Overall, we consider that the bill’s provisions would be more appropriate under Part 4A of the Fair Trading Act rather than Part 1 of that Act as proposed in the bill as introduced. This reflects our recommendation to make contravention of the bill’s provisions an infringement offence (see below). Rather than having the bill insert new section 24A into the Act, we are proposing that it amend section 36A and insert new subpart 3A into Part 4A of the Act, comprising new sections 36WA, 36WB, and 36WC.

Accordingly, we recommend replacing clauses 4 and 5 of the bill as introduced. Our proposed new clause 4 would include “gift card expiry dates” in the purpose section of Part 4A of the Act. New clause 5 would insert our proposed subpart 3A into Part 4A of the Act.

Our specific amendments are detailed below.

As noted above, the bill as introduced would exclude certain cards and vouchers from its provisions, so they would not be subject to the 3-year minimum expiry period. One such exclusion is cards supplied in substitution for returned goods. However, the bill is silent about vouchers that serve a similar purpose.

We consider that the exclusion should apply to both cards and vouchers that are supplied in substitution for returned goods. Therefore, we recommend including the words “or voucher” in section 36WA(a) in proposed new subpart 3A of Part 4A of the Act. This would exclude vouchers that are supplied in substitution for returned goods and clarify that they are not intended to be covered by the provisions in the bill.

Most gift cards can only be redeemed at a specific store or chain of stores (a “closed loop” system). Some, however, operate on an “open loop” system and can generally be redeemed in more places. An example is the Prezzy Card, which can be used at most businesses.

The bill is unclear about whether open loop cards would fall within its provisions. Unlike debit cards, credit cards, or prepaid travel cards—which are specifically excluded—open loop cards have more similarities to gift cards as they are:

• promoted as a form of gift card

• transferrable to another person

• unable to be used to access money or a debt security.

We recommend clarifying that the bill would include open loop cards such as Prezzy Cards within the definition of “gift cards”. To do this, we propose amending paragraph (c) of the proposed definition of “gift card” to exclude “a debit card, credit card, prepaid travel card, or other similar card that allows cash withdrawals” (new section 36WA(c)). Since Prezzy Cards do not allow cash withdrawals, they would be included in the provisions of the bill. The requirement for a minimum expiry date would therefore apply to Prezzy Cards.

In the bill as introduced, proposed new section 24A(4) sets out that the provisions of the bill would not apply to cards and vouchers supplied as part of a customer loyalty programme. We consider that this exclusion is intended to only apply to cards or vouchers used to participate in a customer loyalty programme, for example, a Flybuys card. It is not intended to apply to gift cards “purchased” through a customer loyalty programme, for example, a New World gift card purchased with Flybuys points.

We therefore recommend amending this provision by inserting new section 36WA(d). This amendment would add to the bill’s exclusions “a card or voucher supplied as part of a customer loyalty programme (other than a card or voucher supplied in exchange for a reduction in customer loyalty points)”. This would clarify that the exclusion from the definition of “gift card” would apply to cards or vouchers used to participate in customer loyalty programmes, but gift vouchers purchased through a loyalty programme would still be required to have a 3-year minimum expiry period.

The bill as introduced is not clear about whether it would apply to cards and vouchers provided for time-limited events. We consider that the bill should not apply to these cards or vouchers.

We recommend inserting section 36WA(e) into the Act to exclude from the definition of a gift card any card or voucher used for purchasing goods or services that are only available for time-limited events.

Our intention is that a time-limited event would not include sales and promotions. To make this clear, our proposed section 36WA(e) refers to a “festival, concert, or similar event” as examples of a time-limited event.

Cards or vouchers that entitle holders to a discount (including “two for one” deals) would not be covered by the bill as they are not directly “redeemable for goods or services”. Rather, they are redeemable for a discount on goods or services that still need to be purchased.

We consider that the definition of a gift card or voucher should not be restricted by its form. We recommend including in the definition of “gift card” in our proposed section 36WA the words “(in whatever form)”. We consider that this would make clear that the bill’s provisions should apply to devices other than cards and vouchers which are used for the same purpose as a gift card. This would prevent attempts to disguise a gift card in a different form, such as a bracelet or an electronic voucher.

The bill as introduced is not clear about whether it would apply to cards or vouchers used to pay for public transport (such as Snapper and Hop cards), or telecommunication, electricity, gas, or water services. We consider that it is not intended to apply to these cards or vouchers. We therefore recommend inserting section 36WA(b). This would exclude “prepaid cards or vouchers redeemable only for telecommunication services, public transport, or electricity, gas, or water services” from the provisions of the bill.

The bill as introduced is unclear about how its proposed expiry date provisions would apply to sales of second-hand gift cards by consumers. We do not consider it practical for the bill to apply to second-hand sales by a consumer.

We therefore recommend inserting the words “in trade” into our proposed sections 36WB(1) and 36WC. The words “in trade” are used throughout the Act and have the effect of excluding private or consumer-to-consumer sales. This would exclude the situation of a consumer on-selling a gift card from the provisions of the bill.

We consider that gift cards sold as part of charity sales should not be included in the provisions of the bill. We therefore recommend inserting new section 36WA(f) into the Act to exclude a card or voucher sold principally to raise funds for a charitable purpose from the provisions of the bill.

There is no current legislative requirement for an expiry date to be printed on a gift card. The bill as introduced does not propose to introduce such a requirement.

We consider that requiring the expiry date to be shown on a gift card would be sensible in the context of a mandatory minimum expiry date. Therefore, we recommend inserting section 36WC into the Act to require every gift card to state when it ceases to be redeemable by reference to one of the following:

We have modelled our recommendation on Australian law. We consider that our proposed amendment would make the expiry date of a gift card clear for businesses and customers.

As introduced, the bill would not make it an offence to issue a gift card with an expiry date of less than 3 years. There would be no penalty under the Fair Trading Act for contravening the bill’s prohibition of short-dated gift cards, other than civil remedies.

We propose making contravention of the bill’s provisions an infringement offence as we consider that providing for a penalty would incentivise compliance and enable the Commerce Commission to enforce the new provisions. In deciding on this, we also gave thought to an appropriate level of fee and fine to impose for contravention. This led to our decision to restructure the bill, moving its provisions from Part 1 of the Act (which deals with serious offences carrying large penalties, of up to $600,000) to Part 4A, which deals with infringement offences for specific consumer transactions.

We therefore recommend inserting clause 6 into the bill. This would amend section 40B of the Act to make it an infringement offence to contravene new sections 36WB (gift card expiry date must not be less than 3 years) or 36WC (expiry date must appear prominently on gift card). A person would be liable to an infringement fee prescribed by regulations, or a fine not exceeding $10,000 for an individual or $30,000 for a body corporate, pursuant to section 40(1B) of the Act.

We recommend that, despite provisions being moved to Part 4A of the Act, sections 41 and 42 of the Act should continue to apply to the new provisions. These sections allow a court to grant an injunction to prevent or stop a breach and to order a retailer to disclose information to the public or publish a corrective statement if they have breached the rules.

We also recommend a consequential amendment, inserting clause 9 and Schedule 2 to provide for consequential amendments to the Fair Trading (Infringement Offences) Regulations 2014. For offences against section 40(1B), the regulations currently prescribe an infringement fee of $1,000.

There is no transition period in the bill as introduced. We note that this could leave the Commerce Commission little time to inform businesses about the changes. Further, businesses would lack time to prepare their systems to implement the changes, or to sell existing stocks of gift cards with pre-printed dates. We consider that a transition period would increase compliance with the bill.

We therefore recommend that clause 2 of the bill be amended to state that its provisions would take effect 18 months after the date of Royal assent.