Fair Trading Amendment Bill

I present a legislative statement on the Fair Trading Amendment Bill.

That statement is published on the Parliament website.

💬 Hon Dr DAVID CLARK: I move, That the Fair Trading Amendment Bill be now read a second time.

The Government is committed to protecting New Zealand businesses and consumers from unfair commercial practices. Last term, under the watchful eye of the Hon Kris Faafoi, we reviewed consumer credit laws, strengthened responsible lending, and capped interest and fees that can be charged on high-cost loans. Perhaps it was coincidental or maybe it was the universe foreshadowing what was to be in the future, but last year I was the member who presented the first reading of this bill on behalf of Minister Faafoi when I was all care and no responsibility for matters of commerce and consumer affairs. And now, of course, I have both—all care and all responsibility.

This bill addresses business behaviour that goes beyond what is commercially necessary or appropriate, where big and powerful firms take advantage of their position to take advantage of smaller businesses and consumers, and it is important that the Government addresses this kind of behaviour.

The bill itself introduces three key changes. It prohibits unconscionable conduct in trade, it extends protections against unfair contract terms for business contracts under $250,000 a year, and it legally empowers consumers and businesses to tell uninvited sellers to leave their property, including through the use of “Do not knock” stickers, with penalties proposed at $10,000 for individuals and $30,000 for businesses who ignore these invitations not to knock.

There are many stories of small businesses who’ve been bullied by suppliers or business customers. Some of the ones that were collected during initial consultation prior to the bill include things like photographers being threatened, verbally abused, and blacklisted after asking for payments that were due; supermarkets penalising suppliers for promotions run with other retailers, by demanding compensation for perceived losses caused by other retailers’ promotions and deducting it from payments to suppliers.

Another example is that of a lender repossessing and dumping the personal effects of borrowers which it knows to be of little value. The purpose of the repossessions was not to recover the unpaid debt but, rather, to send a message to the borrower to pay. Aggressive sales tactics are another thing that came up in consultation—for example, a trader who used aggressive sales tactics to sell expensive skincare products in shopping malls. A number of the targets were elderly or otherwise vulnerable, for example, two people with autism were charged $10,000 for their purchases. The list goes on. Unfortunately, the abuse of power by large businesses either in contracts with consumers or with smaller businesses is something that does need to be addressed.

We know that these unfair terms cause stress. They present barriers to growth for firms, and as far as the consumer goes, they can put people in very unfortunate financial positions. That is exactly why we don’t want New Zealanders in this position as we recover from the economic impacts of COVID-19 and why we need to plug the gaps in our existing infrastructure.

I want to thank the submitters on this bill. Feedback is a crucial part of the process and in particular because submissions on this bill were made during the level 4 COVID lockdown. I want to thank the former chair of the Economic Development, Science and Innovation Committee, the Hon Jonathan Young, who led consideration of the bill. I also want to thank other members of the select committee last term, including deputy chair Tāmati Coffey, Poto Williams, and Deborah Russell. They received 51 submissions. They heard 20 orally, either in Wellington or via Zoom, and while they did not get a chance to report back, they did consider the submissions made and also, the department, in its departmental report, considered the submissions. While many submitters supported the bill, there were indeed suggestions for change, and I intend to make changes through a Supplementary Order Paper during the committee of the whole House stage of this bill.

Some submitters wanted a definition of “unconscionable conduct” to aid clarity, and, as it stands, the list of factors in the bill provides a principle-based approach and we believe that actually the courts are best placed to make assessments, because what is unconscionable depends on the circumstances involved. In Australia courts have said that conduct is unconscionable if it goes against conscience by reference to the norms of society, and they’ve said that those norms include honesty and fairness.

Submitters had mixed views on whether the unfair contract terms extension was appropriately targeted. It only applies to standard form contracts which aren’t subject to effective negotiation, and that recognises the fact that what we’re talking about here is those smaller firms who don’t have the bargaining power and don’t have the resources to apply to unfair terms, to identify them, and to argue their corner. So the protections only apply to trading relationships with an expected value of $250,000 a year or more. While submitters argued for a higher or lower cap, we think $250,000 strikes the right balance to capture a range of contracts involving vulnerable businesses while allowing larger strategic contracts to be negotiated in the traditional fashion.

This Government’s goal is to create a productive, sustainable, and inclusive economy where the interests of businesses and consumers are protected, and that is arguably now more important than ever. This, I believe, is the first time we have had a legislative statement for the second reading of a bill, so we’re setting some history here. That lays out the most important aspects for interpretation in the law, and so I will end my contribution here. I commend this bill to the House.

The question is that the motion be agreed to. This debate is interrupted and set down for resumption next sitting day. The House stands adjourned until 2 p.m. tomorrow. Pō mārie.

Debate interrupted.

The House adjourned at 10.01 p.m.