The New Zealand government is introducing new measures to put an end to unfair commercial practices that harm small businesses and consumers.
In a statement released on Tuesday, the Commerce and Consumer Affairs Minister Kris Faafoi and Minister for Small Business Stuart Nash proposed two key changes that go further than existing laws to protect small businesses and consumers.
One is to prohibit conduct that is “unconscionable”, that is serious misconduct that goes far beyond being commercially necessary or appropriate.
The second is to extend current protections against unfair contract terms in standard form consumer contracts to apply to business contracts with a value below $250,000 as well.
The New Zealand Food & Grocery Council welcomed the move as being “pro-business” and said it would benefit small food and grocery manufacturers.
“We’ve advocated for many years that New Zealand business law dealing with unfair practices needed to be strengthened and aligned with Australian law. These proposals are well on the way to achieving that,” Katherine Rich, CEO of the Food & Grocery Council, said in a statement.
Troubling misconduct brought to light
The changes follow a recent consultation on the issue, which brought many troubling examples of misconduct to light.
“We heard about a range of potentially unfair contract terms, including extended payment terms, one-sided contract terms, and businesses being locked-in to contracts for long periods of time,” Nash said.
“We also heard that some businesses aren’t complying with the terms of existing contracts, making excessive demands, and blacklisting and bullying their suppliers.”
In some cases, suppliers were made to pay compensation to retailers for perceived losses after they ran promotions with other retailers.
The negative impact on businesses include cash flow issues, increased costs, reduced sales, wasted time and stress.
On the consumer side, the consultation revealed instances of a trader using aggressive sales tactics to sell expensive skincare products to vulnerable people, including two people with autism, and a mobile trader who entered a mobile health unit and signed up nearly all the patients to unreasonable contracts for phones and PlayStation consoles.
“We’re also strengthening laws to protect vulnerable consumers from loan sharks, looking at other ways to improve business-to-business payment practices, and reviewing the current law around misuse of market power such as predatory pricing,” Faafoi said.
The Minister said the proposed changes, which are expected to be introduced through a Fair Trading Amendment Bill by early next year, would put a stop to this.
