Government to strengthen law against unfair practices
Hon Kris Faafoi
Minister of
Commerce and Consumer Affairs
Hon Stuart
Nash
Minister for Small
Business
24 September 2019 MEDIA
STATEMENT
Commerce and Consumer Affairs
Minister Kris Faafoi and Minister for Small Business Stuart
Nash have today announced new measures to better protect
businesses and consumers from unfair commercial
practices.
“We know that unfair commercial practices are harming New Zealand businesses and consumers,” Kris Faafoi said.
“We’re taking action to prohibit the most serious types of commercial misconduct, and to ensure there are better protections against unfair contract terms,” Mr Faafoi said.
The Government is proposing two key changes.
The first is to prohibit conduct that is ‘unconscionable’ – this 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.
“There are existing laws that already prohibit unfair commercial practices, but the changes we’re making go further,” Stuart Nash said.
Mr Nash said some of the examples of misconduct that people provided during a recent consultation on the issue were particularly concerning.
“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. We also heard that some businesses aren’t complying with the terms of existing contracts, making excessive demands, and blacklisting and bullying their suppliers.
“Clearly, both small businesses and consumers are suffering because of poor commercial conduct, with negative effects on the economy. The measures the Government is taking will put a stop to this,” said Minister Nash.
Mr Faafoi said the Government expected to introduce changes through a Fair Trading Amendment Bill by early next year.
“This is part of other work underway to promote competition and protect people against unfair business practices.
“The new market study powers which the Commerce Commission is using to review the retail fuel sector is an example of the sort of work the Government’s doing in this space.
“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,” Minister Faafoi said.
Editor’s notes
What
changes is the Government making to protect consumers and
businesses from unfair commercial
practices?
The Government is introducing two
key measures to address both unfair conduct across the
economy, and unfair business-to-business
contracts:
• Prohibiting conduct that is
“unconscionable”. That is, the very worst type of
behaviour, or serious misconduct that goes far beyond being
commercially necessary or appropriate
• Extending
existing consumer protections (under the Fair Trading Act)
against unfair contract terms to also protect business
contracts with a value below $250,000.
How bad is the problem in
New Zealand?
The Government has surveyed a
range of businesses, and found that around half of them had
experienced what they considered to be unfair conduct or
contract terms. Many of them reported being negatively
affected by unfair practices, and experienced problems
including cash flow issues, increased costs, reduced sales,
wasted time and stress. Examples the Government has heard
about include:
• Individuals being threatened,
verbally abused and blacklisted after asking for
payment
• Suppliers being made to pay compensation to
retailers for perceived losses after they ran promotions
with other retailers
• Contractors having the scope of
their work increased unilaterally without consultation or
compensation
Unfair
practices are also causing problems for consumers, and the
Government has heard a number of examples, including:
• A lender who repossessed and dumped a borrowers’
personal effects, not to recover their unpaid debt but to
send a message
• A trader who used aggressive sales
tactics to sell expensive skincare products to vulnerable
people, including two with autism who paid $10,000 for their
purchases.
• A mobile trader who entered a mental
health unit and signed up nearly all its patients to
unreasonable contracts for phones and PlayStation
consoles.
While we don’t know the full details
around each case, these examples indicate just how pervasive
the problem is for both businesses and
consumers.
How
will the Government enforce these new
protections?
The Commerce Commission is
responsible for enforcing many of the existing protections
against unfair commercial practices, and will also have a
role in enforcing the new protections. Consumers and
businesses will also have the option to self-enforce the
protections against unconscionable conduct.
ends