Consumer law changes enacted in New Zealand

Article  \  29 Jan 2014

New Zealand's consumer law reform amendments received the royal assent on 17 December 2013 and are now in force. Amendments including the new product safety provisions have immediate effect. Other changes affecting auctions, unsubstantiated claims, disclosure requirements and increased penalties, will come into force in June 2014. And finally, the new unfair contract terms regime will apply from March 2015.

This article summarises the key changes made to the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA).

Changes taking immediate effect

Most of the amendments taking immediate effect (i.e. from 18 December 2013) grant new powers to various government and statutory bodies. The amendments include the following.

  • The Commerce Commission can compel persons to give evidence and have undertakings given to it enforced by a court.
  • A District Court can ban persons from managing a business for up to 10 years if they have breached provisions of the Fair Trading Act two or more times over ten years.
  • The Ministry of Business, Innovation and Employment (MBIE) can appoint new product safety officers who are empowered to enter premises where business is carried out to inspect goods believed to be unsafe. They can also issue short term notices prohibiting the supply of unsafe or dangerous goods.
  • Suppliers must notify MBIE within two working days after voluntarily recalling unsafe products and such notices will be made available on a website for at least 2 years.
  • The Minister of Consumer Affairs can declare goods unsafe if a reasonably foreseeable use or misuse of the goods may cause injury to any person.
  • Vendor bids in auctions are false or misleading representations unless they are clearly identified as a vendor bid and made before the reserve price is reached.

Changes taking effect from 18 June 2014

Six months after the amendments were passed (ie, 18 June 2014), a number of other changes will take effect.

  • A new CGA guarantee that goods will be received by the agreed time, or within a reasonable time if no time has been agreed. And the guarantee that goods will be of an acceptable quality will now apply from the time that the consumer actually receives the goods.
  • An FTA prohibition on persons in trade making 'unsubstantiated representations' without reasonable grounds in respect of goods, services or an interest in land. However, the prohibition does not affect 'puffery' or a clearly exaggerated representation that a reasonable person would not expect to be substantiated.
  • New requirements for contracting out of the CGA and specified sections of the FTA (including the prohibitions on unsubstantiated representations, misleading and deceptive conduct and false representations). Generally, parties that are both 'in trade' can agree to exclude the relevant provisions in a written agreement for the supply of goods, services or an interest in land in trade where it is fair and reasonable for them to do so.
  • The CGA will apply to goods or services being supplied at auction, except for auctions of goods ordinarily acquired for personal or household use that are supplied and acquired in trade where the auction terms specify that the CGA does not apply.
  • Traders in online sales will be required to identify themselves as operating in trade, in which case the CGA will apply to the sale (subject to any permitted contracting out).
  • New disclosure requirements for layby sales, many uninvited direct sale agreements (made by uninvited door-to-door and telephone sales) and extended warranty agreements. Such contracts must be clear and set out prescribed information on the front page. Extended warranty agreements will need to include a comparison of the additional protections provided by the extended warranty over the consumer's rights and remedies under the CGA. The Commerce Commission will also have new powers to impose infringement fees of up to $2,000 for failures to meet the FTA disclosure requirements.
  • A new mandatory 5 working day cool-down period where consumers will be able to cancel extended warranty and uninvited direct sales agreements.
  • Maximum fines for contravention of key FTA provisions will increase from $60,000 to $200,000 for individuals and from $200,000 to $600,000 for bodies corporate.

Changes taking effect from 18 March 2015

Finally, terms that a court has declared to be an unfair contract term must not be included in any new or varied standard form consumer contract on or after 18 March 2015. Generally speaking, the unfair contract term regime will apply to standard form contracts that are not negotiated and often in a take-it-or-leave-it form, for the supply of personal, domestic or household goods or services (that are not resupplied or used to manufacture or repair). Courts may declare a term (other than those relating to the price or subject matter) in such contracts to be unfair if they would cause significant imbalance in the parties' rights and obligations, are not reasonably necessary to protect the legitimate interests of the advantaged party and would cause detriment if relied on. The grey list of terms that 'may be unfair' includes terms that permit one party but not the other to terminate, avoid performance, renew or vary the contract or limit liability.

In conclusion, the consumer law reform amendments to the FTA and CGA introduce new requirements that will affect disclosure and inspection requirements, business contracts and consumer contracts, as well as marketing practices. The initial changes that are now in force primarily apply to the powers of the relevant governmental and statutory bodies and product safety. Other significant amendments will not take effect until June 2014 or March 2015, giving businesses a transitional period in which to update their supply contracts to ensure that they are consistent with the new laws.