General policy statement
Unfair commercial practices—such as the use of pressure tactics, deception, one-sided contract terms, and practices that generally exploit a consumer’s or small business’s vulnerabilities—can prevent markets from functioning effectively by decreasing trust, increasing search and transaction costs, and skewing the playing field in favour of businesses that act dishonestly. They may restrict competition and, with it, productivity and innovation. Even where practices are not strictly anti-competitive, they may restrict the ability of firms to grow and thrive, by diverting their attention away from their core business. Unfair practices can also lead to high levels of financial detriment and stress for consumers.
While there are already a number of legislative protections against unfair practices, consultation undertaken by the Ministry of Business, Innovation, and Employment in 2018 found that gaps in the protections remain.
To address these issues, this Bill amends the Fair Trading Act 1986 (the Act) to introduce the following 2 new protections against unfair practices:
It prohibits unconscionable conduct in trade. Unconscionable conduct is serious misconduct that goes far beyond being commercially necessary or appropriate:
It extends the Act’s existing protections against unfair contract terms in standard form consumer contracts to also apply to small trade contracts. These are contracts between businesses that form part of trading relationships with an actual or expected total value of less than $250,000 in any 12-month period.
In addition, the Bill strengthens the ability of consumers to require uninvited direct sellers to leave or not enter their property, including through the use of generally worded written notices. It also makes a number of minor changes to improve the functioning of the Act and support consistency with other legislation enforced by the Commerce Commission.
These changes seek to support the overall purpose of the Act, which is to contribute to a trading environment in which—
the interests of consumers are protected; and
businesses compete effectively; and
consumers and businesses participate confidently.
The Bill aims to achieve these objectives while also ensuring that—
the measures to protect businesses and consumers do not overreach or unduly undermine commercial certainty; and
businesses can continue to negotiate firmly and enter freely into contracts that reflect their wishes.