Fair trading

Avoid a public relations disaster

Do you understand consumer protection and fair trading laws?

Consumer law is designed to protect consumer rights. Not all consumer laws can be swept away with clever terms and conditions (despite many businesses trying their luck). There are basic minimum standards that apply irrespective of what’s in the contract.

Governments around the world are ramping up penalties to protect the consumer in the information age. It’s more important than ever that you and your staff clearly understand fair trading law.

Prosecutions not only bring fines but, if widely published in the media, may cause significant brand damage and result in loss of business. The NZ Commerce Commission is deliberately ramping up fines in an attempt to clamp down on misleading conduct. Recently the Commission handed down a record $540,000 fine for misleading conduct and the case was widely reported in the media. These PR disasters are easily triggered by a single staff member who doesn’t clearly understand fair trading and consumer protection law.

Get the complete guide to consumer law in NZ

Consumer Law Made Easy gives you straightforward and practical guidance on consumer protection and fair trading laws. The Fair Trading Act is covered in depth, including misleading and deceptive conduct, false or unsubstantiated representations, unfair practices, safety of products and services, and much more. The Consumer Guarantees Act is summarised including guarantees relating to the supply of goods and of services, and the rights of redress against suppliers and manufacturers.

Available on subscription, the guide provides:

  • Essential elements of consumer law for businesses
  • Key provisions of the legislation
  • Case studies and examples

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What is the Fair Trading Act?

The Fair Trading Act ensures that information provided to consumers about goods and services is accurate, and that important relevant information is not withheld. This enables consumers to make informed choices about the goods and services being offered.

Can a business contract out of the Fair Trading Act?

The general rule is that there is no contracting out of the Fair Trading Act. There is a limited right to contract out when both parties are businesses and it is fair and reasonable, specifically in relation to the bargaining power of the parties.

Put yourself in the shoes of the consumer: is the representation fair and reasonable?

If information gives a false impression to consumers, it is likely that they have been misled or deceived. This applies equally to products and services and relates to the price, discounts, product or service description, and place of manufacture, and can be done through advertising and promotions or through representations by salespeople when dealing with customers.

You do not have to actually mislead or deceive. You will be in breach if it is likely to mislead or deceive.

Is your product "certified"?

Do you promote your product as being “made to comply with a certified standard”? Even if the statement is true, it could be misleading if the product has not actually been certified by the relevant body that it meets the standard. The Commerce Commission monitors the market for these types of breaches. It’s possible that the Commerce Commission would take action even if it had received no complaint and even if no-one was actually misled.

Get up to speed quickly with our world class compliance training courses.

 

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Bait advertising

Have you discontinued an advertised product or run out of final stock? You shouldn’t continue to advertise the product in an attempt to bring customers into the store.

 The Fair Trading Act also prohibits a wider range of activity that is intended to solicit sales such as unsolicited goods, unsolicited services, asserting rights to payment, misleading representations, harassment and coercion, pyramid selling, and making false descriptions of imported goods.

 

Breaches of the Fair Trading Act

Individuals and businesses can sue suppliers for a breach of the Fair Trading Act subject to any valid contractual limits on suing.

The Commerce Commission can investigate and take enforcement action including obtaining a warrant to enter and search offices and copy or remove documents. Refusing to assist the Commission is punishable by a fine of up to $30,000. Breaches can result in fines of up to $600,000 for businesses and $200,000 for individuals.

However, it’s important to note that the most damaging consequence, in the event of a widely publicised breach, may be the harm done to the reputation of the organisation.

Criminal prosecutions

Misleading and deceptive conduct under the Fair Trading Act could also result in criminal prosecution under the Crimes Act. If guilty of obtaining by deception or causing loss by deception you could face imprisonment for up to 7 years.

How can you reduce your risk?

With Dacreed's online compliance training you can train managers and staff on their consumer law and fair trading obligations to help protect you and your business from prosecution. Once completed, the training also enables you to demonstrate a lower risk profile to insurers. This results in lower premiums – saving you and your business money.

 

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What is the Consumer Guarantees Act?

The Consumer Guarantees Act applies to all suppliers of goods and services to consumers. The law forces suppliers to ensure that the goods are acceptable quality, fit for purpose, and meet the product description at point of sale. The supplier also needs to ensure the goods are able to be repaired or replaced (within reason).

Consumer transactions

Using deferred payments, layby sales, finance offers, telephone sales, door to door sales, and offering extended warranties are all great ways to help customers purchase your products and services. However, before offering these types of transactions you need to ensure that your representations are documented in writing, are fair and reasonable and clearly set out the consumers’ rights and obligations.

Shipping: what are your obligations?

The Consumer Guarantees Act gives the consumer a right of redress against the supplier for damage or late delivery, even if you have passed them to the courier. It is for the supplier to sort out any dispute with the courier or shipping agent, not the consumers.

Boost customer retention

The easiest way to boost customer retention is to ensure all your staff clearly understand your policies and procedures. Easy access to our compliance training system setting out your policies and procedures will ensure your staff are better equipped to respond to customer needs as they arise. That’s especially important in today’s world where customers expect everything to be resolved immediately.

 

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Product safety standards

There are significant regulations setting out product safety standards (including testing) for a wide range of goods.

A heavily regulated category is electrical goods to prevent risk of injury. The regulations are usually complex, ranging from form and content of markings and prescribed warnings or instructions to accompany the goods. A product recall is a possibility if your business breaches these standards.

Don’t forget the “Unsubscribe” button!

The Unsolicited Electronic Messages Act sets out clear rules about the emails you can send. When emailing your client base you need to ensure that it’s clear who it is coming from and that the recipient can easily unsubscribe from the service. Penalties range up to $200,000 for an individual and $500,000 for an organisation.

Train your staff on consumer protection and fair trading laws

Make sure your retail and marketing staff are aware of their fair trading and consumer protection obligations with Dacreed's online compliance training.

 

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