The Fair Trading Amendment Bill aims to improve protections for consumers and businesses against unfair practices to promote a more sustainable, productive and inclusive economy.
On 17 December 2019, the Fair Trading Amendment Bill (‘Bill’) was introduced to Parliament and is currently undergoing its First Reading. The Bill seeks to amend the Fair Trading Act 1986 (‘FTA’) by providing further protection to consumers and small businesses against unfair commercial practices. The two major proposed changes mirror similar protections in Australian consumer law, including:
1. a prohibition against unconscionable conduct in trade; and
2. an extension of the scope of the FTA’s unfair contract terms regime (which previously only covered standard form consumer contracts), to also apply to standard form small trade contracts (a small trade contract is a contract that is worth less than $250,000 and between two parties engaged in trade).
The Bill also strengthens the consumer’s ability to require uninvited direct sellers not to enter or to leave their premises, through the use of ‘Do Not Knock’ stickers or similar worded written notices.
Finally, the Bill makes several minor amendments to improve the functionality of the FTA.
Background
In 2018, consultations held by the Ministry of Business, Innovation, and Employment found that there were gaps in the current legislation regarding unfair practices. As a result, the Bill was drafted to resolve these gaps to minimise the exploitation of consumer’s or small business’ vulnerabilities and prevent restriction of competition in the market.
Unconscionable conduct
Unconscionable conduct is not defined in the Bill. However, ‘unconscionable conduct’ has been described by the Commerce and Consumer Affairs Minister Kris Faafoi as “serious misconduct that goes far beyond being commercially necessary or appropriate”. The Bill lists a number of factors that the court may have regard to when assessing whether a person’s conduct is unconscionable. The factors are as listed below:
a) the relative bargaining power of the trader and the affected person;
b) the extent to which the trader and affected person acted in good faith;
c) whether the affected person or affected person’s representative was able to protect the affected person’s interests;
d) whether the affected person was able to understand any documents provided by the trader;
e) whether the trader subjected an affected person to unfair pressure or tactics or otherwise unduly influenced an affected person;
f) whether the trader unreasonably failed to disclose intended conduct or risks that would adversely affect the affected person’s interests; and
g) any other circumstance that the court considers relevant.
If there is a contract that the conduct relates to, there are additional factors that may also be taken into consideration. This includes:
a) the circumstances that the contract was entered into;
b) the terms of the contract; and
c) any other conduct of the trader or affected person, after the contract was entered into, in connection with their relationship.
Unfair contract terms regime
Currently, the FTA’s prohibitions on unfair contract terms only apply to standard form consumer contracts. The Bill aims to extend the FTA’s unfair contract terms regime to cover small trade contracts. An unfair contract term is a term that would cause a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the legitimate interests of the advantaged party and would cause detriment to a party.
Under the new provisions,if a court declaration states that a term in a standard form small trade contract is unfair, it will be an offence to include, apply, enforce or rely on that term in a standard form contract.
You can read more about the unfair contract terms regime here.
Penalties
If the court finds that unconscionable conduct in trade or an unfair contract term in a standard form consumer contract exists, the current FTA penalties will apply. This relates to fines, civil proceedings and remedies. Individuals will be subject to a fine not exceeding $200,000 and body corporates will be subject to a fine not exceeding $600,000. The court may also grant an injunction to restrain a person from engaging in unconscionable conduct or declare all or part of a contract to be void.
Next steps
The Bill is currently before the House for its First Reading. Once the Bill passes its First Reading and is at the Select Committee stage, there will be an opportunity for interested parties to make written submissions on the Bill. It is anticipated that the Bill will reach the Select Committee stage in the coming months. You can find the progress of the Bill here and click here to have a read of the Bill.
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