Less Is More - Can Legislation Improve Consumer Confidence?

Speech to the Marlborough Chamber of Commerce; Wednesday, January 21 2009.

Thank you for the invitation to speak to you tonight. This is my first speech on this subject since being appointed Minister of Consumer Affairs in November.

It is both pleasing and appropriate that this portfolio has been given to an MP from ACT - a Party whose roots and title are found in the Association of Consumers and Taxpayers, founded by Sir Roger Douglas in 1993.

In the past, the media has often portrayed ACT as a Party for big business. This is, however, far from the truth: ACT has long championed the cause of both consumers and taxpayers - which is, in fact, almost every New Zealander.

Senior staff Ministry of Consumer Affairs initially wondered what it would mean to have an ACT Minister. I told them then, what I am now telling you now: that it is very easy to anticipate my approach since it is - and always will be - consistent with ACT's philosophical core. I've been delighted with the way they have listened and adapted quickly to my early thoughts, and with their enthusiasm for new projects being proposed.

ACT New Zealand was founded on the ideals of freedom, choice and responsibility in the broadest sense of those words. Our view is, and has always been, that less government is good government - meaning that government should only involve itself in those essential elements of life that people cannot provide for themselves. As such, government should raise only enough tax revenue to fund those activities, and to hedge against specific contingencies.

First, government should determine what it needs to provide, and what the role of government is, and then calculate how much it needs to tax people to achieve this. Taxation is not a matter of 'what the market will bear', because governments have no business being in business. Unfortunately, we must now turn back a considerable amount of history of the latter occurring.

If there were a strong case for comprehensive legislation to protect customers then, logically, the first enactment would have to be that of a Bill called something like the 'Repeal of Caveat Emptor Act 2009'. 'Let The Buyer Beware' is so deeply enshrined in commercial common law that this would now be unimaginable. Likewise we are unlikely to see legislation repealing the concepts of offer, acceptance, valuable consideration, invitation to treat, unconscionable conduct or mistake struck down in the statutes - but the vast array of options in terms of markets and products does mean that much of our legislation is out of date as soon as it is written.

ACT's Regulatory Responsibility Bill - introduced as a Private Member's Bill by ACT Leader Rodney Hide has been before a Select Committee and now awaits its second reading in Parliament. This Bill seeks to reduce the amount of legislation and ensure that bad laws don't get passed. I intend to use that Bill as a guidepost in my governance of Consumer Affairs. It would require the regular review of all legislation to ensure it is still relevant, and for test new laws through such questions as: what is this law for? What will the cost of implementing this law be? What are the unintended consequences likely to be?

It is often mistakenly thought that consumers are just people purchasing goods or services. While it shouldn't be forgotten that businesses are consumers as well, there has been a trend toward an 'us and them' type of legislation where the customer somehow must be 'protected' from potentially bad business.
This is ludicrous. There are as many customers deceiving businesses about their credit-worthiness, or intent to actually purchase, as there are businesses withholding information about goods or services.

References about consumer confidence can be found quite easily. In my view this means that the consumer is confident they have access to enough information to make their purchase decision, and that suitable remedies are available if things go wrong. It is possible, however, for a consumer to be over-confident and make inappropriate choices - for example: the raft of prospectuses, ratings and analyst reports did not help those who recently lost out in the collapse of finance companies.

It is not the role of government to interfere unnecessarily in people's lives, nor to make it harder for people to make choices. For this economy to return to the rate of growth that we can - and must - achieve, we need an efficient market. That means competition and, therefore, choice for consumers.

Choice in a transaction is relative to personal circumstances. For instance: we are often prepared to sacrifice quality in order to get a lower price, depending on the nature and intended use of the product. An ornament for Nana's 90th birthday does not involve the same type of purchase decision as the selection of her healthcare equipment.

Any legislation in the commerce area must first satisfy one test: do the benefits of the legislation outweigh the costs of compliance? If not, then the government is, in effect, degrading the efficiency of the market - effectively interfering on behalf of one party - with the host of unintended consequences that arises from it.

This brings me to the title of this speech: 'Less is More'. Simplicity is the key to effective market activity. I have proposed that Ministry staff explore a simplification programme, which I have called 'One Law - One Door'. The 'one law' refers to a goal of a one principle-based piece of consumer-supplier legislation similar to the approach found in the Privacy Act. It might be that the Fair Trading Act forms the basis of this, but time will tell. The many other pieces of legislation that have been overtaken by time or technology could merge into this as appropriate.

'One door' refers to a simplified complaints procedure rather than the host of complaints and disputes tribunals, ombudsmen and so on that currently serve to confuse the applicant while adding many layers of cost to the taxpayer.
There is much work to do - but I believe that pursuing a simplification model for the Consumer Affairs portfolio is the right path for consumers, suppliers and the market and will therefore produce the best outcome for all Kiwi taxpayers.