When it comes to customer protection, New Zealand legislation sets a high standard, and recent amendments to the Fair Trading Act 1986 shift the focus even more to doing the “right thing by the consumer”.
Amendments to address unfair contract terms, which were introduced in March this year, mean that a party with most of the bargaining power cannot dictate terms and, in particular, cannot implement “unfair” terms.
In NZ this most obviously affects big companies that service many customers, but relevance goes beyond these dynamics.
According to the Commerce Commission, charged with investigating potentially unfair contracts, changes are focusing in particular on industries that have proved problematic overseas or in which complaints have been received in the past such as telecommunications, online trading and finance.
It is therefore advisable that if a business uses standard form consumer contracts it should review the terms in light of these amendments.
Also of interest are the amendments to the Fair Trading Act 1986 in relation to unsubstantiated representations concerning international companies doing business in NZ. This applies to the supply, sale, possible sale or promotion of goods, services, or interests in land.
Any business that makes an unsubstantiated claim about goods or service may be at risk of breaching the Fair Trading Act even if it did not manufacture or supply the goods or service or develop the promotional material.
This means that retailers or online sellers who promote, or otherwise make, an unsubstantiated claim about a good or service they are selling may be liable as well as the manufacturer or supplier from whom the claim originated.
The Commerce Commission gives some example such as the term “factory prices” which implies that prices are especially low because they reflect what other retailers would pay when they buy the relevant goods from the manufacturer for resale.
In order to satisfy the reasonable grounds requirement, the business making such a claim would have to have sufficient pricing and sales data to substantiate that the prices charged to consumers are genuine factory prices.
This data would have to show that the prices reflect the price usually charged by the manufacturer for the goods and that additional costs are not included in the price.
It would be advisable for companies: to not make claims which they cannot substantiate; to rely on facts, figures and credible sources of information as opposed to guesses or opinions; to keep documentation or other information that has been gathered in the process of sourcing or researching; and to ensure they can substantiate claims at the time they are required.
It is important to remember that even if a claim is true, it may still breach the Fair Trading Act if a business does not have reasonable grounds for making it. The substantiation requirement applies irrespective of whether the claim is false or misleading.
Only the courts can make a ruling on breaches of the Fair Trading Act, but penalties can be stiff, with fines amounting to $600,000 for companies and $200,000 for individuals.
The court may also impose a management banning order against anyone convicted of these offences on two or more separate occasions within a ten-year period.
