New Consumer Protection Powers Announced

Hon Stuart Nash (Minister for Small Business) and Hon Kris Faafoi (Minister of Commerce and Consumer Affairs) today announced significant proposed changes to the Fair Trading Act 1986 (FTA), which will bring it more in line with prohibitions applying in Australia, including:

• A new prohibition against unconscionable conduct. This will be similar to the Australian prohibition that has been in place since 2010. This would empower the Commission (NZCC) to seek penalties against parties engaged in unconscionable conduct. Australian courts have interpreted unconscionable conduct as "conduct against conscience by reference to the norms of society". 
  
  The bill will include a 'grey list' of factors that courts should have regard to when determining whether conduct is unconscionable (including whether the conduct was reasonably necessary to protect a legitimate business interest, and whether the defendant acted in good faith).
   
• Extension of the unfair contract terms (UCT) regime. The UCT regime currently only applies to standard form consumer contract (B2C) terms but will be extended to apply to business-to-business (B2B) contracts with a value less than $250,000.
  
  The reason given for this reform was that it is "not realistic to expect businesses to do due diligence, seek legal advice, or attempt to negotiate low-value or routine contracts." The terms of the prohibition will remain unchanged, but it will not apply to contracts with a value over $250,000.
  
  Importantly, the current enforcement regime, where civil remedies for UCTs are not available unless the NZCC has successfully sought a court declaration that a contract term is unfair, will also apply to its proposed B2B regime. However, this is likely to only be temporary as the government has indicated it will seek to change this enforcement regime for both B2B and B2C UCTs once its broader review of the FTA is complete.

The changes mark a very significant change to New Zealand's commercial law framework, and will have far-reaching impacts on how businesses negotiate and contract with one another. The government's intention is to introduce the amending legislation in early 2020. There will be a further opportunity for affected parties to make submissions through the select committee process early next year.

Further details on the government's decision can be found here, and further details regarding the proposal can be found in Russell McVeagh's December 2018 alert here. If you have any questions about how these proposed changes could affect your business, please contact one of our experts below.

This article 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. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.