Part 1: Outline of the Review and Its Purpose

Scope of the Review

The purpose of this review is to determine the effectiveness of the redress and enforcement provisions in the FTA and the CGA. The review will look at enforcement activity taken but effectiveness cannot be simply measured by the number of times a provision is used or by the size of the penalties handed down by the courts. These are signs of some activity but say little about overall consumer or business awareness of the legislation, its relevance or the protection it affords. The effectiveness of the redress and enforcement provisions need to be measured against the desired policy outcomes of the legislation.

The key issues to be addressed in this review are:

The impact of the redress and enforcement provisions on trader compliance and/or consumer confidence.
The examination of the existing redress and enforcement provisions in the FTA and CGA, including the:
- identification of the existing redress and enforcement provisions and an analysis of the effectiveness of those provisions (whether they lead to trader compliance and consumer confidence, how traders view existing penalties etc);
- consideration of the costs and benefits of self-enforcement for consumers and government; and
- enforcement processes and policies of the Commerce Commission and the New Zealand Customs Service, and their impact on the effectiveness of the redress and enforcement provisions.
The investigation of alternative redress and enforcement provisions, including:
- Identifying different approaches to redress and enforcement that may be available in other jurisdictions; and
- analysing whether any of these other approaches may be more effective than New Zealand's present provisions.
The identification of cross-border issues:
- extra-territorial application of consumer protection laws - consumers transact cross-border, but most legislation applies to a nation state; and
- redress in the cross-border (particularly trans-Tasman) context - whether consumers can get redress in cross-border transactions.
The examination of compliance cost issues:
- identifying the cost for traders of complying with the redress and enforcement provisions of the FTA and CGA - whether the costs of complying with the legislation are affecting trader compliance or their market behaviour, or are imposing unnecessary costs on traders); and
- availability and applicability of existing information (whether traders can access information on the FTA and CGA easily and at a reasonable cost and apply it to their business).

Outcomes of the Review

The specific outcomes for this review are:

knowledge of the extent to which the redress and enforcement provisions in the FTA and the CGA contribute towards an environment where consumers' reasonable expectations of transactions are met, including identification of the reasons why traders comply (or not) with the FTA and CGA;
clarification of the role that redress and enforcement have in achieving an environment in which consumers' reasonable expectations of transactions are met by traders;
consideration of the accessibility and effectiveness of redress for consumers; and
identification of the optimal mix of remedies and penalties, enforcement and redress approaches for the FTA and CGA.

Review Outline

The review will include two surveys. The first is a national survey about consumers' awareness and understanding of consumer protection law and their experience in seeking redress. The second survey is a national survey about trader awareness and understanding of consumer protection law. This survey will also seek to explore trader behaviour and attitudes to such legislation.

Given the breadth of this review, MCA is intending to produce a series of review documents. The following is an indicative guide to the content of these documents.

Paper One - An Initial Think Piece (this paper) - outlines the purpose and objectives of the review and provides a discussion of relevant theories of regulation that underpin the review's subject matter.
Paper Two - Discussion Paper - will describe existing redress and enforcement provisions (including enforcement tools) in the FTA and the CGA; redress and enforcement provisions (including the enforcement tools) in consumer protection legislation used in overseas jurisdictions; and discuss issues in the cross-border application of the FTA and the CGA.
Paper Three - Report of National Consumer Survey - will analyse results of the national consumer survey on consumer knowledge and use of the redress and enforcement provisions in the FTA and CGA (whether consumers are: aware of their rights; able to apply the information they have about their rights when they are making transactions; more likely to seek redress when they are aware of rights; and so forth).
Paper Four - Report of National Trader Survey - will analyse results of the trader survey on the knowledge traders have of the FTA and the CGA (including the estimated costs of compliance with those Acts and whether there are any unnecessary costs; the reasons why traders comply (or not) with the consumer protection legislation and the effectiveness of the different redress and enforcement provisions in securing compliance).
Paper Five - Discussion Paper - will present a full analysis of the review findings and outline proposed recommendations for government consideration including recommended amendments to the FTA and the CGA, where appropriate.

Timing of the Review

MCA envisages that the review will be completed over the next two years.

Exclusions from the Scope of the Review

Other consumer protection legislation administered by MCA (e.g. credit and weights and measures type legislation) will not form part of the present review.

The framework used to assess why traders comply with the FTA and CGA will be relevant to any future reviews of legislation for which MCA and the Ministry of Economic Development (MED) have administrative responsibility.

The following areas are also excluded from the scope of this review:

self-regulation: a separate review is being conducted to examine whether self-regulation is an effective means of creating confident consumers, and to clarify the circumstances in which self-regulation can be effective. The conclusions from the self-regulation review will be taken into account as part of this review of the enforcement of consumer protection law;
Commerce Commission funding for the enforcement of consumer protection law that has been the subject of separate reviews managed by MED.

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Part 2: Enforcement and Redress - Theoretical and Conceptual Thinking