Establishment and Development of the Ministry of Consumer Affairs

Background Paper to Creating Confident Consumers

May 2003

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The Relationship between the Ministries of Consumer Affairs and Economic Development

As an operating branch of MED, the Ministry's purpose and objective should contribute to MED's major outcome-"New Zealand's business environment actively promotes and enables a higher rate of sustainable economic development"-which is supported by a subsidiary set of growth and foundation outcomes (MED, 2002 p11).

The Ministry's activities are mostly directed at the foundation outcome, "the regulation of economic activity is effective and low cost" and particularly through the supporting goals of (MED, 2002 p12):

• "Transaction costs are minimised for consumers and businesses in domestic and international markets."
• "Markets, businesses and consumers have access to and use information held by the Ministry that enables them to conduct business effectively."
• "New Zealand's international connections enhance and increase business opportunity."
• "New Zealand's regulatory institutions can effectively monitor and enforce business regulations."

The Ministry also contributes to the growth outcome, "regional development, business growth and innovation are actively facilitated and encouraged" through the supporting goal of "increased Maori and Pacific Island participation in New Zealand's economic development" (MED, 2002 p12).

At a broad level the Ministry's role in contributing to a sustainable economy is identified as addressing the barriers that consumers face when making choices and effective decisions about the purchase and subsequent use of goods and services. The most significant barrier consumers face is access to and use of information. [19] Other barriers include uncompetitive markets and unequal bargaining power (Ministry of Consumer Affairs, 2002).

The basic premise is that if the barriers consumers face are removed or overcome, consumers can play an active role in economic development and growth. "By demanding higher quality products and services, better choice, clear information, value for money and by challenging unethical business practices, the New Zealand consumer stimulates greater economic efficiency and innovation" (Ministry of Consumer Affairs, 2002 p4). Innovation and efficiency are identified as being key to economic growth, and ultimately to higher levels of well-being.

Within the context of sustainable economic growth described above, consumer policy is identified as having the following objectives (Ministry of Consumer Affairs. 2002 p4):

• reduced transaction costs in dealings between consumers and suppliers
• confident consumers
• adequate information for purchasing decisions
• ethical trading practices
• fair competition in the marketplace
• the elimination of unfair trade practices, such as pyramid selling schemes
• access by consumers to complaints resolution and redress
• representation of consumers' interests at decision-making levels.

[19] Information barriers occur when, for example, product defects may not be obvious (or only become apparent through use or over time), when new products are unfamiliar, transaction costs are high or suppliers may withhold information.

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