Wellington, December 28, 2019
The New Zealand government has introduced a Fair Trading Amendment Bill to Parliament, with new protections for businesses and consumers against unfair commercial practices.
The Bill introduces a prohibition against unconscionable conduct and extends the current protections against unfair contract terms in standard form consumer contracts to also apply to business-to-business trading relationships with a value below $250,000 per year.
It also strengthens consumers’ ability to require uninvited sellers to leave or not enter their premises, including through the use of ‘Do Not Knock’ stickers.
Definition of unfair practices
Unfair commercial practices can include (a) unfair contract terms – such as terms which unduly shift risk from one party to another, make it difficult for one party to terminate a contract, allow one party to unilaterally vary the terms of a contract, or are otherwise very one-sided (b) unfair conduct outside of the terms of a contract itself (including pressure tactics to induce someone to enter into a contract, deceptive conduct or enforcing a contract in a harsh way).
The Bill will have its first reading in early 2020.
Small Business Minister Stuart Nash and Commerce and Consumer Affairs Minister Kris Faafoi said that Fair Trading Amendment Bill will make two major changes to protect consumers and businesses better.
Mr Faafoi said that the first set of changes will prohibit conduct that is unconscionable. “This is effectively serious misconduct that goes far beyond what is commercially necessary or appropriate. Businesses that are found to act unconscionably will face fines of up to $600,000,” he said.
The second set of changes extend existing protections against unfair contract terms in standard form consumer contracts so they also apply to business-to-business trading relationships with a value below $250,000 per year.
Significant for small businesses
Mr Nash said that the impact of unfair business and commercial practices can be significant for small businesses and consumers.
“I have heard many stories about one-sided contracts, extended payment terms, and pressure tactics that are hurting small businesses and consumers. Unfair practices make it hard for New Zealand businesses to focus on what really matters – developing their products and services, innovating, and growing their business. It also leads to real hardship for consumers,” he said.
Mr Faafoi said that the changes to the Fair Trading Act will draw a line in the sand about acceptable standards of commercial conduct in New Zealand.
“The Government has clear expectations that business practices will be conducted fairly and reasonably. At the same time, honest businesses should have no cause for concern about these changes,” he said.
Mr Faafoi said that the Bill also complements changes to the Credit Contracts legislation passed by Parliament earlier this month.
The changes will improve protections for consumers against mobile traders and predatory loan shark behaviour.