Are you one of the many New Zealand businesses that sell its goods through online auction sites like Trademe?

If you are, take note, because amendments are coming in the middle of this year to our consumer laws – including the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA) – which may affect your business…BIG time.

The amendments are the most significant set of changes to our consumer-related legislation in nearly 20 years.  For this article I have chosen to focus on an aspect of the changes which to some businesses may be insignificant, but which to an ever-increasing number of small-medium size businesses is highly significant: the granting of rights to consumers who buy goods through online auctions.

Why is this change significant?

The easiest way to explain is by reference to the current law.

Most if not all readers will be familiar to some degree with the protections afforded to consumers in respect of goods and services under the CGA. What readers may not be aware of is that the CGA’s protections do not currently apply to goods which are supplied by auction or competitive tender.  In tandem with this is that the FTA does not currently require a person selling goods online to disclose if they are a trader (versus a private individual selling an item on a one-off basis).

Consider the following fact situation. I visit TradeMe and see a pair of shoes I like being offered for sale. The only detail I am given about the seller is the account name, ‘derek123’. I have no idea if ‘derek123’ is an importer or private individual. If I successfully bid for those shoes my purchase is not currently protected by the Act, regardless of whether ‘derek123’ is a trader or individual. Further, if my shoes fall apart within a week through no fault of my own I have no recourse to ‘derek123’.

If however, I bought the same shoes using the ‘Buy Now’ button my purchase is protected by the Act – provided ‘derek123’ is a trader – because a ‘Buy Now’ transaction is deemed to be the same as physically visiting a retailer and buying goods in-store. But herein lays another problem: I don’t know if ‘derek123’ is a trader or private individual, so how do I know if I can enforce my rights if I need to?

Amendments to the CGA and the FTA fix these problems. The relevant section of the CGA (s41(3)) is being repealed as of 17 June 2014, meaning the protections afforded by the CGA will apply to goods bought by auction and competitive tender on TradeMe as well as by ‘Buy Now’.

In addition, online traders will no longer be able to trade under the radar: a new section in the FTA (s28B)(2)), which comes into force on 18 June 2014, will require online vendors to make it clear to potential purchasers that they are operating in trade. Consumers will thus be provided with surety their purchases will be protected by the provisions of the CGA (and the FTA).

Fifteen years after TradeMe was established, then, consumers will finally have rights against traders in respect of goods bought by auction.

In closing, I offer a word of advice to any business which sells its goods through online auction sites and which has managed to avoid (rather than evade) the nets of the CGA and FTA to date: if you don’t have sufficient or the right liability insurance in place, you would be wise to contact your broker.

This article first appeared in the Waikato Business Times