The Fair Trading Act 1986 protects you against being misled or treated unfairly by traders or shops. The Act prohibits misleading and deceptive conduct, unsubstantiated claims, false representations and certain unfair practices.
It also sets out when information about certain products must be disclosed to consumers, and helps ensure products are safe.
The Act applies to everyone in trade. As well as traders and shops, the Act covers government agencies and state-owned enterprises. Most of the Act does not cover private sales.
The difference between the Fair Trading Act (FTA) and the Consumer Guarantees Act (CGA) is that, in general, the FTA covers claims about products and services before they're bought and the CGA covers the quality of those products and services after they have been bought.
Misleading or deceptive conduct
If you're told things by a retailer that give you a false impression about goods you're buying, then you have been misled or deceived. For example, if you discover that bags advertised as leather are actually vinyl, or if you buy faulty goods and the shopkeeper incorrectly tells you that you're not legally entitled to a refund, replacement or repair.
Retailers can’t make unsubstantiated representations about a good or service: they must have reasonable grounds for making any claim. For example, if you’re told a product is 30% more energy efficient than another, the retailer should have good evidence to back this up.
When information given to you about goods and services is not true, then a false claim has been made. For example, if you buy a shirt with a "Made in Italy" label and find it actually came from a factory in Korea.
The word "representations" covers any situation where a trader claims something about their product or services, either verbally or in writing. It can even cover cases where a trader doesn't say something. For example, neglecting to mention that prices exclude GST.
Unfair practices are selling methods that mislead you. Unfair practices which are illegal under the Fair Trading Act include:
- Offering prizes or gifts without intending to supply them, or not supplying them as offered.
- Bait advertising - when a seller advertises particular goods or services at a particular price, and doesn't intend supplying or selling reasonable quantities at that price.
- Making misleading claims about business activities. For example, claiming you can make $1000 a week selling cosmetics from home, in circumstances where you would have to work about 20 hours a day, 7 days a week to make that sort of money.
- Pyramid selling schemes (see Scams).
- Demanding or accepting payment without intending to supply the goods or services, or without believing they'll be ready at a specified time, or intending to supply different goods or services.
- Demanding payment for unsolicited goods or services (see Mail-order sales)
- Using physical force, harassment or coercion when supplying goods or services.
The Act makes it mandatory for traders to give you specific information about certain transactions. These are:
- Uninvited direct sales (door-to-door and telemarketing)
- Extended warranties
- Layby sales
- Auction sales.
It also includes provisions for “consumer information standards” which set out information that must be disclosed about specific products. These standards are made as regulations and are enforced by the Commerce Commission.
Currently there are 5 consumer information standards.
- Consumer Information Standards (Country of Origin (Clothing and Footwear) Labelling) Regulations 1992: These require most new clothing sold in New Zealand to be labelled with their country of origin. The label must be in English, permanent and positioned so consumers can see it easily.
- Consumer Information Standards (Fibre Content Labelling) Regulations 2000: These require all new textile goods to be labelled with their fibre content. Carpets are covered by the regulations but second-hand goods aren't.
- Consumer Information Standards (Care Labelling) Regulations 2000: These set out the words, phrases and symbols which must be used to tell consumers the correct way to wash, dry clean and care for their clothes and fabrics.
- Consumer Information Standards (Used Motor Vehicles) Regulations 2008: These require used car dealers to display a "consumer information notice" to all cars available for sale. The regulations specify the information that must be disclosed on the notice. See Car buyers' rights for more information.
- Consumer Information Standards (Water Efficiency) Regulations 2010: These require products imported into or manufactured in New Zealand to display water efficiency rating labels. The water efficiency labeling scheme (WELS) applies to 6 product classes: clothes washing machines, dishwashers, lavatories, showers, taps and urinals. You can find more information about WELS on the Ministry for the Environment website.
The Fair Trading Act gives the Minister of Consumer Affairs the power to ban unsafe products or order their recall. A trader can also be instructed to inform the public why and how the goods are unsafe, offer to repair or replace the goods, or provide refunds.
When a trader voluntarily recalls a product, within 2 working days they must report the recall to the Ministry of Business, Innovation and Employment. The ministry is responsible for publishing the recall notice on its website.
Product safety standards
The Act also allows the Minister to set mandatory minimum safety standards for products. Unlike the rest of the Fair Trading Act, these standards do apply to private sales.
So far there are 6 product safety standards:
- Bicycles: This sets out the performance requirements for all new bikes sold in New Zealand. It does not cover secondhand bikes but does include kitset and partially assembled bicycles.
- Children's nightclothes: This is designed to protect children from the dangers of wearing flammable, loose-fitting or flowing nightwear around fires or heaters. The law applies to all businesses involved in the manufacture, distribution and sale of children's pyjamas, nightdresses, dressing gowns, infants' sleeping bags and the like. All these products must carry labels explaining the dangers.
- Cigarette lighters: This aims to make lighters childproof, by setting standards for lighter design and labelling.
- Toys: This covers the sale, exchange and hire of toys for children under the age of 3 and includes "giveaways" such as toys in breakfast cereal packets. The standard says that toys should not be of a size that could choke a child, or have small parts that can be taken off or are easily broken off to create a hazard if swallowed or inhaled.
- Cots: Manufacturers and suppliers of cots, including secondhand dealers, must ensure that cots are safe and meet specific safety criteria.
- Baby walkers: These must be sold with product information and safety warnings on them. Manufacturers must also ensure that safety features to prevent walkers from tipping over or toppling downstairs are also included.
Quotes and estimates
A supplier must be careful when providing quotes or estimates and customers are entitled to rely on the prices given. A quote is an offer to do a job for a certain price. If a quote is accepted, the work must be done for that price, unless the parties agree to change it.
An estimate is the closest price or range of prices that can be given, based on past experience. If the final price is going to be significantly different from the estimate then the business should make this very clear to the customer. In our opinion anything more than 20 percent is significant.
If a business is going to charge you for giving a quote or estimate they must tell you this before agreeing to provide it.
If GST is not included in a quote or advertised price, this must be made clear. If it isn't, you can argue that you should just pay the figure quoted. Companies that didn’t make it clear their advertised prices didn't include GST have been prosecuted and fined.
It is still common for tradespeople to exclude GST. When you first ask for a quote, check the GST status.
You see an ad saying "was $199, now just $99 - save $100!" But you bought one before the sale started and the price was only $129.
Price comparisons like this must be based on actual market prices. In this case, for example, the item should have been on sale for $199 for a reasonable time before reduction. 30 days is regarded as a "reasonable time" for many goods by the Commerce Commission, which enforces the Fair Trading Act. If the earlier price was in fact $129 then the comparison was misleading and the Act may have been broken.
Debt collection fees
If you couldn't pay a bill on time and the debt collectors have been called in, you don't have to pay a debt collection fee on top of what you owe unless you were made aware of this charge before you incurred the debt.
However, if you are subsequently taken to court for continued non-payment of your debt, the court can order you to pay extra costs.
Packaging must not be misleading or deceive you about the nature, quantity or size of the product. If packaging might be deceptive there should be a clear description of the goods on the package and a clear statement about the volume or weight of the product.
"Interest free" finance
The price of an "interest free" or "free credit" offer should be the same as the cash price. If there's going to be any additional cost, this must be made clear. For example, an ad may say "interest free, but credit insurance applies".
If an item is advertised for sale at a particular price, but you get to the shop only to be told that there has been a mistake and the item is actually more expensive, the trader doesn't have to sell you the item for the advertised price. They're entitled to claim a genuine mistake was made.
The Act recognises a "reasonable mistake" may have got through the checking system, or has perhaps been caused by the actions of a third party. However, if a particular trader is always claiming that a "genuine mistake" has been made, they may be in breach of the Act regardless of their plea.
In the past, a supermarket has been convicted and fined for charging higher prices at the checkout than were on display.
Telling a story in fine print at the bottom of an ad, or by way of a small notice inside a store, won't save an ad from breaking the Fair Trading Act. As a general rule, fine print can elaborate on the main selling message, but it should not be used to contradict it.
Traders are also at risk if they advertise a "price" in TV promotions, together with an 0800 telephone number, but flash extra delivery or insurance charges only briefly on the screen. This is misleading, since the product can't be bought unless you pay these charges, which may have been overlooked.
Overseas mail order
The Act applies to all traders who operate in New Zealand, including organisations based overseas that advertise here.
But enforcing the Act could be difficult with a company that has no physical presence or representatives here. It can be very difficult to prosecute or get redress from rogue traders not living in New Zealand.
Delivery of goods
If a business can't supply goods or services within a specified time or a reasonable time then they must not accept payment. What is reasonable depends on the specific circumstances. Generally what is normal practice for that industry or situation is considered to be the reasonable standard.
Making a complaint
If you've been misled about a product or service, first try to sort it out with the trader concerned. But if you can't make headway, you or anyone else can take action under the Fair Trading Act.
You can also apply to the High Court for an injunction to stop the Act being breached.
The best option for consumers with small claims is civil action, most often through a Disputes Tribunal. They can hear cases for claims up to $15,000 or $20,000 if both parties agree.
A tribunal can award civil damages, which could include getting compensation or your money back. But only the courts can impose fines.
You could also call the Commerce Commission.