Review of the Operation of the Motor Vehicle Sales Act 2003: Report Presented to the House of Representatives Pursuant to Section 163 of the Motor Vehicle Sales Act 2003

March 2006

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Introduction

1. The Motor Vehicles Sales Act 2003 (MVSA) came into force in December 2003. This legislation made fundamental changes to the way in which sales of motor vehicles were regulated. A registration regime, administered and enforced by government agencies, replaced the previously industry controlled licensing regime. Some restrictions on who could participate and how they could participate in this market were lifted. The Motor Vehicle Fidelity Guarantee Fund was discontinued and the scope of claims that could be taken to the Motor Vehicle Disputes Tribunal was widened. New information disclosure requirements were introduced in the form of a Consumer Information Standard under the Fair Trading Act 1986.

2. Section 163 of the MVSA requires the Ministry of Consumer Affairs to undertake a review of the operation of the MVSA within two years of its commencement, and to report back to the Minister with recommendations on whether any amendments to the MVSA are necessary, or desirable. In preparing this report the Ministry is required to consult with interested parties, including representatives of consumer interests in relation to motor vehicles.

3. The Ministry has been directed by Government to have particular regard to

• the level of compliance by motor vehicle traders;
• the incidence of insolvencies involving motor vehicle traders;
• the impact on consumers of the loss of the Motor Vehicle Fidelity Guarantee Fund; and
• to report on whether the regulatory regime, on balance, meets its purpose of promoting and protecting the interests of consumers in relation to motor vehicle sales.

Scope of the Review

4. The MVSA put in place three core operational mechanisms or instruments. This report focuses its discussion on these core instruments, outlining what arrangements have been put in place and describing the activities undertaken since the commencement of the MVSA.

5. The core mechanisms are:

• Registration - the Motor Vehicle Traders Register (MVTR).
• Information disclosure - the Supplier Information Notice (SIN).
• Disputes resolution - the Motor Vehicle Disputes Tribunal (MVDT).

6. The report discusses whether the criteria established under the MVSA for each of these operational areas are achieving the objective of providing adequate consumer protection. It considers process issues, in particular any that may hinder the achievement of the consumer protection outcome, or which may impose unnecessary compliance costs. Lastly the report considers whether there are any obstacles to enforcement.

Consultation

7. Section 163(2) of the MVSA provides that in preparing this report, the Ministry must consult with interested parties, including representatives of consumer interests in relation to motor vehicle sales.

8. In October 2005, a consultation paper was sent out to some 60 identified interested parties, inviting their comment on any issues arising from the operation of the MVSA since its commencement in December 2003. The review was also advertised in the Motor Vehicle Traders Newsletter and Business Update, on the Ministry of Economic Development website.

9. 16 submissions were received. A list of those making submissions is attached as Appendix One. The comments received from those making submissions have been incorporated into this report and informed findings.

10. A series of meetings were held with the various government agencies involved in the regulation of motor vehicles and their sale. These included the Ministry of Transport, New Zealand Land Transport, New Zealand Customs Service, Ministry of Justice, the Companies Office, National Enforcement Unit of the Ministry of Economic Development and the New Zealand Commerce Commission.

11. Discussions with government agencies, industry and consumer representatives have informed findings and the drafting of this report. Information received from government agencies is also incorporated into this report.

MVSA Monitoring and Evaluation Project 2003-2005

12. Co-incident with the commencement of the MVSA, the Ministry of Consumer Affairs developed a monitoring and evaluation plan to inform the review of the operation of the MVSA required by section 163 of the Act. Key operational mechanisms of the MVSA were identified and arrangements made with the government agencies responsible for the various operational functions to provide statistical data on their activities. The data collected from these agencies is the primary source of operational data used in this report. Reports were prepared on a quarterly basis and the final MVSA Monitoring and Evaluation Report, which reports on activities from December 2003 to June 2005 is attached as Appendix Two.

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