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Establishment and Development of the Ministry of
Consumer Affairs
Background Paper to Creating Confident
Consumers
May 2003
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How Has the
Ministry Evolved?
Purpose and Objectives
The Ministry's mission in 1987 was: "to develop consistent and
co-ordinated consumer policy; to provide consumer support
measures that meet the needs of all groups in the community and
to promote these widely; and, in so doing, to create an informed
marketplace" (Ministry of Consumer Affairs, 1987 p5).
This mission has evolved over time, influenced by factors such
as the acquisition of new functions,
[4] resource
constraints and changing approaches to economic regulation.
The consumer portfolio is horizontal in nature and intersects
with a number of policy areas vested in other government
agencies. Because a small Ministry could not cover the potential
range of consumer issues, a number of attempts have been made to
define a proper sphere for the Ministry, giving due recognition
to the policy functions and portfolios of existing government
agencies including Health, Social Welfare, Education, Labour, and
Environment.
By 1990 the Ministry's focus had shifted and was much more
directly concerned with consumer transactions in the marketplace.
Its purpose statement in 1990 was: "... to promote a fair and
informed marketplace through the provision of relevant and timely
advice to Government on consumer policy and the provision of
consumer programmes which meet the needs of all groups in the
community" (Ministry of Consumer Affairs, 1990 p3).
By 1993 the Ministry's focus had been further refined and the
distinction between consumers who pay directly for goods and
services and the "... citizen who pays indirectly through
taxation for public services without a relationship to use" was
made (Ministry of Consumer Affairs, 1993 p4). The Ministry's
purpose was, therefore, "... to help New Zealanders prosper by
promoting a fair and informed marketplace for consumers... Those
purchasing goods and service in the market for personal or
domestic use" (Ministry of Consumer Affairs, 1993 p4). This
purpose statement aligned with the Ministry of Commerce's wider
purpose of "helping New Zealand prosper".
The distinction between consumer and citizen, and the
operational definition of consumer above, was reinforced in
subsequent briefings to incoming governments (Ministry of
Consumer Affairs, 1996; Ministry of Consumer Affairs, 1999).
The mid-1990s was also a period when the Ministry sought to
clarify its role with stakeholders. It advised the Minister that:
"Despite some belief to the contrary, the Ministry is not
responsible to consumers or consumer groups, nor is it an
advocate for consumers, although it does provide a channel by
which the concerns of consumers and consumer groups can be
communicated to government" (Ministry of Consumer Affairs, 1993
p9).
By 1999 the Ministry's purpose statement explicitly set out
the economic framework in which it operated. The Ministry was
"... primarily responsible for helping create a fair and informed
marketplace-one in which there is a balance
[5] between the
interests of consumers and businesses, and a minimum of
transaction costs" [6]
(Ministry of Consumer Affairs, 1999 p4).
Following the establishment of the Ministry of Economic
Development (MED)
in 2000, the Ministry's purpose and objectives are now derived
from MED's
strategic planning. The relationship between
MED and the
Ministry is discussed later in this paper.
Evolving Institutional Arrangements
The structure of the Ministry as a relatively small
semi-autonomous body with an independent policy report has raised
tensions. In 1990 the Ministry recommended that its location and
lines of accountability be re-examined, and noted three options:
to subsume the Ministry into the Ministry of Commerce;
[7] to retain the
status quo; or to create a stand-alone Ministry (Ministry of
Consumer Affairs, 1990).
The issues underlying the recommendation were (Ministry of
Consumer Affairs, 1990 p6):
- Accountability-the Secretary of Commerce was
administratively responsible for the Ministry but did not
report to the Minister who agreed to the Ministry's outputs.
This was inconsistent with the accountability structure under
the State Services Act 1988 and the Public Finance Act 1989.
- Consumer policy-in attempting to correct bargaining and
legal imbalance, the equity objectives of the Ministry were
seen as interventionist by nature and inconsistent with the
business perspective of Commerce, which tended away from direct
intervention unless the market had broken down. The Ministry
felt that Commerce viewed it as an impediment to business.
- Contestable advice-the location of the Ministry within
Commerce meant that there was a tendency for the consumer
perspective to be lost, and it noted that as the Ministry had
grown, conflicts in perspective had increased.
- Identity- there was a tendency by other agencies to view
the position of Commerce as that of the Ministry's, and vice
versa. The maintenance of a separate image for the Ministry was
an objective behind its establishment, but this had become
increasingly difficult.
- Service delivery-various delivery functions of the Ministry
were of a social policy nature. This was not seen to fit
comfortably within Commerce.
The Secretary of Commerce shared the view that there were
tensions in the structural arrangements and considered that the
Ministry should remain within Commerce, with the General Manager
reporting through the Secretary to the Minister (Ministry of
Consumer Affairs, 1990). This would have removed the Ministry's
independent policy report and its status as a semi-autonomous
body. It is worth noting that the memorandum of understanding
proposed in 1986 between the General Manager and the Secretary of
DTI was
never implemented (Ministry of Consumer Affairs, 1991c).
In 1991 concern about the transfer of funds from other Votes
within Commerce to support the Ministry over the preceding two
financial years [8] led
the Secretary of Commerce to seek a State Services Commission (SSC)
review of the lines of accountability around the Ministry's
outputs (Ministry of Commerce, 1991). This proposed review was
overtaken by a wider SSC
review in 1992 into the resources of small government agencies
and the possible consolidation of the stand-alone "population"
Ministries. Specific consideration was given to Consumer Affairs,
its structure and relationship to Commerce (State Services
Commission, 1992).
The SSC
described the Ministry as a structural "oddity", although it
noted that its relationship with Commerce did work. The
SSC sought Cabinet
agreement that the priority for consumer affairs expenditure was
policy advice and trade measurement, with operations (ie the
consumer advice service) as a second "discretionary" priority
(Office of the Minister of State Services, 1992). The
administration of trade measurement was identified as a statutory
function and it was noted that there was little scope for further
cost saving. [9]
Options from the SSC
review presented to Cabinet were the status quo or the withdrawal
of the Ministry's operation functions. If Ministers decided that
the operations function should not continue, then agreement was
sought to either integrate the policy advice function into
Commerce, or retain the policy unit as a separate unit reporting
independently (Office of the Minister of State Services, 1992).
In an annex to the SSC
Cabinet paper the Ministry made a number of comments on the
options presented. At a general level concern was expressed that,
with an emphasis on cost savings, the Cabinet paper failed to
address the role of the Ministry in seeking to maximise economic
welfare and consumer policy's grounding in open and competitive
markets. In particular, the paper failed to address the role of
the Ministry's activities (Office of Minister of State Services
1992) in:
- enabling consumers and traders to participate in the market
on a fair, informed and effective basis
- minimising consumer detriment and consequential cost to the
economy, through education and prevention
- stimulating the excellence and quality of suppliers.
Regarding the proposal that the policy unit be subsumed into
Commerce, the Ministry raised concern that this would erode the
provision of contestable advice to Ministers on consumer issues
and noted that this advice was not duplicated either in Commerce
or in other government or voluntary agencies. The Ministry also
questioned the appropriateness of government receiving business
and consumer advice from the same source (i.e. Commerce) (Office
of the Minister of State Services, 1992).
The Ministry justified the continued provision of services by
operations (education, advice and consumer, and trader
assistance) on the grounds that (Office of the Minister of State
Services, 1992):
- for an open market to work effectively and at minimum cost,
both consumers and suppliers needed to be equally well informed
about their rights and obligations
- there was no evidence that either voluntary or commercial
organisations would fill this role should services be withdrawn
- services were targeted to meet the needs of those consumers
who have the most "problems" (and were most at risk of economic
detriment), and to groups of traders where research had
identified shortcomings that would not otherwise be met.
Unfortunately the Ministry's records do not contain a Cabinet
minute relating to the outcome of the review, although the
continuation of the Ministry's form and functions suggests that
its impact was not significant.
Clarifying the Structural
Arrangement-Letter of Relationship
In July 1996 the General Manager and Secretary of Commerce
signed a letter clarifying the relationship between the Ministry
and the Ministry of Commerce. The files appear incomplete, but it
appears that this is the first time the overall relationship
between the two organisations was formally set out.
[10]
The letter was intended to recognise the balance between
independence of approach and effectiveness in integration. Key
features were (Ministry of Consumer Affairs, 1996a):
- The General Manager is accountable to the Minister for the
delivery of annually agreed outputs (the quantity, quality and
cost). The Secretary is responsible for monitoring the delivery
of those outputs.
- The General Manager provides appropriate strategic
direction and leadership on policy and operational matters, but
will inform the Secretary of matters of "note".
- The General Manager is accountable to the Secretary for the
effectiveness and efficiency of the Ministry.
- On policy/advisory and operational matters the General
Manager reports directly to the Minister of Consumer Affairs
and has an independent voice (from Commerce) on consumer
matters.
- The purpose of the Ministry, "... to help New Zealanders
prosper by promoting a fair and informed marketplace for
consumers", was encompassed within the Ministry of Commerce's
purpose "... to help New Zealanders prosper".
Chief Executive's Delegation
With the establishment of the MED the letter of relationship
has been replaced with a Delegation from the Chief Executive to
the General Manager of Consumer Affairs. The introductory context
to the Delegation (Dangerfield, 2002) sets out the relationship
between the Ministry and
MED. It
notes that:
- the Ministry is part of
MED
- the Chief Executive is responsible to the appropriate
Ministers for carrying out the functions and duties of the
Department, and the efficient, effective and economical
management of the Department's activities
- the Ministry of Consumer Affairs has the status of a
semi-autonomous body within
MED and
has a mandate to provide advice direct to relevant Ministers
- there is a requirement for close co-operation and alignment
of goals and outputs for each part of
MED, to
ensure that both organisations take advantage of the synergies
of incorporating the Ministry within
MED,
which is focused on the Government's economic development
strategy.
Legislative Responsibilities
At the time of the Ministry's establishment, the Department of
Justice considered it inappropriate that the Ministry in its
proposed form promote and control legislative reviews-the
Ministry should be restricted to a supporting role only
(Department of Justice, 1985).
Other than the Fair Trading Act,
[11] the Department
of Justice administered the bulk of consumer legislation until
1995. Effectively, therefore, the Ministry's success in promoting
and participating in reviews of consumer legislation was
dependent on the administering Department's commitment to allow a
review to be conducted. As early as 1990 the Ministry had formed
the view that administering Departments had not accorded the
necessary priority to consumer legislation to administer it
effectively. Further, monitoring and promotion of consumer
legislation was accorded a low priority by other Departments
(Ministry of Consumer Affairs, 1990).
Following a SSC
review of the Department of Justice in 1994, the Government
agreed that the primary source of advice on commercial and
corporate legislation should be the Ministry of Commerce.
Specific consumer protection statutes
[12] were transferred
to the Ministry from Commerce in 1995.
At the time, legislation which regulated specific markets in
the consumer interest, such as occupational regulation, was seen
to impact on competition and market entry as much as on consumer
transactions. On the basis of this, and out of concern that the
Ministry did not have the resources to administer licensing or
disciplinary boards, it was recommended that legislation such as
the Real Estates Agents Act 1976 and the Motor Vehicle Dealers
Act 1975 not be administered by the Ministry (Ministry of
Consumer Affairs, 1993a).
Consumer Credit Bill
The Consumer Credit Bill was introduced into Parliament in
2002. The background to the Bill's development illustrates the
tensions around reviewing legislation administered by another
Department.
Credit law reform has been a major goal of the Ministry since
its establishment, and began in 1988 in conjunction with the
Department of Justice. By 1990 a drafting priority for new credit
legislation was sought (Office of the Minister of Consumer
Affairs, 1990), but the Department of Justice withheld comment.
Subsequently, and with the agreement of the Minister of Justice,
the Minister of Consumer Affairs sought and was granted Cabinet
approval to administer consumer credit legislation (Office of the
Minister of Consumer Affairs, 1990a). However, following a
representation from Justice officials to the Minister of Justice,
Cabinet approval to administer the credit legislation was
rescinded.
It was not until 1995 that progress was made in reviewing
credit law when "ad hoc amendments" were progressed that resulted
in the Credit (Repossession) Act 1997 (Ministry of Consumer
Affairs, 1995). By 1998 the Ministry of Justice consented and
allowed the Ministry to conduct a full review of consumer credit
law, which resulted in the current Bill.
Current Legislative Programme
With the recent reviews of credit law and the Motor Vehicle
Dealers Act 1975, the Ministry's legislative activities have
increased. Both the Consumer Credit Bill and Motor Vehicle Sales
Bill (currently before Parliament) are for the purpose of
consumer protection. The Ministry has also assumed responsibility
for reviewing another piece of occupational regulation
legislation, the Auctioneers Act 1928.
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