Consumer Law – 2015 Year in Review

Home Insights Consumer Law – 2015 Year in Review

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Contributed by: Sarah Keene, Troy Pilkington, Joe Edwards, Christopher Graf and Elisha Kemp

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Published on: December 17, 2015


This year has been one of the busiest years for consumer law yet, with significant legislative change, and a record-breaking number of proceedings brought by the New Zealand Commerce Commission (NZCC). 

This Alert recaps the key developments and looks ahead to what to expect in 2016.

NZCC uses new FTA tools

Infringement notices
In March 2015 the NZCC used its new powers to issue infringement notices for the first time – namely, issuing infringement notices to motor vehicle dealers for failing to display Consumer Information Notices. 

The NZCC obtained these infringement notice powers as part of the Consumer Law Reform package introduced in 2014. These powers enable the NZCC to issue notices, which carry a fine of $1,000, to businesses that fail to disclose mandatory information to consumers, for example, a seller on Trade Me not disclosing that they are a trader (rather than a private seller).

Unsubstantiated claims
The Commission has also been active in enforcing the new “unsubstantiated claims” prohibition that was also introduced in 2014 as part of the Consumer Law Reform package. The unsubstantiated claims prohibition makes it illegal for businesses to make claims about goods or services without having reasonable grounds for those claims at the time they are made. 

During 2015 the NZCC has asked a number of businesses to provide the NZCC with evidence substantiating the claims they have made, and it has taken enforcement action in respect of at least one business that failed to provide such substantiation – namely a formal warning to Baa Baa Beads for failing to substantiate its claims about the therapeutic benefits of its amber bead necklaces.1

Unfair Contract Terms provisions
Continuing the theme of new consumer law powers and prohibitions, in March 2015 amendments to the Fair Trading Act 1986 enacting the new Unfair Contract Terms (UCT) regime came into force. The UCT provisions apply to all standard form consumer contracts entered into (or renewed or varied) on or after 17 March 2015.

Under the UCT provisions, a term in a standard form consumer contract can be declared unfair by a court if the term causes a significant imbalance in the parties’ obligations, is not reasonably necessary to protect legitimate interests, and would cause detriment if enforced. 

For more details on the UCT prohibition see here, as well as the NZCC’s guidelines on its approach to the UCT regime.2

In November, the NZCC announced that it had conducted a review of the standard form contracts of 30 businesses and identified 191 potentially unfair contract terms. We expect to see increased focus and enforcement from the NZCC in this area in 2016.

The NZCC’s areas of focus in 2015

In addition to enforcing its new powers, the NZCC’s focus under the Fair Trading Act during 2015 has been particularly focused on three areas:

(1)  online trading;
(2)  scam busting; and
(3)  mobile (truck shop) traders.  

Online trading
The NZCC has said that 33% of all complaints it received during the year to November 2015 were in relation to online trading, and so the NZCC has devoted more resources to focusing on the conduct of online traders. 

A particular practice of online traders that the NZCC has targeted is “opt out” pricing, which is the practice whereby online sellers pre-select optional add-ons for customers unless customers choose to de-select those add-ons.

In March 2015 the NZCC issued a media release asking businesses to cease “opt out” pricing on the basis of concerns that consumers may be misled into purchasing something they did not intend to during online purchases.  

As a result of the NZCC’s focus on this area, a number of businesses, including Air New Zealand, House of Travel and Naked Bus announced during 2015 that they would move to an “opt in” basis for customers to purchase travel insurance (and other add-ons).

We anticipate opt out pricing will be a continued area of focus for the NZCC in 2016.

Scam busting
Minimising the impact of online scams on New Zealanders has become a key priority for the NZCC. 

In particular, given most online scams emanate from overseas, which makes prosecution and enforcement difficult, the NZCC is focusing on education to mitigate the impact of scams. This includes issuing media releases as and when it becomes aware of scams, and search-engine optimising those releases, in an attempt to spread the word about scams before potential victims suffer harm.

Mobile traders
The NZCC conducted a year-long investigation into the conduct of mobile traders (commonly known as truck shops), being businesses that sell household goods door-to-door or from trucks, typically on credit and in lower socio-economic areas.

This investigation was a result of the NZCC receiving a number of complaints that consumers, particularly vulnerable consumers, were being given confusing or deceptive information by mobile traders, particularly over the total price of their purchases.

The NZCC’s investigation culminated in the release of a report in August that detailed its findings.  The NZCC found that 31 mobile traders did not comply with their obligations under the Fair Trading Act 1986 and Credit Contracts and Consumer Finance Act 2003 (CCCFA). Of those 31 traders, 29 were advised by the NZCC to make changes to their sales practices and 2 were subject to further targeted investigations.3   

Of those 2 traders, one (Vikram Mehta of Flexi Buy Ltd) was subsequently arrested by the Police in September and charged by the NZCC for breaches of the Crimes Act 1961 and Fair Trading Act 1986 in relation to the sale of smartphones, televisions and computers door-to-door.4 The NZCC is understood to be continuing to collect evidence against this trader – in December it issued a media release publicly appealing for customers of Flexi Buy Ltd that purchased goods but never received them to contact the NZCC.5

A record year for the NZCC

In addition to the priority areas described above, the NZCC has also been busy in taking enforcement action in other areas as well.  Dr Berry, chair of the NZCC, has described 2015 as “certainly the busiest litigation period ever” for the NZCC under consumer law, with the NZCC having 12 proceedings on foot (as at November) and expecting to file an additional 10 cases by the end of 2015. 

The NZCC’s enforcement activity has also included (amongst other things):

  • Charges against Yoghurt Story New Zealand Ltd (Yoghurt Story) and Frozen Yoghurt Ltd (Frozen Yoghurt) for “promoting frozen yoghurt products which did not contain yoghurt, and for making false claims about the health benefits of the product on the Yoghurt Story website”;6 and
  • Issuing a warning to McCormack and McKellar Auctioneers “after failing to disclose they owned a Tom Esplin painting they were auctioning”.7

NZCC issues investigation guidelines

In December 2015 the NZCC issued “Competition and Consumer Investigation Guidelines” to assist the business community better understand how the NZCC’s investigation processes are conducted, including to better understand how the NZCC makes enforcement decisions, how it gathers evidence, and when it will make public statements about its investigations. 

We think these guidelines are a helpful addition to the NZCC’s outreach programme to demystify the NZCC’s internal processes for the business community. The guidelines are available here.

Amendments to the Credit Contracts and Consumer Finance Act

In June 2015 significant changes to the CCCFA came into effect. The CCCFA governs the conduct of lenders in the provision of loans/credit to consumers. 

The key changes are:

  • The introduction of lender responsibility principles, which include requiring lenders to make reasonable enquiries before entering into a loan, or taking a guarantee, to be satisfied that the credit provided will meet the borrower’s needs.
  • New disclosure requirements, which require lenders to ensure loan documents are “clear, concise and intelligible” and to publicly display their interest rates, fees and standard contract terms.8

The Minister of Commerce and Consumer Affairs released the Responsible Lending Code on 17 March 2015 to provide guidance to lenders on the lender responsibility principles introduced by the CCCFA.9

We expect the NZCC will be vigilant in monitoring the new requirements introduced by this reform.

Cladding as a “consumer good” under the Consumer Guarantees Act?

There have also been interesting developments in the consumer law world under the Consumer Guarantees Act 1993 (CGA) (which is outside the enforcement jurisdiction of the NZCC).

In particular, in the Minister of Education v CHH, the Minister of Education has made a claim that cladding (shadowclad) manufactured and supplied by Carter Holt Harvey for the building of a school was defective, and breached the CGA’s guarantee of acceptable quality. 

The Minister of Education, in purchasing cladding for the use in a school, is not a typical “consumer” in everyday parlance. However, the CGA defines “consumer” not by the nature of the purchaser but by the nature of the good/service purchased. For example, if a good/service is usually purchased for personal or household use then the purchaser is a consumer. 

The Court of Appeal upheld the High Court’s decision not to strike-out the Minister’s CGA claim. Given it was not a substantive hearing, limited analysis was provided by the High Court and the Court of Appeal on the application of the CGA; however, the strike-out decision means the Court will now need to consider the substantive question of whether shadowclad is a good usually purchased for personal or household use. 

This case may extend the tail of the large volume of litigation in New Zealand over the last decade relating to “leaky buildings”. The Court of Appeal held that the ten-year long stop limitation period within which claims relating to building work must be brought does not apply to claims against manufacturers and suppliers of building products. 

This will be a case to watch, as any decision will have a bearing on class actions that have been commenced against cladding manufacturers this year.

Looking ahead

We expect the NZCC’s busy period of consumer law enforcement in 2015 will continue into 2016. In particular, the NZCC is likely to remain focused on enforcing the Fair Trading Act against online businesses (including in respect of opt out pricing), enforcing the unfair contract terms regime, and enforcing the new requirements in the CCCFA against consumer lenders.

In the meantime, far from relaxing for the Christmas holidays, the NZCC has announced it will be vigilant for any misleading discount claims during the Christmas shopping period.10 Take care while shopping (and selling) these holidays.



  2. Unfair Contract Terms Guidelines (February 2015), linked here.
  8. NZCC Media Release (3 June 2015), linked here.
  9. Responsible Lending Code (March 2015), linked here.

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

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