Consumer law modernised and extended

The Commerce Commission says it’s ready to enforce the changes enacted by the passage into law this week of the Fair Trading Amendment Act 2013, and urges businesses to know the new ground rules and ensure they act within the law.

Commerce Commission Chairman Dr Mark Berry says the changes are a significant modernisation and urges businesses to act now to ensure they comply.

“This extensive revamping of the Fair Trading Act has been a long time coming but should bear fruit well into the future.”

“There are some major changes in the Bill that traders and consumers need to understand because they have consequences for both buyers and sellers. The sanctions for breaching the Act are now more severe, and the Commission has enhanced powers to investigate and enforce the Act. The stakes are higher for traders now that this Act has passed,” said Dr Berry.

While some new provisions, such as compulsory interview powers, product safety powers and management banning orders come into effect immediately, most will be implemented in six months. Laws prohibiting unfair contract terms will come into force in 15 months.

Included in new provisions that will come into effect in six months are rules on i) substantiation, where it will be an offence for traders to make unsubstantiated representations without reasonable grounds; ii) online selling, ensuring traders who sell over the internet make it clear they are traders, and extending consumers rights under the Consumer Guarantees Act to include sales by auction or tender; iii) extended warranties, where disclosure is required of the consumer’s rights under the Consumer Guarantees Act and a comparison of these with the benefits of the extended warranty being offered; iv) increased fines.

“The ground rules are now clear,” said Dr Berry. “Don’t claim your product can do something unless you can back it up with fact.”

Dr Berry also said an increase in financial penalties, management banning orders, and infringement notices are significant developments that make it especially important that businesses understand their new obligations.

“Penalties for misleading and deceptive conduct, false representations, unfair practices and product safety breaches have increased from $60,000 to $200,000 for individuals and from $200,000 to $600,000 for businesses. Individuals who repeatedly break the law will also face banning orders, which can see them banned from trading for up to ten years. The Commission will also be able to issue infringement notices for more straight forward breaches.”

Dr Berry says that educating market participants about the changes is critical to their success.  “We intend to work closely with businesses to provide guidance, ensure they understand their obligations under the new law and help them comply. Together with other agencies, we will also provide consumers with information that clearly explains their rights under the new law,” said Dr Berry.

Now that the Bill has been passed into law the Commission will be finalising its guidance on each of the new provisions, which it will publish ahead of the changes coming into force.