Amendments to the Fair Trading Act in New Zealand
We published a newsletter regarding Amendments to the Fair Trading Act in New Zealand. To view the PDF version, please click the following link.
→Amendments to the Fair Trading Act in New Zealand
One Asia Lawyers Compliance Newsletter January 2022
Amendments to the Fair Trading Act in New Zealand
In August 2021, the Fair Trading Amendment Act 2021 (“Amendment Act”) was passed in New Zealand. This new legislation amends the Fair Trading Act 1986 (“FT Act”) to provide additional protections
against unfair commercial practices by targeting the use of pressure tactics, deception, one-sided contract terms and practices that exploit the vulnerabilities of consumers and small businesses. While some provisions introduced by the Amendment Act have already come into force on 17 August 2021, the most significant changes are due to take effect on 16 August 2022.
Prohibition on unconscionable conduct (Sections 7 and 8)
The Amendment Act introduces a prohibition against unconscionable conduct in trade. While there is no definition provided for ‘unconscionable conduct’, the Amendment Act does provide a non-exhaustive list of factors[1] that the court may take into consideration when assessing whether the conduct is unconscionable. These include factors such as differences in bargaining power, the ability of the affected person (i.e. the person who is or is likely to be disadvantaged by the conduct) to understand any documents provided by the trader, and the extent to which the parties acted in good faith.[2]
Conduct may be deemed unconscionable regardless of whether there is a system or pattern of unconscionable conduct, whether a particular individual is identified as disadvantaged (or likely to be disadvantaged) by the conduct, or whether a contract exists.[3]
Individual traders who engage in unconscionable conduct may be fined up to NZ$200,000, and business traders up to NZ$600,000.[4] Existing provisions in the FT Act dealing with civil proceedings and remedies will also apply.
Unfair contract terms regime to extend to small trade contracts (Sections 26B – 26E)
Until now, the provisions against unfair contract terms have been limited to standard form consumer contracts (i.e. between businesses and individuals). However, sections 26B – 26E of the Amendment Act now extends the scope of these provisions to capture small trade contracts. Namely, small business-to-business contracts with a value below NZ$250,000 per year.[5]
The existing test which determines whether a contract term is ‘unfair’ will now also apply to small trade contracts.[6] Any term is deemed unfair if:
(a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied on.[7]
If the Court determines that a term is unfair, that term cannot be applied, enforced or relied upon. This offence is punishable by a fine of up to NZ$200,000 for individuals or up to NZ$600,000 for body corporates,[8] and civil remedies will also apply.
New directions to leave premises or not enter premises for uninvited direct sales (Section 36RA)
The FT Act already provides special protections to consumers in respect of uninvited direct sales agreements. These are agreements made for the supply of goods or services, resulting from negotiations taking place in a consumer’s home or workplace during an uninvited visit or call, priced at NZ$100 or more, or otherwise the price of which cannot be determined at the time of supply.[9] The existing protections include requirements for the content and form of such agreements (e.g. to be expressed clearly in writing and to include the total price payable), as well as the consumer’s right to cancel such an agreement.[10]
The Amendment Act introduces a new section, 36RA, which enables residents (or those acting with the authority of a resident) to direct people to leave or not enter their premises if they are there for the purpose of negotiating an uninvited direct sales agreement. These directions may be verbal or in written or other visual form, must be audible or visible, and may be a general standing direction (e.g. a notice on a front door directing salespeople not to call) or a specific direction (e.g. a face-to-face spoken direction). If the direction is specific, the uninvited direct seller must not enter or re-enter the premises within 2 years of the direction for the purpose of negotiating an uninvited direct sale agreement.
Any individual who contravenes such a direction may be liable for a penalty of up to NZ$10,000, and a body corporate may be fined up to NZ$30,000.[11] Certain civil remedies are also available, such as an order cancelling or varying a contract or directing the payment of compensation.
Other provisions that are already in force
As noted above, some provisions introduced by the Amendment Act have already come into force on 17 August 2021. They include the following changes (albeit less significant than those explained above):
・The requirement for businesses selling extended warranties over the phone to provide consumers with a written copy of their extended warranty agreement within 5 working days after the date on which the agreement was entered into.[12] ・The scope of management banning orrs (which prohibit a person from being the director of, or managing, a company that carries on business in New Zealand) has been broadened to cover a wider set of circumstances.[13] ・The Commerce Commission can now prohibit the disclosure of information, documents, and evidence relating to an investigation or inquiry under the Fair Trading Act.[14]
[1] Provided by section 8 of the Amendment Act.
[2] These concepts are similar to those of section 20 of the Australian Consumer Law. Please see our October 2021 Newsletter ‘Consumer Protection in Australia’ for further details: https://oneasia.legal/en/4085#_ftn3
[3] Section 7 of the Amendment Act.
[4] Section 40(1) of the FT Act.
[5] Section 26D of the Amendment Act.
[6] The existing test is stipulated by section 46L of the FT Act.
[7] This test and its application to small businesses is similar to section 23 of the Australian Consumer Law. Please see our October 2021 Newsletter ‘Consumer Protection in Australia’ for further details: https://oneasia.legal/en/4085#_ftn3
[8] Section 40(1) of the FT Act.
[9] Section 36K of the FT Act.
[10] Please see sections 36L – 36R of the FT Act for all protections and obligations.
The concepts and protections related to uninvited direct sales agreements are similar to those of ‘unsolicited consumer agreements’ in Australia (section 69 of the Australian Consumer Law). Please see our October 2021 Newsletter ‘Consumer Protection in Australia’ for further details: https://oneasia.legal/en/4085#_ftn3
[11] Section 40(1B) of the FT Act.
[12] Clause 10 of the Amendment Act which amends section 36U of the FT Act.
[13] Clause 14 of the Amendment Act which amends section 46C of the FT Act.
[14] Clause 20 of the Amendment Act which inserts the new section 48T in the FT Act.
