From 17 June 2014 significant changes are to be implemented to
New Zealand's consumer law, largely by changes to the Fair Trading
Act 1986 ("FTA") and the Consumer Guarantees Act 1993 ("CGA").
Set out below is a snapshot of the key
Contracting out of the FTA:Businesses, when contracting with
each other, may contract out of certain legal protections imposed
by the FTA; however business cannot contract out of their
obligations to consumers.
Product claims:There is a new restriction on making
"unsubstantiated representations". Claims made in respect of goods
or services being sold must be based upon "reasonable grounds".
This may mean that retailers can rely on claims made to them by the
product wholesaler, but only to the extent it is "reasonable" for
them to do so. Retailers may have a duty to show that claims they
make about products are accurate.
This does not prevent claims being made which the reasonable
consumer clearly understands to be marketing or advertising spin,
such as "Red Bull Gives You Wings".
Layby sales:The Layby Sales Act 1971 is repealed, and the law
relating to this is now found in the FTA. The layby contract must
now be in writing and disclosure of the key terms of that contract
to the consumer is required, including the consumer's right to
cancel, how cancellation charges are calculated and when the
retailer may cancel the contract. The new provisions may be
enforced by the Commerce Commission.
Uninvited direct sales:The Door to Door Sales Act 1967 is
repealed. New provisions are included in the FTA. The consumer must
be told of their rights under the FTA, including their right to
cancel the contract before agreeing to be supplied and they must be
given a copy of the sale agreement. This includes sales made over
Extended product warranties:The FTA now includes very specific
disclosure procedures, which includes giving the consumer a
cooling-off period, the requirement to provide the consumer with a
summary comparison between the consumer's rights under the CGA and
the protections which they will be given under the extended
warranty arrangements. An extended warranty does not include a
Auctions:A new Auctioneers Act 2013 will apply which sets out
the administrative aspects of auctions and auctioneers. The auction
process itself is to be governed by the FTA. There are specific
changes in relation to sellers' bids, including their use and
disclosure. If relevant, sellers must disclose their status as
professional traders. The CGA protections may now be applied to
sellers in trade by way of auction. These changes do not apply to
"Trade Me" type transactions (they are not treated as true
Delivery of goods:Under the CGA, the time at which goods are
deemed to be supplied to the consumer has been clarified and new
provisions inserted to give a guarantee as to the time of delivery
of goods (which is either within a specified time period, or if no
time period is agreed, within a reasonable time).
Along with the changes set out above, penalties for breaches of
certain consumer laws have been increased and in other areas the
Commerce Commission has been given wider powers to act against
We recommend that:
A further change due in March 2015
A further change to the FTA, to regulate what can be described
as "standard form consumer contracts" (which may in fact also
include business-business contracts relating to consumer goods) to
address concerns about terms in those contracts which may be
considered unfair, is to come into effect in March 2015.
The FTA will set out what types of terms in contracts
are likely to be unfair to consumers, as they are not easily
understood, or not commercially legitimate, such as those
We recommend businesses now start to review their standard form
contracts/terms, especially where they are entered into with
consumers, to consider if certain terms could be considered unfair
and if they are unsure to take specialist advice.