authority (UK) 5 4 | June 2016 G ing to Market Consumer law update The Complaints Board also expressed its concern at the company’s “repeated refusal to engage with, and respect, the principles of self-regulation”. The ASA does not have the power to fine advertisers or take them to court but Wicked Campers’ vans have been banned from some New Zealand camp grounds. Links: ASA decisions 16/133 and 16/134 Australian Competition and Consumer Commission Appeal of Nurofen “Specific Pain” products penalty The ACCC is appealing the $1.7 million penalty ordered by the Federal Court against Reckitt Benckiser (Australia) Pty Ltd. It wants it raised to at least $6 million to reflect the widespread nature of the conduct, deter others and recognise the substantial sales made from the misleading advertising. Reckitt had claimed that its Nurofen products were formulated to treat specific types of pain when in fact they were generic. The New Zealand Commerce Commission’s investigation into Reckitt Benckiser (New Zealand) Limited’s packaging is ongoing. Link: ACCC media release Australians lose over AU$229 million to scams in 2015 The ACCC and the Australian Securities and Investment Commission (ASIC) used Consumer Fraud Week to alert consumers to the risk of scammers. The top five scams reported to ASIC last year were: • overseas cold calling about investment opportunities • overseas calls offering easy credit or loans after payment of an upfront fee • sports arbitrage or gambling schemes • money transfer schemes (job opportunity or other fraud), and • fake debt and invoice scams. The ACCC also warned against dating and romance scams – in which scammers build up a relationship with their victims via dating websites or social media before asking to “borrow” money. Links: ACCC media release, ASIC media release Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 3 Australian Competition and Consumer Commission 4 Financial Conduct Authority (UK) 5 5 | June 2016 G ing to Market Consumer law update If you would prefer to receive this newsletter by email, or if you would like to be removed from the mailing list, please send us an email at [email protected] Every effort has been made to ensure accuracy in this newsletter. However, the items are necessarily generalised and readers are urged to seek specific advice on particular matters and not rely solely on this text. © Chapman Tripp For further information, contact VICTORIA HEINE – PARTNER T: +64 4 498 6327 M: +64 27 561 3707 E: [email protected] TIM SHERMAN – SENIOR ASSOCIATE T: +64 4 498 2400 M: +64 27 345 3250 E: [email protected] KELLY MCFADZIEN – PARTNER T: +64 9 357 9278 M: +64 27 473 2230 E: [email protected] SARAH QUILLIAM-MAYNE – SENIOR SOLICITOR T: +64 4 498 6307 M: +64 22 136 2601 E: [email protected] Our thanks to Rose Goss for assisting with this edition of Going to Market. Financial Conduct Authority (UK) (FCA) FCA reviews mortgage market, calls for better consumer choices The FCA has released a thematic review of how firms are applying the responsible lending rules introduced in April 2014. It found that: • firms have positively engaged with the aim of the regime • where lending is affordable, there was no evidence that creditworthy consumers were having difficulty obtaining loans • record keeping for lending decisions needs to improve • firms could be more “proactive and consistent” in making exceptions to the lending rules for existing customers, and • online calculators would provide a more accurate guide to the likely amount that lenders would be able to lend. The FCA also announced that it would undertake a targeted market study focused on consumers’ ability to make effective choices in the mortgage market. Links: FCA Feedback Statement, FCA Thematic Review