New measures proposed to protect small businesses and consumers from unfair commercial practices

On 24 September 2019, the Minister for Commerce and Consumer Affairs Kris Faafoi and the Minister for Small Business Stuart Nash announced that the Government will be introducing new measures to protect both small businesses and consumers from unfair commercial practices, in an attempt to clamp down on poor commercial conduct. These measures will take the form of a Fair Trading Amendment Bill, anticipated to be introduced in early 2020. The Bill is expected to introduce more comprehensive protections against unfair contract terms, and prohibit certain forms of commercial misconduct.

Current regime

Currently under the Fair Trading Act, consumers are protected from misleading and deceptive conduct, false representations, unsubstantiated claims and unfair practices (including the inclusion of unfair contract terms in standard form contracts). A provision in a standard form consumer contract is unfair if it:

– Creates a significant imbalance between the two parties’ rights and obligations;

– Is not necessary to protect a legitimate business interest of the party benefiting from the provision; and

– Would cause detriment to the consumer if the provision was enforced.

Any contract term that is declared to be unfair by the District Court or High Court is not able to be included in standard form contracts going forward, and the party who benefited from the provision is prohibited from applying, enforcing or relying on the term.

Nash said that although there are existing laws which prohibit unfair commercial practices “the changes we’re making go further.”

Proposed changes

The new protective measures announced by Ministers Faafoi and Nash propose two key amendments to the Fair Trading Act. The first is the prohibition of any commercial conduct which is considered to be ‘unconscionable’. This includes any serious misconduct which goes beyond being commercially necessary or appropriate. What constitutes serious misconduct has not yet been discussed.

The second proposed amendment to the Fair Trading Act involves expanding the scope of the unfair contact term regime, including extending the regime to standard form business-to-business contracts with a value of less than $250,000. Currently the regime only applies to contracts where one party is an individual consumer.

Enforcement

It is anticipated that any new changes will be enforced by the Commerce Commission, as they are already responsible for enforcing many of the protections available against unfair practices, including the Fair Trading Act. Consumers and businesses will also have the option to self-enforce any protections against unconscionable conduct. Currently, however, the right to challenge unfair contract terms is reserved exclusively to the Commerce Commission.

There are few details of the new protective measures available at this stage. We will update clients when the Fair Trading Amendment Bill is introduced to the House and advise on the process for making submissions in due course. In the interim, if you have any queries regarding the proposed amendments or would like know to whether your business is fully compliant with the Fair Trading Act, please do not hesitate to get in touch with a member of Lane Neave’s Corporate Team.

Business Law team

Gerard Dale, Claire Evans, Graeme Crombie, Evelyn Jones, Anna Ryan, Joelle Grace,  Peter Orpin, Ellen Sewell, Matt Tolan, Carlo Wan, Kristina Sutherland, Jacob Nutt, Whitney Moore, Alex Stone, Ben Cooper