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Phase Two: Organisational Review: Final Report
22 August 2003
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Context
1. The current Review of the Ministry of Consumer Affairs was
initiated late in 2002 at the request of the then Minister of
Consumer Affairs, Hon. Jim Anderton. A full review of the
Ministry's role and functions had not been undertaken since its
establishment in 1986, although there have been a number of
changes to the Ministry's role and functions during that time.
2. The Review has been divided into two phases. A team made up
of Ministry of Consumer Affairs and wider Ministry of Economic
Development staff undertook the first phase. Their assessment of
the Ministry's strategic direction - "what" the Ministry does and
"why" and what is needed to deliver on this vision is contained
in Creating Confident Consumers and its associated
background papers. [1]
Phase One: Review Key Conclusions
3. Perhaps the most critical question the Phase 1 Review team
asked itself was "What is the Ministry (on behalf of
government) seeking to achieve"? Put another way, what
outcome should the Ministry be working towards? The Review Team
has concluded that the Ministry should be seeking to create an
environment in which consumers transact with confidence.
What does this mean? Ultimately that, when consumers
purchase a product or service, their reasonable expectations of
that transaction will be met and, if not, consumers will have
access to effective redress.
4. Consumers may have a variety of expectations, around issues
such as safety, quality (relative to price), performance,
quantity and price. So for example, when purchasing an appliance,
consumers are likely to expect that it is safe and will function
as expected. Similarly, parents are likely to expect that the toy
or baby equipment they have purchased is fit for the purpose and
safe. The regulatory framework for consumer safety is designed to
ensure this expectation is met, and educational campaigns inform
consumers of their responsibilities regarding safe use and proper
maintenance of equipment and appliances.
5. So what is the primary reason why consumers don't get
what they expect from a transaction (or in other words get a bad
deal)? Having reviewed a number of different ways of
thinking about consumer issues, the Review Team has concluded
that information barriers are the major reason for the gap
between what consumers expect and what they get from a
transaction. This is referred to in the report as an
"information-based" framework for thinking about consumer issues.
6. The causes of these information barriers are many and
varied. For example, information might be costly to obtain and
difficult to interpret. An imbalance of information between
consumers and suppliers (about a car or a credit contract, for
example) may provide scope for suppliers to take advantage of the
consumer. Consumers may simply underestimate the value of
information about a particular product or service. Their
background and previous experiences shape their likes and
dislikes, the way they interpret and use information and the way
they make decisions.
7. So is there a link between consumer policy and economic
development, and if so, what is it? The Review Team has
concluded that creating an environment in which consumers can
transact with confidence is critical to a thriving, innovative
economy. Consumers have a vital part to play in the development
of dynamic and competitive markets through their purchasing
decisions. They satisfy their own needs as individuals. Their
collective decisions also help ensure competition amongst
suppliers. Consumers who use information to make sophisticated
choices and demand high quality products and standards of service
will stimulate providers of goods and services to innovate as a
means of improving their quality and efficiency. In addition,
through providing incentives for suppliers to focus on consumer
expectations, consumer policy provides an additional stimulus for
product and service improvements.
8. As consumers, products and services, and ways of doing
business change so do the challenges facing consumer policy. The
Review Team has identified a number of key challenges for
consumer policy in the next 5-10 years. These include:
- the changing age and ethnic profile of consumers
- potential shifts in attitudes amongst consumers themselves
- changing market practices resulting from new
technology, but also simply from the ways suppliers adapt
products, services and behaviour to attract and retain
customers and in response to the way markets are designed
- how best to approach information "overload" issues
- globalisation - the implications of cross-border
transactions for New Zealand consumers and overseas consumers
of New Zealand goods and services. The interaction of consumer
policy with trade policy generally will become an area for
increased focus.
9. Given the wide range of issues that the Ministry of
Consumer Affairs could become involved in, the
Review Team has developed some guidelines for involvement
to help determine where the Ministry should put its effort.
Essentially the message behind the guidelines is the need to
focus the Ministry's effort on those consumer problems and issues
that are likely to make the biggest difference for consumers as a
whole.
10. So what is the role of a Ministry of Consumer Affairs
in a dynamic modern economy? The Review team has concluded
that the Ministry's primary role is to create an
environment that is conducive to good and accurate information
flows been suppliers and consumers so that consumers can transact
with confidence. This is fundamentally about developing,
or assisting in the development of, the rules (whether
self-regulatory or regulatory) that govern the behaviour of
consumers, suppliers, institutions (such as the Commerce
Commission) and markets in general so that the gap between what
consumers expect and what they get from a transaction is as small
as possible. For example, the Fair Trading Act is designed to
ensure that consumers are not misled about what to expect from a
transaction. The Weights and Measures Act is designed to ensure
that consumers get the quantity of goods that they expect. Good
consumer policy should improve consumers' estimates of the value
of information or reduce the cost of information to consumers (or
both).
11. The Ministry also has an information delivery role with
respect to consumer and supplier generic rights and
responsibilities under consumer law, some consumer safety issues
and for some targeted groups of consumers.
12. So what does this all mean? The Review Team
concluded that "nothing was broken" within the Ministry. However,
there are a number of issues that the Ministry must address in
order to ensure:
- effective results for consumers
- businesses understand and meet their obligations under
consumer law
- the consumer/trader environment contributes to a
sustainable increase in economic growth.
13. Particularly, in order to deliver
on this role into the future the Review Team has concluded that
the Ministry needs to:
- strengthen its policy capability
- ensure that policies and programmes are informed by an
in-depth understanding of consumer and trader experiences and
behaviour and "what works for whom" by focusing on:
- fully exploiting the ability of the operational arms of
the Ministry to gather "intelligence" about consumer issues
- strengthening the links between policy and operations,
particularly those between the Policy Team and the Consumer
Information Service
- better utilising and extending its networks and contacts
with consumers and businesses
- improving access to and addressing gaps in consumer data
- further developing its capability to research or
contract research on consumer issues
- enhancing its ability to monitor and evaluate the
impacts of consumer policy (including enforcement,
compliance and redress policies and their application in
practice) on consumers and society in general.
- build better links with the rest of the Ministry of
Economic Development in order to gain leverage from the wider
organisation and ensure that a consumer perspective is taken
account of in economic development policy
- examine the impact of changes in demographics, and evolving
consumer/supplier characteristics and needs, on the ongoing
effectiveness of the Ministry's current information-delivery
strategies
- take a systematic approach to the identification,
development and maintenance of key stakeholder relationships
- have greater input into the discussions between
MED (led
by Regulatory and Competition Policy Branch) and the Commerce
Commission on accountability and monitoring issues
- move quickly to address succession planning issues,
particularly those in the Trade Measurement area where
potential loss of staff skills and expertise threatens the
viability of the New Zealand trade measurement infrastructure.
Phase Two: Organisational Implications
- Phase Two of the Review, an assessment of the
organisational implications of the Review for the Ministry of
Consumer Affairs and the Energy Safety Service Branch has been
undertaken by the General Manager. The findings of this
assessment are contained in this report. The Terms of
Reference for Phase Two drew heavily on the key conclusions of
Creating Confident Consumers, particularly the
list referred to in paragraph 13
above.
14. In addition to these items, the Terms of Reference
indicated that Phase Two would also focus on:
- The way in which the consumer safety function is delivered
and resources.
- Ways of better integrating the functions of the Ministry of
Consumer Affairs (taken to mean in this case the branch as a
whole) to take better advantage of the synergies between them.
[2]
15. The Phase Two draft Organisational Implications Report was
presented to staff on 10 July 2003. The process used for feedback
purposes is outlined in
Appendix One. A summary of the main points made through the
submission and feedback process, together with the response to
the comments made and any action taken is contained in
Appendix Five. This should
be read in conjunction with the recommendations in this report.
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