When things go wrong – cancellations, delays, outages – many businesses reach for their standard terms and a stock response: “we’re not liable”. The Commerce Commission’s 2025 warning to KiwiRail (Interislander) is a reminder that this approach can backfire. Even where a disruption starts as a genuine operational issue, misstating what customers are entitled to following a disruption can breach the Fair Trading Act and trigger regulatory action.
THE TWO-MINUTE COMPLIANCE CHECK (FOR ANY BUSINESS SELLING TO CONSUMERS)
Ask yourself:
- Do our terms imply customers have fewer rights than they actually do?
Watch for broad “no liability for any loss” wording in standard form consumer terms. - Do our templates/scripts say “no compensation” before we know the cause?
If you are still investigating the cause of an issue, be careful about definitive statements such as “outside our control”. - Are our frontline teams aligned with our legal position?
One outdated email template or script can undo a well-drafted contract.
If you are unsure about any of those, this case is relevant to your business.
WHAT HAPPENED WITH THE INTERISLANDER (AND WHY THE COMMISSION STEPPED IN)
In early 2023, Interislander ferries suffered several mechanical failures, causing widespread cancellations. The Commission said KiwiRail likely misled customers about their rights by:
- Relying on website terms that purported to exclude liability for delay/cancellation losses in situations where customers may have rights to compensation under consumer law; and
- Telling customers (during at least February-May 2023) that cancellations and delays were outside KiwiRail’s control and it was not liable – when KiwiRail later accepted at least one event was within its control.
The Commission issued a formal warning to KiwiRail (16 April 2025) and accepted court enforceable undertakings from KiwiRail.
IT’S NOT JUST WHAT YOUR CONTRACT SAYS
Three consumer law principles sit behind the Commission’s warning. These principles apply where businesses are dealing with consumers and cannot be contracted out of.
- Consumers have a remedy where statutory guarantees are not met
The Consumer Guarantees Act requires services to be provided with reasonable care and skill and sets out remedies – including compensation for reasonably foreseeable loss – where guarantees are not met.
- You must not misrepresent consumer rights
The Fair Trading Act prohibits false or misleading representations about the existence or effect of consumer rights. That includes terms of trade and statements suggesting consumers have no right to a refund or compensation when they may do so.
- “Outside our control” is not a safe default
Under the Consumer Guarantees Act, a business may not be required to provide a remedy for certain failures if the service problem was outside the business’ reasonable control (eg a natural disaster or caused by someone the business is not responsible for). However, the Commission’s warning letter also makes a practical point: if a business is going to rely on the exclusion for events “outside our control”, it needs to be carefully assessed and communicated at the right time – not assumed at the outset.
WHAT KIWIRAIL COMMITTED TO DO
Under its enforceable undertakings, KiwiRail agreed to steps including:
- Compensating affected customers and reassessing specified past claims;
- Updating its standard terms and customer communications so they clearly acknowledge Consumer Guarantees Act rights; and
- Treating delays/cancellations caused by mechanical faults without an obvious cause as within its control for compensation decision-making.
PRACTICAL STEPS TO HELP ENSURE COMPLIANCE
A proactive approach to consumer compliance is critical. Here are some practical steps you can take:
- Review standard consumer terms with a “worst day” lens
Focus on cancellation/delay/refund wording and any exclusion or limitation of liability clauses. - Audit customer communications (emails, web copy, call scripts)
Make sure your staff are not using language that overreaches – especially early in an incident. - Build an “incident pathway”
A simple internal decision tree: what we know, what we do not, what we say while investigating, and when we confirm eligibility. - Train frontline teams
Staff training is essential. Frontline teams need a clear understanding of consumer protection obligations (and how they apply to your business) and how to respond accurately to customer complaints. The goal is consistent and accurate explanations of rights and next steps.
FINAL THOUGHTS
The KiwiRail investigation and warning show that misleading wording and messaging can turn an operational disruption into a legal and reputational problem. Getting your terms right is important – but it is only half the job. Your customer communications and internal processes need to match.
If you would like help reviewing your consumer terms, refund/cancellation messaging, or complaint handling process, please contact your usual Jackson Russell Business Law advisor or one of our Business Law team below.
