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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.
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 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:
The Act makes it mandatory for traders to give you specific information about certain transactions. These are:
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.
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.
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:
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.
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.
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.
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.
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.
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.
The Act is enforced by the Commerce Commission. The Commission can take traders to court if it thinks they have breached the Act.
The Commission doesn't act on every complaint it receives, but it does log all complaints, and this log provides a guide to deciding which cases it will take up.
The Commission generally becomes involved where there is a blatant abuse of the law, or there is significant detriment to either traders or consumers, or a precedent needs to be established.
If a trader contravenes the unfair conduct or product safety provisions of the Act, criminal penalties may apply.
Companies can be fined up to $600,000 and individuals up to $60,000, plus costs.
Traders also risk being prosecuted by the Commerce Commission for failing to comply with consumer information standards and rules relating to door-to-door sales, extended warranties, layby sales and auctions. Penalties for breaches are limited to $10,000 for an individual and $30,000 for a company.
The commission has the option of issuing an infringement notice where a trader hasn’t given consumers the required information about their rights in relation to door-to-door, extended warranty and layby sales. The maximum infringement notice fine is $2000.
Infringement notices can also be issued for breaches of a consumer information standard and where an online trader falls to disclose that they’re “in trade”.
Traders who contravene the Act may also face civil penalties. The range of penalties includes injunctions, orders to issue corrective advertising and awards of damages.