Establishment and Development of the Ministry of Consumer Affairs

Background Paper to Creating Confident Consumers

May 2003

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The Legal and Economic Context

Until the mid-1980s the development of consumer law had been ad hoc, responding to changes in the marketplace and the inadequacy of common law to deal with new trader practices (Kalapu, 1997). The body of consumer law that did exist was administered by a variety of government agencies including the Departments of Trade and Industry (DTI), Justice, and Labour. [1]

The mid-1980s was also a period in which government policy shifted away from regulation and protection of sectors of the economy towards creating the conditions for a competitive market environment, with the aim of increasing economic efficiency and, through this, increased welfare. Competition and consumer policy were seen as integral parts of the government's economic policy.

Increasing welfare through competitive markets was identified as relying on consumer awareness of both the price and quality of products, as well as the choice and availability of competing or substitute products. The premise was that competitive markets would operate best where consumers were selective over their purchases, but accurate information was necessary for this to occur (Consumer Affairs Unit, 1985).

The consumer law of the time had a number of shortcomings and did not contribute to the implementation of the government's economic policy. For instance:

• it did not provide a general standard for trade descriptions and trade conduct-this impacted on the supply of consumer information
• consumers had no direct access to redress, which reduced the incentives to comply with consumer law
• regulation-making powers for the provision of information were spread over a range of statutes, creating the possibility of differing and/or conflicting rules
• the law relating to fair trading was variously described as "ineffective", "outdated", "haphazard" and "inefficient" (Consumer Affairs Unit, 1985; Shields, 1985).

[1] Pre-1984 consumer legislation included: Sale of Goods Act 1908, Weights and Measures Act 1925, Merchandise Marks Act 1954, Door to Door Sales Act 1967, Consumer Information Act 1967, Lay By Sales Act 1971, Hire Purchase Act 1971, Commerce Act 1975, Unsolicited Goods and Services Act 1975, Motor Vehicle Dealers Act 1975 and Credit Contracts Act 1981.

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