Second Reading of the Consumer Law Reform Bill

Mr Speaker, I move that the Consumer Law Reform Bill be now read a second time.

I would like to thank the Commerce Select Committee for its consideration of this complex and significant reform.

The Committee has considered changes to ten Acts and reflected on more than 90 submissions covering a wide range of views. Their changes reflect a fair and robust process, and I am very pleased that the Committee was unanimous in their support for this significant update of consumer law in New Zealand. Ideally, law reform such as this should receive cross-party support.

Mr Speaker, the Government is committed to building a more productive and competitive economy. Strong consumer laws are the cornerstone of a buoyant market. When consumers transact with confidence, and honest business practices are supported, we all reap the rewards.

Our laws are basically sound, but they are over 25 years old and need updating to deal with modern transactions, such as internet trading and other technological advances.

The main aims of this Bill are:

• to offer better protection to both consumers and businesses
• to bring consumer laws in line with the business practices of our times
• to make complying with the laws much more straightforward
• and, not least, to make enforcing the laws more efficient and more effective.

On this Government’s agenda, is progressing a Single Economic Market with Australia. Changes in the Bill make our law consistent with the Australian Consumer Law, where it is the right thing to do so.

Three main consumer laws are being updated: the Consumer Guarantees Act, the Fair Trading Act, and the Weights and Measures Act. The Door to Door Sales Act, the Layby Sales Act and the Unsolicited Goods and Services Act will be repealed, and incorporated into the Fair Trading Act. A new Auctioneers Act with a modern approach to registration is being put in place.

I believe this Bill will be welcomed by consumers, businesses and regulators alike. My thanks go to Hon Heather Roy, Hon John Boscawen, Hon Simon Power and Hon Chris Tremain, the former Ministers of Consumer Affairs who have previously guided this work. I believe I have also added to the final flavour of this legislation.

I would like to comment on some of the most significant changes in the Commerce Committee’s report.

The Consumer Law Reform Bill provides for a principles-based approach. Binding the legislation is a purpose clause that will precede the Fair Trading Act, Consumer Guarantees Act and Weights and Measures Act. This clause has been amended to better reflect the Acts’ driving principles: consumer protection and a trading environment that encourages healthy competition amongst traders.
The revised purpose is crystal clear. It is to ensure that:

• the interests of consumers are protected
• businesses compete effectively, and
• consumers and businesses participate confidently in the marketplace.

It is through delivering positive outcomes for both consumers and business that we will see markets flourish and the economy thrive.

The Bill will significantly amend the Consumer Guarantees Act so that it covers all transactions between traders and consumers. This includes goods sold at auction or by competitive tender – on or offline – that are currently excluded from coverage by the Act. All goods sold by traders to consumers will now be covered by the basic guarantees – that the goods have clear title, comply with description and are of acceptable quality. This makes modern transactions between consumers and traders mode of sale neutral.

I acknowledge that some traders, particularly traders of used motor vehicles, have raised concerns about the guarantee of acceptable quality. The Bill will now amend the acceptable quality guarantee to make it clear the context of a sale must be considered when the definition of ‘acceptable quality’ is judged. If, for example, a consumer buys a used car from a trader for $1000, with 300,000 kilometres on the clock, it probably won’t be reasonable to expect the trader to repair it if it breaks down several weeks later.

A complementary change has been made to the Fair Trading Act so that traders will be required to identify themselves as such when selling goods on internet sales sites. This is to prevent traders avoiding obligations by posing as consumers.

The Committee has recommended a new delivery guarantee is added to the Consumer Guarantees Act as a more precise way of increasing protection to consumers. Traders will now be held responsible for goods up to the point of delivery. When goods are damaged or don’t turn up, consumers can expect traders to address issues. Traders will have to contact carriers for compensation.

The Fair Trading Act is also an important part of our consumer law framework. A major new provision in the Bill is to ban unsubstantiated representations. These are representations made without the manufacturer or trader having any reasonable basis for making them.

This type of claim disadvantages responsible businesses that do their research and evidence their representations. People may pay a premium for goods that “prevent asthma” or “are environmentally-friendly”, and it is only fair that we can trust that these claims are based on reasonable grounds.

At Select Committee many submitters raised concerns about the application of the new provision to creative advertising. Regulation at the cost of creativity is not the intention. As a result, a new subsection has been added. The rules will not apply to claims that a reasonable person would not expect to see backed up by research and evidence.

The Fair Trading Act will now include the rules for consumer transactions: layby sales, uninvited direct sales, extended warranties and auctions conduct. We have all either experienced, or have heard of cases, of the extra buying pressure exerted by people who come to the doorstep. Or of the experience of being sold an extended warranty – when it’s not quite clear why a person may need it.

These areas of the law are vital to get right. Several enhancements have been proposed by the Committee. Two main areas of change are in uninvited direct selling and extended warranties:

• Regarding uninvited direct selling, a concern was that the new provisions were too broad. The Committee have made changes to ensure trade events like “Fieldays” are not captured by the provisions, while still ensuring protection from unexpected selling in the home.
• The disclosure requirements for extended warranties have been changed. Traders must now list what extra protections the extended warranty gives, over and above the Consumer Guarantees Act so any extra benefits of an extended warranty are completely transparent.

The Commerce Committee was asked to specifically examine whether to add to the Bill unfair contract terms and unconscionable conduct provisions, along the lines of such provisions in the Australian Consumer Law.

Weighing up the views from both business and consumer representatives, the Committee has recommended adding provisions dealing with unfair terms in standard form contracts into the Fair Trading Act. With respect to unconscionable conduct the Committee has advised it is desirable in principle to address this issue but believes it is prudent to wait until Australia has developed a body of authoritative case law on the matter before considering following suit.

Only the Commerce Commission will be allowed to take action to have a term in a contract declared unfair. The Bill also includes a list of examples, as are also listed in the Australian Consumer Law, which will give the courts additional guidance.

And finally, the Committee has taken steps to strengthen enforcement powers and penalties.

These include:

• Giving the Commerce Commission compulsory interview powers when investigating the most serious breaches of the Fair Trading Act.
• Penalties for more significant breaches of the Fair Trading Act like giving false or misleading representation have been raised to $200,000 for individuals and to $600,000 for corporate bodies, and these bring us closer to comparable Australian consumer laws.
• Penalties in the Weights and Measures Act have been brought into line with those in the Fair Trading Act.
• Fines for offences in consumer transactions like layby sales − removing the need to take matters to court.
• Product safety officials given more authority to enforce consumer information and product safety standards, including the right to inspect business premises.

Strong and relevant consumer laws are essential for both consumers and businesses. I am confident this reform will help promote confident, well-informed consumers. In turn, we can drive competition, innovation and sustained growth.

Mr Speaker, I commend this Bill to the House.