Businesses should review the terms and conditions of their gift cards to ensure that they comply with the new laws in NSW on gift cards.
The NSW Parliament has recently passed legislation that impacts gift cards. The new laws (contained in the Fair Trading Amendment (Ticket Scalping and Gift Cards) Bill 2017) will prohibit:
- the sale to a consumer in NSW of a gift card with an expiry date of less than 3 years after the date of sale of the gift card; and
- the imposition of any fee, after the sale of a gift card to a consumer in NSW, that reduces the value of the gift card.
A gift card is defined as a card or voucher (in hard copy or electronic form) that is redeemable for goods or services in NSW. The effect of this definition is that where gift cards are purchased in NSW but only redeemable outside of NSW (the example given in the second reading speech is a gift card purchased in NSW for a restaurant that only operates in Tasmania) the laws will not apply. However, if the gift card can be redeemed in NSW, the laws will apply.
Any term or condition of a gift card that contravenes the laws will be void. For example, any gift card that expires less than three years after the date of sale will be considered to have an expiry date of three years after the date of sale.
The parts of the new laws dealing with ticket scalping and use of bots will be covered in a later edition of Insights.
What penalties apply?
Businesses that contravene the new laws may face:
- a penalty notice of $550 (this is a notice issued by NSW Fair Trading that imposes a penalty for contravention of the law. Payment of the penalty is not regarded as an admission of liability and prevents further action being taken (although it does not affect civil claims arising from the matter)); or
- a maximum penalty of 50 penalty units (currently $5,500).
The new laws do not apply to:
- cards supplied in substitution for returned goods;
- prepaid cards or vouchers redeemable for phone credit and internet access (and other similar services);
- debit cards, credit cards and prepaid travel cards and similar products supplied by financial institutions;
- cards or vouchers supplied as part of customer loyalty programs.
The second reading speech also indicates that the regulations will be amended so that gift cards associated with a discount are not covered by the new laws. Other exceptions may also be included in the regulations.
What about gift cards purchased online or by phone?
The laws will not apply to gift cards where:
- the gift card is delivered to the consumer at an address that is outside NSW; or
- the contact details provided by the consumer include a residential address that is outside NSW.
In both cases this is because the gift card will be deemed not to have been sold to a consumer in NSW, so the new laws will not apply. Where gift cards are sold online (and delivered to an email address), a business would need to have checked that the consumer's residential address is outside of NSW in order to take advantage of this defence.
We are not aware of any proposed legislation in other States or Territories, although it has been reported that the Victorian Government would consider the new laws. However, in order to ensure compliance with the new laws, it is likely that many businesses that operate in NSW and other parts of Australia will simply amend their gift card terms and conditions for all jurisdictions in which they operate.
The new laws are likely to commence in 2018, and they will not apply to gift cards purchased before they commence. In the meantime, businesses should review the terms and conditions of their gift cards to ensure that they comply with the new laws.