New Zealand introduces comprehensive consumer law reforms
Representing “the most significant change to New Zealand’s consumer laws in more than twenty years” the Consumer Law Reform Bill (Bill) introduces amendments to ten statutes, including the Consumer Guarantees Act 1993 (NZ) (CGA) and the Fair Trading Act 1986 (NZ) (FTA).
Among the stated objectives (such as to enable consumers to transact with confidence, and to protect suppliers and consumers from inappropriate market conduct), the New Zealand government hopes that the Bill will achieve“harmonisation with the Australian Consumer Law” in accordance with the agenda of a single economic market with Australia.
The Bill received Royal Assent on 17 December 2013, with most of the amendments commencing either immediately or within six months. Immediate amendments include:
- new powers under the FTA allowing the Commerce Commission (Commission) to enforce undertakings, seek management banning orders for individuals involved in repetitive contraventions, and compel a person to give evidence before the Commission;
- new powers allowing the Minister of Consumer Affairs to make safety statements, declare goods to be unsafe and require prompt notification of voluntary product recalls; and
- the appointment of product safety officers with powers to inspect goods and business premises.
Amendments taking effect from 18 June 2014 include:
- increased pecuniary penalties for particular FTA contraventions (from $60,000 to $200,000 for individuals, and $200,000 to $600,000 for bodies corporate);
- a new prohibition on persons in trade making “unsubstantiated representations” without reasonable grounds in respect of goods, services and interests in land (excluding representations that a reasonable person would not expect to be substantiated);
- a new guarantee on traders that goods will arrive by the agreed time and will not be damaged;
- new powers allowing the Commission to issue infringement notices and fines of up to $2,000 for particular contraventions;
- new provisions enabling parties in business transactions to negotiate out of the CGA and particular sections of the FTA (such as the new prohibition on unsubstantiated representations);
- new disclosure requirements for layby sales, uninvited door-to-door and telephone sale agreements and extended warranties;
- the introduction of a five working day cooling off period for uninvited door-to-door and telephone sale agreements; and
- the extension of the CGA to all transactions (including goods sold at auction or by competitive tender, whether online or offline) involving traders, with traders required to identify themselves as such.
The increased pecuniary penalties will apply to contraventions of Part 1 (misleading and deceptive conduct, false representations and unfair practices), Part 3 (product safety) and the new Part 4A (consumer transactions and auctions) of the FTA. Although the increase is not as high as that sought by the Commission, the Commerce Committee (Committee) agreed that the increase “would act as a deterrent and bring the penalty regime closer to that of comparable consumer laws and the Australian Consumer Law”. The Committee is one of thirteen select committees responsible for scrutinising legislative matters on behalf of the House of Representatives.
The new unfair contract terms regime, which was one of the most debated amendments, will not take effect until 18 March 2015 in order to give businesses extra time to review and amend their current contracts, and to allow for potential case law development in Australia. Generally speaking, the regime will apply to standard form contracts (that is, where there has been no effective negotiation between the parties about the terms) for the supply of personal, domestic or household goods or services. The regime is essentially equivalent to that found in Part 2-3 of the Australian Consumer Law, meaning that there is consistency in the unfair terms regimes for businesses operating in both Australia and New Zealand.
The Committee also considered whether to include a statutory remedy for unconscionable conduct in the FTA. In New Zealand, statutory unconscionable conduct is currently limited to one of the elements of “oppression” underthe Credit Contracts and Consumer Finance Act 2003 (NZ), and the common law concept is a defence rather than a positive remedy. Ultimately, the Committee recommended waiting until Australia has developed an authoritative body of case law before following suit. Although the Committee recognised that it is desirable in principle to address the issue, it stated that implementing unconscionable conduct provisions could lead to uncertainty while being tested by the courts in both Australia and New Zealand.
These reforms (and the discussions of parliamentarians and Committee members) reflect the government’s evident intention to modernise New Zealand’s competition and consumer laws and bring them closer to those in Australia. Such consistency between the two jurisdictions may make compliance easier for those operating in Australia and New Zealand, who will now need to ensure that their existing practices comply with the new provisions.