Late last year, Nicola Willis and Scott Simpson announced that Parliament intends to increase the penalties for breaches of fair trading law.[1] These changes follow an almost 23% increase in the number of fair trading complaints made to the Commerce Commission over the past five years, as noted in the government’s announcement.
For businesses, the message is clear: exposure for fair trading breaches is increasing, and consumer-facing claims, processes and terms will face closer scrutiny.
THE CHANGES
MISLEADING AND DECEPTIVE CONDUCT PENALTY INCREASES
Parliament proposes to significantly increase the maximum penalties for key Fair Trading Act breaches, including misleading and deceptive conduct. The current maximums ($200,000 for individuals and $600,000 for companies) will be replaced with the highest of the following:
- $1,000,000 for individuals or $5,000,000 for companies;
- Three times the value of the commercial gain made or loss avoided; or
- The value of the relevant transaction(s) connected to the breach.
CONSUMER LAW PENALTY INCREASES
Penalties for other consumer law breaches (such as breaching consumer information standards) will also rise:
- $10,000 to $60,000 for individuals; and
- $30,000 to $200,000 for companies.
MANAGEMENT BAN PENALTY INCREASES
Parliament also intends to lift the maximum penalty for breaching a management ban from $60,000 to $200,000.
CIVIL LIABILITY REGIME
A number of Fair Trading Act breaches will move from a criminal regime to a civil regime. In practice this means that the Commerce Commission will be able to bring proceedings, where breaches are determined on the balance of probabilities, rather than needing to meet the standard of beyond reasonable doubt. This is likely to make enforcement action more straightforward in some cases.
WHAT IS NOT CHANGING
Parliament has confirmed that it will not proceed with proposals to expand infringement fees and unfair contract terms provisions at this stage. We expect that unfair contract terms penalties may change in the future.
WHEN TO EXPECT THESE CHANGES
These changes are expected to become law later this year. While the legislation is not yet in force, the direction is clear and businesses should be preparing now.
WHAT SHOULD BUSINESSES BE DOING?
Businesses should use this period to proactively strengthen their fair trading compliance. In practical terms, businesses should consider:
- Reviewing consumer-facing terms (including standard terms and online terms) to ensure they are current, transparent, and aligned with how the business operates.
- Reviewing advertising and marketing materials to ensure claims are clear, accurate, and supportable.
- Reviewing sales practices and internal processes (including scripts, templates, and staff training) to ensure fair trading compliance in practice.
FURTHER INFORMATION
If you would like to know more or would like help with your review, please contact your usual Jackson Russell Business Law advisor or one of our Business Law team below.
[1] https://www.beehive.govt.nz/release/crackdown-underhand-business-practice
