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Unfair Commercial practices

Unfair Commercial Practices - MBIE Seeking Submissions

New Zealand has a range of legislative provisions to protect against unfair commercial practices; including the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and the Commerce Act 1986. The Ministry of business, innovation and employment (MBIE) has released a discussion paper seeking submissions on whether there is a need to strengthen protections for businesses and consumers against “unfair commercial practices”.

The results of a recent survey conducted by MBIE found that 45% of businesses felt that they had been offered unfair contract terms in the last year and 47% felt they had otherwise had been treated unfairly.  MBIE believes these results may indicate that there is a gap in the protections available to businesses.

MBIE is also aware of examples of shocking conduct by some business towards consumers which indicate that the existing consumer law may not provide enough protection.

In terms of unfair conduct, MBIE is looking for input on three possible options:

  • Option One is to prohibit unconscionable conduct based on Australian Law
  • Option Two is to prohibit oppressive conduct based on NZ’s existing consumer credit law
  • Option Three is to prohibit unfair practices based on European Law.

MBIE considers that options one and two would have high thresholds meaning that only a small number of cases would be caught.  Whereas option three would have a great reach but perhaps with uncertain results.

It was noted that small businesses are particularly vulnerable to unfair conduct because of reduced bargaining power or lack of ability to deal with contractual non-compliance.

MBIE is also looking for input on whether the existing protections in place for standard form contracts should be extended to protect businesses.  If this happened businesses would not be able to include terms which would:

  1. Cause a significant imbalance in the parties’ rights and obligations under the contract;
  2. Are not reasonably necessary; and
  3. Would cause detriment if they were enforced.

Examples of actual unfair contract terms in business to business contracts could include terms which:

  • limit the liability of a supplier
  • allow a party to unilaterally vary the terms of a contract
  • limit a party’s right to enforce their rights under the contract or terminate a contract
  • were anti-competitive
  • required high levels of liability insurance
  • required a party to pay the others legal fees

Such legislation could have far reaching effects as it could potentially impact on most business to business transactions and would mean that businesses could incur significant costs in reviewing and redrafting their contracts.

Written submissions are required by 25 February 2019,  for more information go to https://www.mbie.govt.nz/about/news/discussion-paper-on-unfair-commercial-practices/ 

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