Fair Trading Amendment Bill Passes Second Reading

The Fair Trading Amendment Bill (‘the Bill’), which will amend the Fair Trading Act 1986, has now passed its second reading in Parliament. Key changes will likely be in effect next year.

The Bill is intended to address concerns held by the Ministry of Business, Innovation and Employment that there are gaps in protections against unfair trading practices which could have the effect of preventing markets from functioning effectively. Here we present an overview of the major changes contained in the Bill.

There are three major changes that the Bill will enact. First, it will extend the existing prohibition on unfair contract terms in standard form consumer contracts to cover “small trade contracts” – that is, business-to-business contracts that have an actual or expected value of less than $250,000 in any twelve month period at the time the contract is entered into. This will be a significant change that will affect many businesses, who will have to ensure that many of their business-to-business contracts do not contain “unfair” terms.

Second, the Bill will introduce a prohibition on “unconscionable conduct” in trade. The term “unconscionable conduct” is taken from Australian law, and while the Bill itself does not expressly define it, it is expected to be interpreted in line with how it has been interpreted by Australian Courts, which have found that conduct is unconscionable if it is “against conscience by reference to the norms of society”. In addition, the Bill contains a list of factors that the Courts may have regard to when determining if unconscionable conduct has occurred, including the relative bargaining power of the trader and the affected person and the extent to which the trader and the affected person have acted in good faith.

Finally, the Bill strengthens consumers’ ability to restrict uninvited direct sellers’ (cold callers) access to their homes. Under the Bill, consumers will be able to direct a seller not to enter their homes and to direct them to leave their homes, in verbal, written or visual form, including by generic gate or front door notices telling salespersons not to call. A salesperson who has been given a directive to leave will not be able to enter the home for another two years.

These changes will have significant effects on how trade is conducted in New Zealand. In particular, all businesses should review their standard form business-to-business contracts that could be used for transactions worth less than $250,000 a year to ensure they do not contain any unfair terms. If you would like assistance with this, please get in touch.