Despite the existing protections under the Commerce Act 1986, Fair Trading Act 1986, Consumer Guarantees Act 1993, and the Credit Contracts and Consumer Finance Act 2003, the Government considered that unfair practices were occurring due to gaps in the current framework, for example:
- Unfair contract terms: MBIE noted problems with unfair contract terms were likely to be concentrated in standard form contracts where one of the parties is small.
- Unfair conduct: the MBIE survey noted that much of the unfair conduct reported in the survey was already prohibited to some extent, or subject to common law remedies which suggests that businesses are not complying with the law and/or the threshold for prohibited conduct under the law is higher than the threshold that some businesses feel is unfair.
The Fair Trading Amendment Bill (Bill) has passed its third reading. Once it receives the Royal Assent later this month, the Bill will amend the Fair Trading Act 1986 to:
- Extend the principal Act’s protections against unfair contract terms in standard form consumer contracts to include small trade contracts; and
- Prohibit unconscionable conduct in trade.
The Bill also tightens rules around uninvited sellers on residential premises.
These are significant changes to the law on business conduct.
Businesses have 12 months before these changes come into force. Businesses should:
- Review all their standard form business contracts and ensure any contract terms which may be deemed unfair are removed in advance of August 2022; and
- Review business conduct and ensure that all staff are aware that the law will now specifically prohibit engaging in conduct that could be seen as acting in bad faith, exerting undue pressure or taking unfair advantage of a superior commercial or bargaining position.
References
[1] Protecting businesses and consumers from unfair commercial practices, Discussion paper, Ministry of Business, Innovation and Enterprise, December 2018, p. 6.
