Need for Fair Trading Act changes questioned
Changing the Fair Trading Act 1986 to protect New Zealand consumers is not needed, as the Act and other existing law already provides adequate protection. This is the view of the New Zealand Law Society on two Ministry of Consumer Affairs papers on consumer law reform .
The papers, Referencing Good Faith in a Fair Trading Act Purpose Clause and Unconscionability, ask whether including unconscionability provisions or a purpose clause referencing good faith will enhance consumer protection in the Act.
In its submission to the ministry, the Law Society says there is no need to include a reference to good faith in a purpose clause of the Act nor to include unconscionability provisions in the Act. It says the proposed are not necessary to protect consumers and will not change the outcomes of cases used as examples given in the papers. On the other hand, including the proposed terms would increase the burden on suppliers, increasing transaction costs.
The Society supports the ministry’s own conclusion that a reference to good faith in a purpose clause of the Act is not necessary. It notes that good faith is a subjective concept and that “a reference to it does not sit well with the Act’s strict liability provisions”, with an example being that “a trader may be acting in good faith but still breach the Act.”
The Law Society argues there is no need to expressly prohibit contracting out of the Act as it is not currently permitted. A contract cannot exclude statutory rights unless the statute makes provision for the rights to be excluded and the Fair Trading Act makes no such provision.
The Courts have recognised that in some circumstances silence may constitute misrepresentation. The Society argues against extending this further. It says requiring suppliers to provide all material information would place a much greater burden on them. This would increase transaction costs and potentially result in information overload for consumers.
On the inclusion of unconscionability provisions, the Society argues that “including unconscionability provisions in the Act similar to those in the Australian Trade Practices Act would not materially enhance the protections that already exist for consumers in New Zealand.”
It believes most of the cases used as examples in the ministry’s paper would have succeeded in New Zealand under the Fair Trading Act or in contract law. It also points out that the New Zealand Disputes Tribunal regime has jurisdiction to make decisions according to the overall merits and justice of a case.
The inclusion of an “emotive and semantically vague” term like “unconscionability” would add another layer of complexity and would likely increase the number of complaints to traders and to the Commerce Commission. This would result in additional transactional costs.
The consultation on the issues paper is part of the Government’s wider Consumer Law review which covers seven consumer protection statutes including the Fair Trading Act. The objective of the review is to ensure a principle-based approach to consumer law that is simplified and consolidated and harmonised with Australia where possible.