Fair Trading Act - what it covers
Information on the Fair Trading Act, the role of the Ministry, the role of the Commerce Commission, unfair trade practices and product safety standards.
Scope of the Fair Trading Act
The Fair Trading Act applies to all people in trade. You cannot contract out of the Fair Trading Act.
The Act prohibits people in trade from misleading or deceptive conduct in general. You do not have to intend to mislead or deceive, it is whether your actions did or could mislead or deceive.
It prohibits certain types of false and misleading representations about
- goods and services, including false claims that goods or services are of a particular price, standard, quality, origin or history or that they have particular uses or benefits, or that they have any particular endorsement or approval the public in respect of goods and services and employment
- employment
- sales of an interest in land.
The following information is a general guide to the Fair Trading Act.
You can access the Fair Trading Act online at the New Zealand legislation website
All motor vehicle traders need to complete and display a Consumer Information Notice (CIN) when a used motor vehicle is offered for sale.
Further information on the Consumer Information Notice (CIN) is here.
Unfair trade practices
The Fair Trading Act also prohibits specific unfair trade practices such as:
Bait advertising
Bait advertising is advertising goods at a price which is likely to act as a lure to customers where you do not have a sufficient supply of those goods. A possible defence to a charge of bait advertising is to supply a "raincheck". A raincheck entitles the customer to future goods which are the same or similar to the goods at the advertised price.
Offering of gifts and prizes with no intention to provide
You must not offer gifts and prizes that you have no intention of providing. If you are running a contest or sales promotion you must not mislead or deceive people as to the nature of a competition or to the prizes to be won.
Pyramid selling
Pyramid selling schemes are specifically prohibited by the Fair Trading Act.
Schemes normally have these elements:
- they offer a financial return based on the payments of new recruits
- the return is primarily dependent on new members being continually recruited.
Schemes also include those involving participants buying or selling an investment opportunity or schemes that involve participants using an agent - provided by the scheme operators - to recruit other participants on their behalf, instead of recruiting participants themselves.
It should not be confused with multi-level marketing schemes. These schemes also involve the selling of a product, but a financial return is not reliant on more people joining the scheme but on the sale of the products.
Harassment and coercion
The Act prohibits the use of harassment, coercion or physical violence if you are selling goods. Be aware of your sales operation - tactics that could be considered just "hard sell" may border on harassment to your customer.
Product safety standards
Currently there are six Product Safety Standards under the Fair Trading Act. They relate to:
- Baby walkers
- Cigarette lighters
- Children’s toys – for the under three age group
- Children’s nightwear
- Pedal bicycles
- Household cots
Consumer information standards
There are four consumer information standards at present.
The current standards are:
- country of origin labelling - for most clothing and footwear
- care labelling - for clothing and textiles
- fibre content labelling - for clothing and textiles
- "Consumer Information Notice" for motor vehicle traders.
Copies of the first three standards are available from:
Standards New Zealand
Private Bag 2439
Wellington 6140
Website: www.standards.co.nz
Information on the Consumer Information Notice standard for motor vehicle traders is available here
Administering the Fair Trading Act - role of the Ministry
The Ministry administers the Fair Trading Act. This means that we have the responsibility to report to Government on the need for changes to the current law and other policy matters. The Minister also has the power to order compulsory recall of goods which fail to meet a product safety standard or which may cause injury.
Enforcing the Fair Trading Act
The Commerce Commission enforces the Commerce Act and Fair Trading Act. They are also charged with the role of providing information on both Acts.
Individuals who breach the Act can be fined up to $60,000 and corporations up to $200,000 for breaching the Fair Trading Act.
In the case of pyramid selling schemes, the maximum fine for both individuals and corporations is $200,000. There is also an extra penalty based on the amount gained commercially from their involvement in the scheme.
Contact the Commerce Commission.
Taking your own civil action
The Commission does not take civil actions on behalf of the public. The Commission is interested in Fair Trading issues, but only investigates those that meet set criteria. Consumers or traders seeking compensation for a breach of the Act can take a civil action through the Disputes Tribunal or the District Court.
Commerce Commission publications on the Fair Trading Act
The Commission publishes a range of printed information on the Fair Trading Act including general information as well as covering specific topics such as pyramid selling, debt collection and the various standards.
Visit their website to order any publications .
