Welcome to Chapman Tripp’s consumer law update for August
Our monthly review helps you to keep tabs on consumer law developments in New Zealand and overseas. This edition reviews updates and developments from the New Zealand and Australian courts and consumer regulators. We also look at some recent market developments.
Legislation
Fair Trading (Infringement Offences) Regulations 2014
The Fair Trading (Infringement Offences) Regulations 2014 will come into force on 8 August 2014. These regulations set out fees for infringement offences under the recent amendments to the Fair Trading Act 1986 and the form of infringement and reminder notices for those offences.
Link: Fair Trading (Infringement Offences) Regulations 2014
Feedback sought on Responsible Lending Code
The Ministry of Business Innovation and Employment (MBIE) has invited feedback on the content to be included in the Responsible Lending Code (Code). The Code is intended to assist lenders to comply with new lending responsibilities under the Credit Contracts and Consumer Finance Amendment Act 2014.
The discussion document has been released to promote discussion about what should be in the Code. It discusses industry best practice and how other countries have approached responsible lending.
Submissions close 13 August 2014. The Code is expected to be in place by March 2015.
Link: Responsible Lending Code Discussion Document
- | August 2014
Contents
Legislation 1
Consumer law cases 2
Commerce Commission 3
Privacy Commissioner 3
Advertising Standards Authority 4
Australian Competition and Consumer Commission 4
Market news 5
Contacts 6
- | August 2014
Consumer law cases
ANZ v Unka [2014] NZHC 1320
In this case, ANZ sued the Unkas in their capacity as guarantors of loans made by the Bank to three companies. As part of the loan arrangement, the parties entered into an Interest Rate Swap agreement (IRS). The Unkas opposed the summary judgment application, alleging misleading and deceptive conduct concerning the manner in which
the IRS was sold to them. In turn ANZ relied on clauses in the IRS documents which it said excluded any liability on the Bank’s part for any breach of the Fair Trading Act.
The exclusion clauses stated that each party agreed that it had not relied on any advice (whether oral or written) from the other party other than as set out in the IRS agreement (‘entire agreement clause’), that it had the capacity to evaluate the transaction, and that it understood and accepted the risks and obligations involved.
While Associate Judge Smith dismissed the Fair Trading Act claims, the case is notable for its recognition that, while it is generally not possible to contract out of the Fair Trading Act, the entire agreement clause in this case was effective. It reflected the parties’ consensus that the contract constituted the entire agreement and therefore superseded
all alleged oral misrepresentations made before the date of the agreement.
Mace v Strategic Planning Group Ltd [2014] NZHC 1500
This litigation concerned six disastrous investments by Mace Trust on the alleged misleading and deceptive recommendations of a Mr
Robinson, as an investment advisor. It was claimed that Mr Robinson did not warn adequately of the risk inherent in the investments. For example, for one investment, there was no evidence to show that there was any serious examination of the merit of the investment by Mr Robinson. For another investment, Mr Robinson never highlighted the risks of investing in a start-up company, which was incurring losses, with no positive cashflow, and dependent entirely upon an invention
acquiring commercial value in the future. The Judge agreed that Mr Robinson’s conduct was deceptive and misleading by reason of leaving out facts which would adversely affect the merit of his recommendation to invest.
Link: Mace v Strategic Planning Group Ltd
Bank faces court in test case on interest-rate swaps
Silveroaks Group (Silveroaks) has brought a civil claim, alleging that a bank sold interest rate swaps to businesses despite knowing that a likely fall in interest rates would leave its customers facing losses.
Silveroaks’ claim alleges that the deal was a breach of contract and amounted to deceptive and misleading conduct under the Fair Trading Act. The Commerce Commission is currently investigating the interest rate swaps sales and has said it will file actions against three banks. With the increasing presence of litigation funders in New Zealand (although it is not clear how Silveroaks is funded) parallel enforcement and consumer litigation is becoming more common. These types of situations raise particular issues for businesses arising from potential breaches of consumer legislation.
Cat food giants fight over protein claims
As reported in our July newsletter, Nestlé New Zealand has taken proceedings relating to claims on some Whiskas packaging as to the protein content in its dry cat food products. Whiskas packaging claims the biscuits have the ‘highest level of protein’. A smaller explanatory box says this is ‘based on average of Whiskas dry range compared with leading dry range cat food brands in supermarkets excluding Optimum’.
Nestlé’s application was heard before Justice Andrews earlier this month. Nestlé’s lawyer argued that the comparison created a “smoke and mirror” effect in the way it made comparisons to averages. Justice Andrews has reserved her decision.
Link: Fur flying in cat food case
Contents
Legislation 1
Consumer law cases 2
Commerce Commission 3
Privacy Commissioner 3
Advertising Standards Authority 4
Australian Competition and Consumer Commission 4
Market news 5
Contacts 6
Commerce Commission
Media Release
The Commerce Commission has issued a warning for mobile phone users to be wary of inadvertent in-application (in-app) purchases. While many mobile apps are free to download, they require a payment to improve their usability or to access extra content. Consumers, particularly children, may not understand that buying in-game currency and other in-app purchases require payment of real money. Overseas consumer protection organisations have received a large number of complaints about in-app purchases, which has resulted in some positive changes in how mobile platform providers advertise applications. The Commission has issued tips to reduce the risk of consumers incurring unexpected bills on their mobile phone.
Link: Commission reminds consumers to watch out for in-app purchases
Investigation
Wilson Parking is under investigation by the Commerce Commission for its signage, pricing and contract terms. The Commerce Commission has said its investigation is in the “very early stages” and is scrutinising aspects of Wilson’s parking business for potential breaches of the Fair Trading Act.
Link: Wilson Parking under investigation
Privacy Commissioner
Good privacy practices for mobile applications developers
The Privacy Commissioner has released a new guideline for businesses and application developers to help them understand their legal obligations under the Privacy Act when collecting personal information through mobile apps. In a recent survey, it was highlighted that not enough information is being provided to users about how a mobile app accesses and uses their personal information. The new guideline is based on five concepts:
- make a plan and spot the risks
- when a user makes a decision to download the application, be there with the right information
- ‘nice to know’ does not mean ‘need to know’
- invest some time working out how to make privacy clear and relevant to your users, and
- providing information in real time is as important as being up front in advance.
Link: Privacy Commissioner’s need to know or nice to have guidance
$10 limit for charging for credit reports
Privacy Commissioner John Edwards has announced there will now be an upper limit on the amount a credit reporter can charge a consumer for an immediate credit report. From 1 September 2014, consumers will pay no more than $10 for immediate access to their credit information. This amendment to the Credit Reporting Privacy Code follows the Commissioner’s inquiry into the charging practices of Veda Advantage.
Link: $10 limit for charging for credit reports
- | August 2014
Contents
Legislation 1
Consumer law cases 2
Commerce Commission 3
Privacy Commissioner 3
Advertising Standards Authority 4
Australian Competition and Consumer Commission 4
Market news 5
Contacts 6
Advertising Standards Authority
Misleading and unsubstantiated therapeutic claims
The Advertising Standards Authority (ASA) has ruled that several sellers of health products have misled consumers with advertisements that contain unsubstantiated health benefits claims. For example,
the unsubstantiated therapeutic claims made by Health2000 and Ear Candles by Louise had the potential to mislead and exploit the
knowledge of consumers. The ASA also noted that the disclaimer on the website did not absolve the advertisers from being required to substantiate the claims made. These complaints highlight that the existence of a disclaimer will not discharge an advertiser’s duty to carefully substantiate any health benefits claims.
Link: Complaints against Health2000 and Ear Candles by Louise
Australian Competition and Consumer Commission
Regulatory action – false or misleading representations
In July, the ACCC instituted several proceedings in the Federal Court of Australia in relation to false or misleading representations.
The ACCC is taking proceedings against Coverall Cleaning Concepts South East Melbourne Pty Ltd (Coverall) who allegedly made representation to two franchisees about their future monthly income threshold without having any reasonable grounds for making those representations.
In an action against Spreets Pty Ltd in relation to its online group buying website, the ACCC alleges that Spreets misled consumers about the price of certain deals offered on its online buying website, their ability to redeem vouchers, and the applicability of consumer guarantees under the Australian Consumer Law.
It has also taken action against Electrody Carpet Cleaning’s subsidiary A Whistle (1979) Pty Ltd who allegedly posted fake testimonials on a number of review sites. It is alleged that the testimonials were written and posted by people associated with, or contracted to, Electrody, and not by its genuine clients as the testimonials implied.
Link: ACCC takes action against cleaning franchisor
Link: ACCC takes action against Spreets alleging it misled consumers
Link: ACCC takes action against Electrody
The ACCC has put the fitness industry on notice for using the phrase
‘No Contracts’ in advertisements, where they require consumers to sign membership contracts with conditions for termination and
- | August 2014
Contents
Legislation 1
Consumer law cases 2
Commerce Commission 3
Privacy Commissioner 3
Advertising Standards Authority 4
Australian Competition and Consumer Commission 4
Market news 5
Contacts 6
payment of the membership. These types of contract are also likely to be scrutinised in New Zealand under the new unfair contract terms legislation.
Link: ACCC warns gyms about ‘No Contracts’ membership
Regulatory action – unsolicited consumer agreements
The ACCC has instituted proceedings in the Federal Court against Adata Pty Ltd and Adata (Vic) Pty Ltd (Adata), alleging that Adata has breached the unsolicited consumer agreement provisions of Australian Consumer Law. It alleges that Adata breached the unsolicited consumer agreement provisions by:
- receiving payments from consumers within the 10 business day cooling off period
- failing to inform consumers of their termination rights
- failing to provide consumers with an Agreement Document
- failing to use an Agreement Document which complied with the ACL, and
- calling on consumers on a Sunday.
Market news
New consumer protections for building work
From 1 January 2015, residential building work valued over $30,000, will require builders to have written contracts; provide information on their relevant skills, experience and qualifications; and disclose their insurance and warranty cover. Building and Construction Minister Dr Nick Smith said: “these important new consumer protections are part of a wider programme of improving New Zealand’s building industry.”
Link: Building and Construction Minister Dr Nick Smith’s
Link: Action taken against tax agent travelling to Indigenous communities
