Trader Beware –  New consumer laws set to increase trader obligations

Article written by: Lucy Hudson    |   Tuesday 13th August 2013

The Consumer Law Reform Bill (“CLRB”), which is expected to be passed into law later this year, will bring about a number of key changes to consumer laws including the Fair Trading Act 1986 (“FTA”) and the Consumer Guarantees Act 1993 (“CGA”). These changes will make New Zealand laws more in line with consumer laws in Australia.

The key changes are as follows:

1. Applying the Consumer Guarantees Act to online transactions

The CLRB provides that the CGA will apply to all transactions including those on the internet. Online traders will be obliged under the new laws to identify themselves as ‘traders’ or as being ‘in trade’ and will therefore be deemed to provide the existing guarantees and redress to consumers under the CGA regarding issues such as the quality, purpose and price of the goods or services being offered.
These changes are aimed at increasing consumer confidence in doing business online.

2. Unfair contract terms in standard form consumer contracts

The CLRB also includes a new provision in the FTA which prohibits enforcing, including or relying on unfair terms in standard form consumer contracts.
In assessing whether a term is ‘unfair’ a court will need take into account factors such as whether the term:

  • creates an imbalance of the rights and obligations of the parties (e.g. where only one party can terminate, vary or renew a contract); or
     
  • would cause financial detriment to a party; or
     
  • is not transparent or is unnecessary to protect the interests of an advantaged party

This new provision will be for the Commerce Commission to enforce through the courts rather than by consumers.

3. Unsubstantiated Representations

The current FTA prohibits traders from making false or deceptive representations in relation to their goods and services. However, the changes to the FTA will prohibit representations unless a trader can prove that they have good grounds for making such representations.

What action should traders take to prepare for these changes?

If you are an online trader, you will need to identify yourself as being ‘in-trade’. If you are not already familiar with the provisions of the CGA, now would be a good time to review its provisions to see what guarantees and redress you must provide to consumers.

If your business uses standard form consumer contracts, it would be prudent to review these to ensure that they do not include terms which may be considered ‘unfair’ under the new provisions of the FTA.

When advertising and marketing materials are being prepared, extra care should be taken and documentary evidence should be kept in case you need to show that you have good grounds for making such representations.

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