Fair Trading Amendment Bill

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

💬 DEPUTY SPEAKER: That statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Fair Trading Amendment Bill be now read a third time.

This is an important piece of legislation that will introduce new protections for business and consumers against unfair commercial practices. If someone is operating a fair and honest business, they have absolutely nothing to fear from this legislation. The bill—in passing it, what we’re doing is, firstly, introducing a prohibition against unconscionable conduct in trade. The second thing we are doing in passing this bill is extending protections against unfair contract terms in consumer contracts to small business contracts. And the third thing we’re doing is legally empowering consumers and businesses to tell uninvited sellers to leave a property, including through the use of “do not knock” stickers. These protections are long overdue. Stakeholders have argued for them for a very long time.

I want to cover each of those three things in turn. I’ll start with the unconscionable conduct changes, the prohibition. So that new prohibition has had a lot of talk around it, both in this House and amongst submitters. “What does unconscionable conduct really mean?” has been the question that has been asked, and “Why not prohibit unfair conduct or oppressive conduct, or at least perhaps find a word that’s easier to say?” Unconscionable conduct covers behaviour that’s both unfair and oppressive. We’re talking about serious misconduct here that goes beyond what’s commercially necessary or appropriate, and that might involve a large business taking advantage of a small business’s lack of bargaining power to pressure it into accepting certain contract terms. It could involve unreasonable tactics to pressure someone to buy something they don’t want to and can’t use. That could, in many cases, be a vulnerable person.

Some submitters and other members of the House have asked why we haven’t introduced a definition of unconscionable conduct. I haven’t gone with a definition, because that could limit the circumstances in which the protections could be used. I personally wouldn’t want to predict the types of situations that could be defined as unconscionable conduct, and so I think it’s really important that we don’t define those terms in that way. The bill instead provides a list of factors that a court will consider when deciding whether someone’s actions meet that test, and that includes things like whether an imbalance exists in bargaining power and whether that’s a contributing factor.

Our neighbours across the Ditch have had a similar prohibition, and their courts, I note, have been successful at weeding out processes and practices which are truly unconscionable from those that might simply involve unequal bargaining power but no real misconduct, and I’m confident that the prohibition will have the same effect over here. The bill makes it clear that we’re targeting business practices which involve a high threshold of misconduct, and let me say again, just to be really clear: if people are operating a business in a fair way, they have nothing to fear from this change in the legislation.

The other key change made by this bill is, of course, the extension of the prohibition against unfair contract terms, protecting businesses as well as consumers. As the Minister responsible for commerce and consumer affairs, I hear stories from small businesses opposing unfair contract terms with larger businesses, and I’m sure the Minister for Small Business hears similar stories. Currently, these small businesses can’t really do much about unfair terms unless they want to walk away from that business, from a contract altogether, and, of course, they then lose that opportunity. Once the bill passes, I’ll be able to assure those businesses who have come to me seeking help that they have new protections here in this provision that’s in the bill.

There’s been some concern that the protections go too far and will interfere with large contracts that might be negotiated between parties who are quite capable of doing their own due diligence. I want to emphasise again that the protections only apply to standard form contracts. Those are ones where one party has no real power over the other in the negotiation, and if they don’t like any of the terms, well, they can walk away.

So we’re talking about fairer contract terms overall. They only apply to contracts worth less than $250,000 a year, and that limits the protections to smaller or more vulnerable businesses who don’t have bargaining power and who aren’t negotiating terms in larger, more strategic contracts. So we’re just talking about situations where there isn’t that power imbalance. The third thing which I mentioned in my introduction is the “do not knock” provisions. The bill builds on protections for consumers approached by door-to-door salespeople. Those changes mean that an uninvited seller must leave a residential property if they’re asked to directly, or if those stickers are there, the “do not knock” stickers send a clear message.

The bill itself was considered in the previous parliamentary term by the Economic Development, Science and Innovation Committee, and I want to thank the members of that committee last term for their consideration of the bill, and for the public who submitted their ideas to make this bill better. Unique circumstances meant that that committee didn’t report back to the House, and although therefore the committee didn’t recommend any changes, we had taken into account the views of submitters and made a few changes to improve the bill through a Supplementary Order Paper (SOP). During the committee stage of this bill, the House considered these small amendments through the SOP that I introduced. I have heard some excitable comments from members across the House about how we’d need to fix a vast number of things, gaping holes in the bill and so forth. Actually, the amendments needed to the bill were indeed only minor tweaks, but they’re important tweaks, and we have made them through the committee stages and they’ll carry through in the bill as it’s passed this evening. They will then give businesses more certainty.

I’m confident that the bulk of the framework is sound and that it will work well. The changes, though, introduced through the SOP, the first of them is to slightly adjust the threshold for businesses covered by the unfair contract terms protections to allow more businesses to benefit. The bill prohibits unfair terms in small trade contracts, where the contracts are worth less than $250,000 in a year. Previously, in the bill as it was originally drafted, contracts with related parties were captured, which meant that a firm that had contracts with both a parent and a subsidiary company which added up to $250,000 wouldn’t be covered by the protections. Now, that was changed through the SOP. It had a change so that contracts with related parties don’t count towards the threshold. That means there’ll be more certainty for firms on whether the protections apply; it gives that clarity to everyone involved. It also means that more businesses will benefit from the protections.

There were also some comments from members in the House during the second reading of the bill about uncertainty for insurance contract, and I’m very pleased to be able to inform members that we’ve engaged with the insurance industry to make minor tweaks to the bill and provide them with more certainty and a reduction of costs. That change aligns the bill with the Government’s work on the insurance contract law review. That’ll mean insurers won’t need to review their contracts twice following two sets of law changes. So that’s some more good news about how this bill has progressed and changed—and been made better along the way. So, again, I want to thank the submitters on the bill. As I said before, these are relatively minor tweaks, but ultimately they will reduce costs and increase certainty for businesses, which is no small thing.

So, in closing, this Government’s goal is to create a productive, sustainable, and inclusive economy, where the interests of businesses and consumers are protected. This piece of legislation is one of the many things this Government is doing which contributes towards this aim, by providing better protections for businesses and consumers. I commend this bill to the House.

Thank you, Madam Speaker. I would start by indicating that on this side of the House, we oppose this bill. I think, when it comes to commerce and consumer affairs - type legislation in this House, most people would like to think that we’re creating law that makes it easy for people to conduct business, and, from time to time, regulations need to be adjusted to update because some laws are quite old. But in terms of unfair conduct, such as the use of pressure tactics, targeting of vulnerable consumers, or drawing up of overly complicated contracts or one-sided contracts, it is something that we oppose—you know, use of deception and things like that. We do oppose that, but we already have laws in place which actually can prosecute those behaviours to protect the consumers.

In terms of some of the things that the Minister actually said, he began his speech by saying that, you know, he didn’t want to define the unconscionable conduct. That was at the very first beginning sentence of his speech tonight. The issue is that back in 2013, the Fair Trading Amendment Act—actually, I’ll go back. The bill follows the updates of the New Zealand Fair Trading Act and the Consumer Guarantees Act and the Auctioneers Act, which was passed between 2010 and 2015. The Fair Trading Act went through the select committee process, and the select committee at the time opted not to include the unconscionable conduct law, which was similar to that that existed in Australia. The reason why they opted not to include it at the time was because they wanted to wait for a body of case law built up around what unconscionable conduct actually means. Now this Labour Government is actually introducing this law without the body of case law, I believe. I just think it is unfair for people to actually spend more money, because when laws are created, regulations are actually created for businesses. It means, particularly for small businesses, it’s extra burden on them, extra money to figure out what unconscionable conduct actually means. It means money for lawyers. Lawyers can actually, you know, test this in a court of law, but for businesses, it means extra burden, extra costs. I think this Minister is actually putting those costs on businesses that should not have to spend that kind of money. When good laws are created, they shouldn’t have to spend money on legal advice to define what unconscionable conduct means.

I would’ve preferred it if the Minister had decided to define it, to make it very, very clear. I quote some of the concerns that stakeholders—and I actually quoted these in part in the previous iteration of our debate. Consumer New Zealand actually supported this law but recommended tighter drafting. And I quote—it says, “We support the introduction of a ban on unconscionable conduct. We consider New Zealand consumers deserve better protection from unfair business-to-consumer conduct than currently provided. However, we are concerned the new [provision] may not have [the] intended effect”—is one of the things that they actually said. Business New Zealand also—and I quote—“It would be fair to say that addressing this issue has been a lengthy and … repetitive process and we have consistently made the point there must be clear evidence of a significant problem before any of the changes proposed are enacted. At no stage during the process - now lasting around 16 years - have we had any clear evidence yet despite this, issues apparently already dealt with have now resurfaced.”

So what has changed? Nothing, really—nothing has actually changed. There’s no evidence introduced that this unconscionable conduct exists. We can’t even define it in legislation, but the burden is being put on our businesses, increasing the costs of good, working New Zealanders, mums and dads who run small businesses. It is a burden that they will now have to wear and face. I think if it’s good law, we would support it, and in my opinion, this isn’t one of them. I oppose this bill.

Madam Speaker, thank you for the opportunity to take a call on this excellent piece of legislation. I acknowledge the Minister the Hon Dr David Clark for the work that he has done bringing this to the House—or shepherding this through the House; I think it was the previous Minister who brought it in. I’d also like to acknowledge the select committee and the work that they’ve done. As the chair of the Economic Development, Science and Innovation Committee, I appreciate all of those who have made submissions on this bill. As we heard from the Minister, those submissions have been taken into consideration and changes have been made in the bill. That is our very good democratic process in full operation, which we like to see.

I’m not going to take a long call. The Minister outlined quite clearly the aspects of the bill. He outlined some of the changes that we’ve seen in the bill through this process. As we know, it prohibits unconscionable conduct in trade, extends the Act’s existing protections against unfair contract terms, and strengthens the ability of consumers to require uninvited direct sellers to leave or not enter their property.

I just want to quickly touch on the aspect around the uninvited direct sellers, because a recent survey from Consumer New Zealand of their members showed that 70 percent of people disliked door-to-door salespeople and want them to stop calling. I think I would be one of those 70 percent, because often someone comes to your door, trying to sell you something, and then you’re like, “Well, look, let me have a conversation and get back to you. Give me your card, give me your details.”, and they are like, “No, you have to sign up right now.”, and they pull out the iPad and they want to get your details right there, which is not good practice, in my opinion.

So I think I’ve sort of just raised a couple of points there. I commend this bill to the House.

Thank you, Madam Speaker. I rise on behalf of the National Party and as a member of Parliament for Southland to speak on this bill. Note that National Party opposes this bill. As I noted in the second reading of this legislation, unclear law is bad law. Unnecessary and unneeded regulation only stifles New Zealand’s productive sector. Now, there’s nothing scarier than a Government saying “You’ve got nothing to fear as long as you do the right thing—but we’re not going to tell you what the right thing is.” And that’s essentially what I heard from the Minister. The Minister said “I haven’t gone with a definition because I don’t want to limit the circumstances in which it can be used. So, look, don’t worry. If you’re doing the right thing, you’ll be fine. But we’re not going to tell you what the right thing is.”

We’re talking about small businesses here. And look, if I look at the penalties here—the maximum penalties of $600,000 for a body corporate and $200,000 for individuals—now, if I’m operating a small business, I’m going to be worried. I’m going to want to know what the definition is so that I don’t contravene it. So I don’t become liable as an individual for a $200,000 fine and my business doesn’t become liable for a $600,000 fine. Unfortunately, the Minister has just said “You’ve got nothing to fear, if the business is operating the business in a fair way. But I’m not going to tell you what a fair way is.” The Government has an obligation and a duty to provide certainty in the law that it creates. Certainty is what businesses need, especially right now in a very uncertain environment.

One of the biggest things we’re seeing across our communities, and certainly in my electorate of Southland, is a lack of workers. That leads to my next question, if you don’t have certainty about what these rules are, you’re going to need a workforce to interpret what these rules may or may not mean and how they apply to your business. Now, we have a huge shortage of workforce. We have even a shortage of lawyers. So this is a boon for lawyers, as my colleague said before. But we have a shortage of lawyers. So good luck finding a lawyer. And we saw in this House only a few weeks ago the Auditor-General had a shortage of auditors, so the Government had to extend the time for the Auditor-General to report back to the House by two months. We’re talking about small businesses. Small businesses don’t have the benefit of the Government that it’s going to extend the time that they need to work out what unconscionable conduct may or may not mean and try to find the workforce to interpret that for them and make sure they don’t become liable for a $600,000 fine, or a $200,000 fine for the individual.

This is bad law. It’s uncertain law that creates uncertainty in a difficult trading environment, and it is not well thought out. It is, unfortunately, in my estimation, not responsible for the Government to bring this piece of law in as it stands. After three readings, multiple reports, and a brief survey of Australian case law, we remain none the wiser and have no greater clarity or certainty about how this legislation may be applied. Ordinary small business people cannot have any certainty or clarity by looking at a statute and what the definition of unconscionable conduct would be. I note there are some subjective parts of the way that this may be interpreted in terms of what the court may have regard to in terms of “whether an affected person was able to understand any documents provided by the trader.” Well, good luck to a trader trying to determine whether or not an effective person was able to understand the documents they provided to them. That is a subjective matter for the court to determine and it’s going to be very difficult for businesses to try to work that out.

But I emphasise that we already have laws in place which can be used to hold those to account who try to exploit vulnerable consumers. Even if we take the Minister’s argument at its highest that this bill improves market conditions for consumers, such a proposition fails the sniff test. Again, if we look at Australia—which has a much larger and more complex trading environment—since the unconscionable cultural trading legislation which passed in 2010, 11 years ago, they’ve only had 16 cases that have been brought to their courts. The bottom line: this bill is a solution in search of a problem. The problem has been clearly defined and the definition has not been clearly defined. It fails to provide the certainty that is the responsibility of Government to provide to our business community. So with that, I would say I do not recommend this bill to the House.

Thank you, Madam Speaker. As a small-business owner for, I think, about 16½ to 17 years, I can speak with a bit of authority to say it’s very, very important that we have bills like this that support fair trade. This is why I believe we must commend this bill to the House. It gives me great pleasure to do so. Congratulations to everybody involved. Thank you, Madam Speaker. I commend this bill to the House.

This debate is interrupted and is set down for resumption next sitting day. The House stands adjourned until 2 p.m. tomorrow.

Debate interrupted.

The House adjourned at 9.58 p.m.