7.2 Unsolicited Goods and Services

The Unsolicited Goods and Services Act 1975 provides protections for people who have received goods or services they have not ordered or requested, i.e. unsolicited goods or services. The protections are available to all persons, not just consumers. Businesses receiving unsolicited goods or services are also protected under the Act.

The provision of goods and services in an unsolicited manner is not necessarily an issue. A problem arises, however, when the person receiving the goods does not want the goods or services and the sender or service provider demands payment.

With respect to goods, the sender relies on the consumer’s inertia not to return the unwanted goods. This practice is called “inertia selling”, and relies on the sender’s assumption that the consumer has accepted the goods because the consumer has taken possession of them. The sender then relies on this assumption to demand payment for the goods, supported by the statutory rules for determining the presumed intention of buyers and sellers under section 20 of the Sale of Goods Act 1908.

This practice puts the consumer in a position of disadvantage because their right to choose and accept the goods is limited. It also means that the consumer has responsibility for goods that are, to all intents and purposes, forced on them.

The supply of unsolicited services has the same effect as unsolicited goods in that consumers do not have the ability to choose the service or consider the associated risks. For example, when an agreement has been made for a service, liability and risk can be established so it can be managed. Where the service is unsolicited the consumer’s ability to protect their interests is reduced.

These practices put the consumer in a position of disadvantage because they deny the consumer the right to choose and accept the goods and services and any associated risks. On the other hand excluding the ability to provide goods and services on an unsolicited basis removes what can be a legitimate means of attracting business (i.e. a form of advertising) when done in an ethical and socially responsible way.

The Unsolicited Goods and Services Act balances these interests by establishing that any unsolicited goods remain the property of the sender until the person receiving them accepts them. If the sender does not recover the goods (and the consumer does not prevent the recovery) then within three months, or one month if the consumer notifies the sender that they do not want the goods, the goods become an unconditional gift to the consumer. Services are slightly different, but service providers are prohibited from invoicing unordered services unless they have reasonable cause to believe they have a right to payment.

History of the Unsolicited Goods and Services Act

The Unsolicited Goods and Services Act was based on similar legislation in Australia and the United Kingdom to address issues associated with unsolicited goods and services, particularly issues around unsolicited directory entries. The Act is essentially unchanged since it was passed in 1975.

There has been one successful case taken by the Commerce Commission under the Act (and also the Fair Trading Act 1986) in 1989 against Shore Productions Limited related to charging for advertising not agreed to³⁶.

Ongoing relevance

The underlying principles for regulating unsolicited goods and services are that:

• consumers and businesses should not have to accept, take responsibility for and pay for goods or services that they have not sought; and
• consumers and businesses should not be subjected to demands for payment for goods and services that they have not sought.

The ability for consumers to choose what goods and services they want and how and when they interact in the market is important because it affects competition and market diversity.
As noted with door to door sales, when there is existing legislation establishing protections against certain practices, it is difficult to get a clear view of the problem that would exist if these protections were not in place. Some idea can be obtained from sources such as Consumer NZ and the Commerce Commission.

The Consumer NZ website includes two 2009 examples of unsolicited goods received and consumers feeling pressured to accept and pay for the goods, showing that traders sending unsolicited goods is still practised and there is still a need to provide some level of consumer protection in this area³⁷. These examples are intended to alert consumers about dealing with unsolicited goods. Consumer NZ advises that its files record many unsolicited goods and services enquiries. Over the years it has noted in its Consumer magazine ongoing examples of consumers being put under pressure related to unsolicited goods and services.

The Commerce Commission’s record of complaints/enquiries received over the last three years indicates a number of businesses complaining about invoices for unsolicited advertising and also consumers complaining about unsolicited goods.

This data indicates that the potential exists for unfair practices, such as inertia selling and unsolicited advertising, to resurge and cause consumer detriment in the absence of legislative intervention, and that the underlying principles supporting protections against unsolicited goods and services are still relevant in today’s legislation.

Whilst the need for regulation of unsolicited goods and services remains, there is a question as to whether the provisions of the Unsolicited Goods and Services Act are the appropriate approach and whether they are sufficiently clear in their current form.

The United Kingdom and Australia continue to regulate against unsolicited goods or services and it is useful to review how their legislation has been modernised and changed.

The United Kingdom’s Consumer Protection (Distance Selling) Regulations 2000 regulate unsolicited goods and services. They make unsolicited goods an unconditional gift to the consumer (extinguishing rights of the sender in the goods). The regulations also contain penalty provisions for demanding or asserting a right to payment for unsolicited goods and also for making threats regarding payment. For services, the provider needs to establish a reasonable cause for demanding or threatening payment. These regulations are made under the European Communities Act and flow from the Directive on the protection of consumers in respect of distance contracts³⁸.

The United Kingdom’s Unsolicited Goods and Services Act 1971 regulates directory entry services, requiring the supplier to document the consumer’s agreement for the directory entry to establish their right to payment. The Act also enables consumers to recover any money paid for unsolicited directory entry services.

The new Australian Consumer Law proposes regulation of unsolicited supplies. This legislation covers unsolicited credit and debit cards³⁹, unsolicited goods or services and unauthorised directory entries or advertisements.

The proposed regulation of unsolicited goods or services under the Australian Consumer Law aims to achieve the same objectives as the New Zealand Unsolicited Goods and Services Act, but in a modernised form. Essentially, this part of the Australian Consumer Law proposes that a person in trade or commerce cannot assert a right to payment from another person for unsolicited goods or unsolicited services unless the person has reasonable cause to believe there is a right to a payment; and the person bears the onus of proving that the person had reasonable cause to believe there was a right to payment. It also says the person receiving the goods or services is not liable for payment for the goods or services and is not liable for any loss or damage to the goods (other than wilful) or for loss or damage as a result of the supply of the services. It also sets out recovery periods for the trader to claim back the goods (3 months or 1 month if the person receiving the goods gives notice), after which the goods become the property of the person who received the goods.

The Australian Consumer Law provides a model that could potentially be adopted by New Zealand. This model provides for regulation of unsolicited goods or services under the general consumer law as a separate form of unfair practice. In a New Zealand context, this would mean including such regulation in the Fair Trading Act. This approach fits well with the Consumer Law Reform objective to simplify and consolidate consumer law. The Australian Consumer Law proposals also reflect the principles noted above supporting the need for regulation of unsolicited goods or services in a clear and concise fashion. Alignment with the Australian Consumer Law provisions also accords with the single economic market principles for harmonisation of business and consumer regulation where appropriate. This is the preferred option for future regulation of unsolicited goods and services.

Australia, like the United Kingdom, also has specific provisions for unauthorised directory entries or advertisements. Both the Australian and United Kingdom provisions for unsolicited directory entries require prior written approval from the consumer before the service can be charged for. Their legislation also enables money paid for unsolicited directory entries to be recovered. The New Zealand Unsolicited Goods and Services Act does not have a similar specific provision for directory services, but it provides generally that unordered services cannot be charged for unless the trader has reasonable cause to believe they have a right to payment. Specific regulations can be made under the New Zealand Act requiring prior written consent from consumers for specified unsolicited services, but no such regulations have been made.

In New Zealand, unsolicited directory entries appear to have been adequately managed through the generic provisions of the Unsolicited Goods and Services Act and the Fair Trading Act⁴⁰. There is not a problem that requires specific legislation and, accordingly, it is not proposed that New Zealand follows the Australian and United Kingdom practice of separately prohibiting unauthorised directory entries.

An alternative option to using the Australian approach to regulating unsolicited goods and services would be to adopt the United Kingdom approach of considering unsolicited goods as an unconditional gift. The advantage of this approach is that the consumer has no liability if they dispose of or in some way damage the unsolicited goods received before the 3 month period the sender has to reclaim the goods. The consumer would be able to dispose of unsolicited goods as and when they see fit. The United Kingdom approach, however, does not apply to unsolicited goods sent for the purposes of the business of the receiver.

The United Kingdom approach makes it an offence to invoice for either unsolicited goods or unsolicited services.

Such an approach reduces the incentive on sellers to send unsolicited goods more than the current Unsolicited Goods and Services Act. However, it would not stop their provision as a means to attract business. This approach would also not exclude businesses from being able to request a voluntary payment for an unsolicited good or to seek the consumers’ agreement to future goods.

In summary:

As noted, while there continues to be a need for some form of regulation regarding unsolicited goods and services, there is a question as to whether the provisions of the Unsolicited Goods and Services Act are the appropriate approach and whether they are sufficiently clear in their current form.

The new Australian Consumer Law provides a model to use for a more modern approach to regulating unsolicited goods and services. In a New Zealand context, this would mean including such regulation in an enhanced Fair Trading Act.

In considering the objectives of the Consumer Law Reform, continued regulation of unsolicited goods and services as part of an enhanced Fair Trading Act will meet the objectives that:
the law will:

• enable consumers to transact with confidence,
• protect reputable suppliers and consumers from inappropriate market conduct,
• be easily accessible to those affected by it,
• is enforceable, and
• is in line with international best practice;

there will be simplification and consolidation of the existing law; and
harmonisation with the Australian Consumer Law will be taken into account.

Questions

Footnotes

36 Commerce Commission v Shore Productions Ltd (1989) 3 TCLR 482 (District Court).

37 www.consumer.org.nz/news/view/unsolicited.goods

38 Directive 1997/7/EC of the European Parliament and of the Council of 20 May 1997, consequently amended by Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market.

39 Not relevant to this discussion as New Zealand’s regulation of credit and debit cards is covered under the Credit Contracts and Consumer Finance Act 2003.

40 Pro-forma billing, which is a type of fraud or scam where invoices are sent, without ever intending to provide a service, in the hope that the consumer will not question the invoice and pay it, is a breach of section 21 of the Fair Trading Act.