Summary of Submissions on the International Comparison Discussion Paper

September 2006

Table of Contents / Next Page

1. Introduction

The Ministry of Consumer Affairs (MCA) is reviewing the effectiveness of the redress and enforcement provisions in the Fair Trading Act 1986 (FTA) and the Consumer Guarantees Act 1993 (CGA) as part of our ongoing monitoring of our legislation in order to assess how effective it is in practice in achieving desired outcomes.

As part of the review, MCA released a discussion paper Review of the Redress and Enforcement Provisions of Consumer Protection Law- International Comparisons (the discussion paper) in May 2006. The discussion paper compared the redress and enforcement provisions in the FTA and the CGA with those found in the consumer protection legislation in other similar jurisdictions. The comparison suggested that the approach taken by New Zealand's consumer protection legislation is consistent with legislation in other similar jurisdictions.

Whilst there were no significantly different approaches taken in the overseas legislation there were some differences in the provisions that may be worth considering for adoption. The advantages and disadvantages of adopting these provisions into New Zealand's consumer protection legislation were considered in the discussion paper.

This report provides a summary of the views expressed in submissions received on the Ministry of Consumer Affairs' discussion paper. Twenty-seven[1] submissions were received on the discussion paper. Fourteen were from business and business groups and associations (the business group). Four were from consumer organisations and community law centres (the consumer group) and 8 were from a range of parties including lawyers, consumer complaints ombudsmen and the Commerce Commission.

As a general comment business groups and associations tended not to see the need to amend the Fair Trading Act 1986 (FTA) to provide for the additional redress and enforcement provisions outlined in the discussion paper for possible adoption. Half of the submissions in this group considered that self-regulation is the way forward. They commented that there is a very strong incentive for businesses to comply with consumer protection legislation simply to protect the image of the business (or the brand name) and that the issues raised in the discussion paper are not significant enough to justify additional regulation. Submitters from this group considered the paper treated business with suspicion, there was not enough evidence of a problem, some of the proposed amendments would increase compliance costs and that more regulation can constrain the performance of business. Concerns were also raised about extending the powers of the Commerce Commission.

On the other hand, consumer organisations and community law centres supported the proposals. They particularly supported the proposal to prohibit unfair terms in consumer contracts. Generally, they supported the other proposals on the basis that they would help the Commerce Commission to do its work more effectively and this would get better outcomes for consumers.[2]

The Commerce Commission fully supported all the proposals except the unfair terms in consumer contracts prohibition. Although the Commission identified some problems with the unfair terms in consumer contracts prohibition, they did admit that such a provision could positively contribute to their ability to stop misleading behaviour quickly.

The comments made in the submissions are outlined below by reference to the seven tools that were identified for possible adoption following from the comparison of New Zealand's consumer legislation with similar overseas legislation:

A prohibition on unfair terms in consumer contracts;

The ability to seize and warn the public of potentially unsafe products;

• Cease and desist orders which would prevent a trader from continuing with alleged misconduct;
• Substantiation notices which would place the onus of truth on those making claims (not the Commerce Commission);
• Court enforceable undertakings which could be used if a business contravened the terms of a settlement with the Commerce Commission;
• A strengthening of the Commission's interview powers so that they could require a person to answer questions and give evidence; and
• Banning orders which would prevent recidivist offenders from supplying goods and services either for a set period of time or indefinitely.

The addition of any of the above tools to New Zealand's consumer protection regime would require amendments to the FTA.

Table of Contents / Next Page