On 17 December 2019, the Fair Trading Amendment Bill (Bill) was introduced, and on 12 February 2020 passed its first reading. The New Zealand Parliament is now inviting the public to make submissions on the Bill by 27 March 2020 [Update: Submissions now due 26 April 2020].
This Bill proposes to amend the Fair Trading Act 1986 (Act) following the government’s consultation on unfair commercial practices, by:
- introducing a new prohibition against unconscionable conduct in trade; and
- extending the existing prohibition against unfair contract terms in standard form consumer contracts to standard form small trade contracts.
The Bill also proposes other important changes.
Unconscionable conduct
The new prohibition against ‘unconscionable conduct’ provides that no person shall, in trade, engage in conduct that is ‘unconscionable’. The Bill proposes that the Act provides a list of factors for the court to consider in assessing whether a person’s conduct is ‘unconscionable’. Such factors include:
- the relative bargaining power of the parties;
- the extent of good faith of the parties;
- the ability of the affected person to reasonably protect their own interests;
- any unreasonable non-disclosure of the trader’s intended conduct that may adversely affect the affected party’s interests;
- any unfair pressure or tactics or undue influence being applied; and
- the terms and form of the contract.
A breach of this prohibition would be an offence under section 40(1) of the Act, which prescribes fines of up to $600,000 for bodies corporate and $200,000 for individuals for each offence.
Standard form small trade contracts
The extension of the existing prohibition against unfair contract terms in standard form consumer contracts to standard form small trade contracts would mean that small businesses will gain the same protection as consumers against unfair contracts. The Bill proposes to define a small trade contract broadly as having the following three qualities:
- it is not a consumer contract;
- it is a contract between parties engaged in trade; and
- it is not part of a trading relationship worth $250,000 or more per year when the contract is first entered into.
Other changes
Other changes that the Bill proposes are:
- Prohibiting a person from entering residential premises to negotiate an uninvited direct sale agreement if asked by the resident to not enter, and mandating exit if the resident directs that person to leave.
- A warrantor entering into an extended warranty agreement by telephone will have 5 working days to provide the consumer with a copy of the agreement rather than immediately.
- Affirming the jurisdiction of the High Court to consider questions of law regarding the Act referred by the Commerce Commission.
- Elaborating on the undertakings the Commerce Commission can accept and requiring public information disclosure if the undertaking includes payments of compensation to any person (or payment of the Commission’s costs).
- Allowing management banning orders against people who have committed 2 offences personally or as a director/manager of an incorporated or unincorporated body, as opposed to needing to have committed 2 offences personally.
- Giving the Commerce Commission the same powers it has under s 100 of the Commerce Act to prohibit the disclosure of information, documents, and evidence forming part of an investigation.
Follow up
A copy of the Bill and the accompanying explanatory note can be found here.
You can keep track of the Bill’s progress here.
You can make submissions on the Bill here.