Ministry of Consumer Affairs Ministerial Briefing

Robyn McDonald Consumer Affairs

The Ministry of Consumer Affairs

The Ministry of Consumer Affairs is an operating division of the Ministry of Commerce.

On administrative, personnel and financial matters the Head of the Ministry reports to the Chief Executive of the Ministry of Commerce, who is responsible for resourcing the Ministry of Consumer Affairs (see Annex 1). On matters relating to consumer policy, operations and trade measurement, however, the Head of the Ministry reports directly to the Minister of Consumer Affairs.

The Ministry's purpose is to work with consumers and business to promote a fair and informed market place for consumers. We do this in the context of contributing to the Government's strategic result area of "enterprise and innovation".

Our mission is...

  • To provide high quality advice to Government on key laws, practices and policies affecting consumers
  • To enhance consumers' ability to function effectively and equitably in the market by providing information, education and advice
  • To ensure that market transactions based on weight and measurement are accurate, and fair
  • To promote improved market practices and encourage compliance with codes, standards and laws

... and we do this in the interests of both consumers and business.

The Ministry is not responsible to consumers or consumer groups. Nor is it an advocate for consumers - although it does provide a channel through which their concerns can be communicated to government.

The Ministry's Definition of A Consumer
The extent of the Ministry's work is constrained by its definition of "consumers". We define consumers as:

'those purchasing goods and services in the market for personal or domestic use'.

This definition clearly separates the consumer who pays directly for private products or services that they use and the citizen who pays indirectly (through taxation) for public services that they may or may not use. This means we exclude most public-sector services from the scope of our activities. The exception occurs when a consumer directly buys a product or service from a public-sector organisation.

The Ministry's Activity Areas
The Ministry of Consumer Affairs has three principal activity areas:

  • Policy
  • Operations
  • Trade measurement.

We take an integrated approach to our activities: the work of each area underpins that of the others. This "integration" is an essential element in the Ministry's ability to achieve its purpose.

Policy

Consumer policy contributes directly to a dynamic and growing economy. So the Ministry provides policy advice as an input into the wider government objective of building a sound, effective and growth-oriented economy.

The emphasis is on balanced advice. This means taking into account the interests, concerns and needs of both business and consumer communities - which we regularly do as part of assessing the likely costs and benefits of any proposed policy.

Our responsibilities for product safety are also carried out within the policy area. The responsibilities include administering the mandatory product safety standards for toys, bicycles and nightclothes and we investigate product-safety incidents in areas not covered by other specific regulation in order to advise the Minister on appropriate action under the Fair Trading Act 1986. Again, the emphasis is on balanced advice - and risk assessment and consultation are amongst the key mechanisms for achieving this.

The quality of our policy advice draws considerable strength from the input of our operations area - in particular, from the Consumer Advice Service. Through the calls that the Advice Service receives, we gain in-depth knowledge about the issues being faced in the market, the weaknesses that are emerging in law and practice, and the economic costs that consumers are incurring because of these weaknesses.

In summary, the Ministry's main policy-advice activities are:

  • Monitoring the impact that marketplace practices and legislation have on consumers
  • Advising the Minister about worthwhile changes that could be made in law or in market behaviour
  • Administering sales and credit legislation (see box on page )and ensuring that this legislation is relevant to today's marketplace
  • Investigating product-safety incidents
  • Encouraging suppliers of unsafe products to take voluntary corrective action
  • Encouraging industries to self-regulate, and to voluntarily provide redress and disputes-resolution procedures
  • Promoting consumer perspectives in the policy advice of other government agencies.

The Ministry's Legislative Responsibilities

The Ministry of Consumer Affairs administers (but does not enforce) the following sales and credit legislation:

  • Fair Trading Act 1986 and regulations
  • Consumer Guarantees Act and regulations
  • Unsolicited Goods and Services Act 1971
  • Layby Sales Act 1971
  • Hire Purchase Act 1971

The Commerce Commission enforces the first of these (the Fair Traduing Actt). The remaining Acts are self-enforcing.

The Ministry, through its Trade Measurement Unit, administers and enforces the Weights and Measures Act 1987 and its amendments, as well as regulatiuons made undert hat legislation.

It should be noted that the ministry of Consumer Affairs does not administer or enforce all consumer sales and credit legislation. Two important pieces of legislation, the Motor Vehicle Dealers Act 1975 and Credit Cxontracts Act 1981, are administered by the Ministry of Justice. Another two, the Chattels Transfer Act 1924 and the Door to Door Sales Act 1967, are administered by the Ministry of Commerce.

More details on the Acts administered by this Ministry can be found in Annex 2.

The Minister's Powers

The Minister of Consumer Affairs has powers to ban or recall unsafe products under Parts III and IV and of the Fair Trading Act 1986. The Minister also has. the power, to recommend the making of product-safety .and consumer-information standards under Act.

'The Minister appoints two consumer representatives to the Insurance Savings Ombudsman Commission and one to the Banking Ombudsman Commission. The commissions are responsible for running the respective schemes.

Operations

The Ministry's Operations area is responsible for consumer information and education, including the Consumer Advice Service.

Our aim in this area is to "inform" consumers so that they can exercise choice and be effective in asserting their rights and responsibilities in the marketplace. Consumers who exercise choice effectively can have a substantial influence on service standards and on the quality of goods - and businesses which respond to consumers' demands are better placed to thrive in a competitive environment.

All consumer information, education and advice programmes are targeted at those who are less educated, less informed, or less articulate. Specifically, we see our target groups being low-income, Maori, and Pacific Island consumers.

We place emphasis on providing relevant information that enables consumers to resolve their own problems - a "self-help" approach with a minimum of third party assistance.

Close links established over a number of years with the New Zealand Association of Citizens Advice Bureaux, Budget Advisory Services and Community Law Centres have allowed us to maximise the availability of our information and advice. It has also meant that we do not waste resources by duplicating the activities of those organisations.

In summary, the Ministry's main operational activities are:

  • Providing an accessible national Consumer Advice Service
  • Providing information that supports the development of policy as well as operational programmes
  • Producing information resources on consumer issues and laws
  • Producing consumer-education resources for schools - and training the teachers who deliver these resources
  • Developing and supporting consumer-education packages in a range of learning environments, for iwi and other community groups
  • Developing specific resources to inform traders of their rights and obligations under consumer legislation.
Consumer Advice Service

The Consumer Advice Service operates from offices in Otahuhu. Wellington and Christchurch. Advice and information is given to callers on a self-help basis. Financial barriers to the use of ther Service are minimised through the use of toll-free telephone lines.

Where appropriate, the Service channels complaints and enquiries to other organisations which have specific statutory or regulatory roles in investigation and enforcement such as the Commerce Commission, the Disputes tribunal, the Privacy Commissioner, the banking Ombudsman, and the Insurance & Savings Ombudsman.

Trade Measurement

The Ministry's Trade Measurement Unit has statutory responsibility for administering and enforcing the Weights and Measures legislation.

Accurate measurement and weighing of goods is essential if an economy is to have true competition between the suppliers of those goods. Buyers - whether domestic or commercial - need to know that a kilogram, a cubic metre and a tonne are exactly the same from both supplier X and supplier Y. The Weights and Measures legislation is intended to ensure that all goods are sold for trade on the basis of fair and accurate measurement.

In summary, the main activities of the Ministry's Trade Measurement Unit are:

  • Determining and maintaining technical standards of trade measurement (andharmonising these with ANZCERTA and with international standards)
  • Providing technical advice to the Government on legal metrology
  • Accrediting private-sector agents to certify equipment
  • Certifying equipment used for trade where no accredited private-sector agent exists
  • Promoting compliance with the legislation through education and enforcement mechanisms
  • Formally approving new types of weighing and measuring equipment for trade use
  • Delivering education programmes for both traders and consumers with particular emphasis on raising trader awareness of the importance of accurate measurement.

The Ministry's Staff
The Ministry has 43 staff. Of these, 24 are based at Head Office and 19 at regional offices.

The Consumer Advice Service has regional offices in Otahuhu, Wellington and Christchurch.

The Trade Measurement Unit has regional offices in Auckland, Feilding. Wellington, and Christchurch.

A chart showing the Ministry's structure is set out below.

The Ministry's Funding
The Ministry's net government funding is $4.11 million for the 1996-97 financial year. This is for the purchase of three classes of output:

  1. the provision of policy advice on law relating to consumer transactions, marketplace regulation and consumer safety:
    • Crown funding: $1.013 million
  2. the provision of advice, information and education resources and programmes for consumers, traders, schools, and community organisations:
    • Crown funding: $1.744 million
  3. the administration and enforcement of the Weights and Measures Act and regulations (trade measurement):
    • Crown funding: $1.348 million
    • Other funding: $0.060 million

Strategic Directions
The Ministry of Consumer Affairs takes a forward-looking and pro-active stance to its work - and it does this in the context of specific strategic directions. Because we have limited resources, we have to direct our activities for maximum effect. We also have to be clear about what is appropriate for us to achieve, and why we are trying to do so.

Our strategic direction is determined by:

  • Our environment - which defines the parameters of our activities
  • Our focus - which defines who we see as consumers
  • Our relationships - which give us the means to achieve our purpose.

DEFINING THE PARAMETERS OF OUR ACTIVITIES
The Ministry operates within a number of different environments. Each one of these environments both constrains our scope and offers opportunities for developing new ways of approaching our work.

The fiscal environment has the most immediate impact. The Ministry's budget is relatively small and we choose our work priorities with care. We aim to contribute to wider Government policies, to complement and not duplicate the work of other public organisations, and to deliver programmes that have real benefits for the marketplace.

The economic environment has given us our focus on the consumer as a major consumer as a major player in market efficiency.

The premise behind current economic thinking is that the best outcomes for business and consumers are produced by open and competitive markets.

Open and competitive markets are based on the notion of consumer sovereignty. That is, consumers' purchasing decisions determine the range and quality of the goods and services that are supplied.

These markets, however, are not always perfect. Breakdowns can occur. They can occur when there are monopolies or barriers to market entry, both of which have the effect of limiting consumer choice. Or they can occur when consumers lack the information they need to make choices in a complex purchasing decision, or to demand redress when a market product is faulty. It is important that transactions in the marketplace work well. When markets are imperfect, they are not able to deliver sovereignty to consumers.

Nor does competition always deliver its benefits evenly. For example, competition may eventually force the suppliers of poorly performing goods and services to leave the market. But this may take a considerable time. And until it occurs, consumers will continue to suffer losses - which can lead to inefficiency in those markets.

The Ministry's work is aimed at increasing the ability of consumers to participate in the open and complex economy which we now have. By doing this, we extend consumer choice, enhance competition, and help develop a market which is of mutual benefit to consumers and traders. Deregulation and the reform of outdated or unworkable legislation are features of the legal environment within which the Ministry operates. Hence our emphasis on consumer self-help, and both self-regulation and voluntary corrective action by industry groups.

The aim here is to make sure that excessive or inadequate regulation does not interfere with the efficiency of markets, either directly or through hindering the exercise of effective consumer choice.

The legal environment also requires us to monitor existing legislation and to promote law that is accessible, informative, and capable of ensuring compliance.

Our cultural and social environment emphasises individual self-reliance. It also emphasises the targeting of assistance to individuals who are disadvantaged, vulnerable and most in need. Both these principles carry through into the Ministry's work - in its 'self-help" approach, and in its target groups of consumers.

Self-Regulation
"Light-handed" regulation is the current
approach to market and industry regulation in New Zealand, and
self-regulation is emerging as an alternative to Government regulation
in some market areas.

Self-regulation has the potential to make
a significant contribution to good consumer poliy and practice in New
Zealand, and so we are encouraging and monitoring its development.

For a self-regulatory regime to be effective for consumers it must:

  • Have the commitment of all members of that particular industry
  • Be developed in consultation with consumers and their representatives
  • Be publicised
  • Be administered in a sound and transparent manner
  • Be monitored actively
  • Be reviewed regularly, and in consultation with consumers and their representatives

And, in terms of its content, it must:

  • Go beyond what is required strictly by law
  • Include an inde pe ndent disputes-resolution process which involves consumer representatives
  • Have staff who are responsible for applying it and who are
    trained in the principles and procedures to be adopted.

We have already been involved in the
establishment of two important self-regulatory arrangements: the
Banking Ombudsman and the Insurance & Savings Ombudsman. We have
also produced a Guideline on Developing a Code of Practice (October
1993), a reference document for business organisations that
incorporates overseas work on self-regulation.

We are currently planning to review the
Guideline to take into account more recent New Zealand experience. We
are also preparing a policy paper on self-regulation, to help define
when it is an appropriate policy for dealing with marketplace issues.

We also work within an international
environment - and so are guided by the 1985 United Nations' Guidelines
for Consumer Protection which successive governments have applied in
developing New Zealand's consumer law. These guidelines contain eight
consumer rights:

  1. to have access to basic essential goods and services
  2. to be protected from unsafe products and practices
  3. to be given the information necessary to make informed choices
  4. to choose among a range of goods and services
  5. to be represented in the making and execution of government policy
  6. have redress against unfair practices, shoddy goods and poor services
  7. be educated on basic consumer knowledge and skills
  8. to enjoy a healthy environment.

Maximising Our Influence
The current environment of self-reliance
and self-regulation means that persuasion, consultation and networks
have become valuable mechanisms in promoting a fair and informed
marketplace.

As part of making sure that our views have
maximum impact, we have concentrated on developing sound relationships
with consumer and business groups, other government agencies, and
international consumer organisations.

Consumer and business groups

The Ministry is conscious of the
importance of maintaining close working relationships with consumer and
business groups. Both are consulted on proposed reforms and
developments, and they in turn provide information on the impact of
proposals on their members and clients.

The Ministry works closely with consumer
groups such as Consumers' Institute, the New Zealand Association of
Citizens Advice Bureaux, the National Council of Women, the Community
Law Centres, Budget Advisory Services, the Automobile Association,
Plunket, and the Maori Women's Welfare League. We keep them informed of
the Ministry's activities, consult them on issues, and obtain
information from them.

We are active in providing resources and
training to organisations that are strategically located in the
community - for example we have produced a comprehensive manual on
consumer-complaints handling for the Citizens Advice Bureaux and Budget
Advisory Services, and have instituted training in consumer law for
workers in both these organisations.

The Ministry recently convened a Consumer
Issues Forum for government and non-government agencies with an
interest in consumer issues. The forum identified areas of common
interest where, with further work, we could achieve a more efficient
use of resources and bring about benchmarking of practices. This will
lead to better overall outcomes for consumers. The forum will meet from
time to time and will work on issues identified at the initial meeting.

We have also created a product safety
network, encompassing both consumer and business interests. This acts
as an information-exchange for product safety matters and ensures that
both business and consumers can have input into policy issues in this
area.

We also work on standards committees to
assist in developing appropriate safety standards for products such as
toys, bicycles, nightclothes, strollers and resin chairs.

In its relationships with business groups,
the Ministry liaises most closely with those whose activities directly
affect consumers - such as the Retail and Wholesale Merchants'
Association, Manufacturers' Federation, and the various groups
representing the banking and financial services sectors. Such
consultation is designed to alert business to emerging developments, to
encourage traders to meet their legal obligations and become more
responsive to consumers, and to promote appropriate industry self
regulation.

The Ministry is continuing to build
effective relationships with expert groups in the private sector - with
economists, academics, and other commentators. This allows us to have
access to specialised technical expertise (for example, for peer review
of our policy papers).

Extending consumer representation

The Ministry operates a Consumer
Appointments database, which acts as a resource for organisations who
wish to appoint consumer representatives. This database is :regularly
updated. When we receive requests for nominations, we contact suitable
people from the database for permission to put their names forward to
the organisation concerned.

The Ministry has also developed a resource
for consumer representatives on how they can be effective in
representing consumers. This resource is distributed to employees.
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Other government agencies

As an operating division of the Ministry
of Commerce, we have a necessarily close relationship with that
Ministry. The closeness of that relationship means that a process of
mutual influence is possible - it is notable that the Ministry of
Commerce's recently developed mission statement specifically
acknowledges the importance of consumers: "...Commerce will be
recognised as a leader in both the delivery of services to business and
consumers, and in the provision of policy advice to the Government on
business and consumer issues.

Apart from the Ministry of Commerce, we
have good working relationships with the Ministry of justice, the
Department for Courts and the Commerce Commission.

The Ministry of justice administers the
Motor Vehicle Dealers Act 1975, the Credit Contracts Act 1981 and a
range of other consumer-related legislation and so we have a common
interest in ensuring that existing (and new) consumer legislation is
effective, is known about by consumers and traders, and is complied
with.

The Department for Courts, with its
responsibility for courts and tribunals, oversees the Disputes
Tribunals and Motor Vehicle Disputes Tribunals that play an important
part in consumer redress. We have already established good working
relationships with staff in this new department.

The Commerce Commission is an independent body funded by government to enforce the Commerce Act 1986 and the Fair Trading Act.

The Commission has built up considerable
expertise in the Fair Trading Act through its enforcement activities.
We draw on this expertise, meeting regularly with the Commission at
both senior and operational levels. We consult the Commission on
applications of the Fair Trading Act, reviews of any aspects of it, and
any proposals to create regulations under it. We also pass on to the
Commission information about any possible breaches of the Act which may
need Commission attention or action.

International consumer organisations

Our relationship with Australian organisations is particularly
important because of New Zealand's obligations under ANZCERTA (the
Memorandum of Understanding on the Harmonisation of Business Law) and
the Trans Tasman Mutual Recognition Agreement.
The Minister of Consumer Affairs participates in the Ministerial
Council on Consumer Affairs (MCCA) which meets once a year. This is a
valuable forum for information exchange and, in particular, the
harmonisation of policy initiatives.

A series of officials' meetings supports
the Ministerial Council on Consumer Affairs and ensures effective
liaison and harmonisation on trade measurement issues, education, fair
trading enforcement, and product safety. Departmental heads also meet
to identify key strategic issues for Ministers' attention.

We participate in the Consumer Policy
Committee of the Organisation for Economic Cooperation and Development
(OECD). This committee discusses both product-safety and market-related
issues, and we normally attend one meeting a year. The Ministry is
currently actively involved in a number of OECD issues including the
development of an international product safety notification system
through the Internet.

We are a corresponding member of Consumers
International, which has been active in establishing Pacific Island and
Asian networks for consumer organisations. Membership of these two
organisations allows us to gain information that is valuable in the
development of consumer policy in New Zealand. It also gives us the
opportunity to communicate New Zealand's experiences to the rest of the
world.

The Ministry is a corresponding member of
the International Organisation of Legal Metrology (OIML). We look to
this organisation for expert technical guidance in the legal aspects of
weights and measures, and for international
consistency in standards.
The Ministry is a member of the Asia Pacific Legal Metrology Forum
(APLMF). This is a specialist regional body set up under the Asia
Pacific Economic Co-operation (APEC) umbrella. This organisation seeks
to harmonise requirements in legal metrology across all the APEC
economies.

In addition to our membership of formally
established organisations, we maintain close liaison on an
issue-by-issue basis with officials in Australia, the United Kingdom,
the United States and Canada. Such contact is generally low key, but is
sufficient to ensure we have an effective working knowledge of global
consumer developments that will help inform policies and programmes in
New Zealand.

Using policy and framework papers to maximise our influence

We have identified a need to more
explicitly articulate our policy position on issues that underpin our
activities. We believe that this will enhance the quality of our work
and help extend our influence with other government departments, and
consumer and business groups.

These policy papers will be based on our
current views of issues. They will be rigorously peer-reviewed by
outside commentators and discussed with business and consumer groups.

During the 1996197 year we are working on the following policy papers:

  • Self Regulation and Codes of Practice
  • Unfair Contracts
  • Redress Principles
  • Voluntary versus Mandatory Product Safety Standards
  • Information Disclosure.

We have also identified benefits in
developing framework papers. These will be used largely for improving
the quality of our policy advice, although some may be used to convey
our approach to outside agencies and groups.

We are currently working on two such papers:

  • A framework for cost benefit analysis of policy proposals specifically tailored
    for consumer issues
  • A framework for consulting Maori on Ministry policy proposals.

These papers will also be reviewed by outside commentators.

Achieving Our Strategic Direction By Prioritising Issues
The Ministry has limited policy resources
and to be effective it has to prioritise carefully. We use the
following criteria as a guide to determining whether an issue warrants
detailed study:

  • Is the issue relevant to the Ministry's stated purpose and outputs, and to the goals of Government?
  • Is there evidence that the issue presents a problem for
    consumers, and would there be significant detriment to consumers if we
    did nothing? Does the issue impact upon the Ministry's specific target
    groups? Where the issue is product safety, does the risk assessment
    justify investigation and action?
  • Is the Ministry the most appropriate agency to undertake this work? Are we avoiding overlap with other organisations?
  • Does the political/commercial environment indicate that likely
    recommendations will be seriously considered, and can we achieve our
    objectives within the available resources?
  • Can our input add value to policy making?

The next chapter sets out a number of key
issues that are based on our criteria for prioritising issues. Some of
these issues are more urgent or immediate than others; all are
important.

Product Safety

There is no co-ordinated approach to product safety matters in New
Zealand. Product safety policy and complaints are dealt with under a
variety of legislation and by a range of Government agencies. For
example, the safety of electrical and gas products is the
responsibility of the Energy and Resources Division of the Ministry of
Commerce. Transport related safety issues, such as motor vehicle
standards, seat belts and motorcycle and cycle helmets are the
responsibility of the Ministry of Transport. All food related safety
issues are the responsibility of the Ministry of Health. The Department
of Labour is responsible for safety issues concerning explosives,
fireworks and the workplace. All of these jurisdictions are granted by
specific legislation. The Ministry of Consumer Affairs uses the broad
powers granted by the Fair Trading Act to cover areas not elsewhere
legislated, although those powers can also, if required, be used in
such areas.

The issue

A product-safety issue can arise at any
time, usually without prior warning. The Minister of Consumer Affairs
has the power to recommend the making of product safety standards and
the responsibility and the power to ban unsafe products or recall them
from circulation. The Ministry advises the Minister on this.

Developments so far

In practice, most product-safety questions are resolved voluntarily and the Minister's powers are seldom required.

There have been only four instances of
product banning, all related to children's toys: pistol crossbows,
water pistols with fluids that were dangerously alkaline, three brands
of unsafe toy guns, and children's bangles that contained contaminated
water. In 1989 the Minister ordered a compulsory recall of certain
unsafe bicycles, the only time these powers have been used.

Current policy in this area stresses industry self regulation and consumer choice.
It acknowledges that, while hazards must be controlled to some extent,

  • consumers should have the freedom to manage their own risks. To do this, they
  • need to be sure that a product will be reasonably safe in normal use. If a product
  • involves serious risk, then consumers need more information on what that risk is,
  • and on how they can minimise it.

We are presently preparing a policy paper
on mandatory versus voluntary product-safety standards. We have keenly
felt the impact of pressure groups in this area in the past, with
debate at times being heated and emotional. But we believe that
self-regulation and education are our primary tools and that more
interventionist options are a tool of last resort.

In line with the current policy of
industry self-regulation, we have been working with importers,
manufacturers and retailers of infant products to improve the level of
safety of these products. Many manufacturers and importers have
expressed their willingness to comply with voluntary standards, but a
method needs to be developed to ensure consumers are aware of which
products comply with the standards.

We favour the establishment of an industry
group which would manage and promote voluntary standards. Industry
representatives have met over recent months and have agreed to form an
association. They are now working on how the association should be set
up and organised.

Another issue that might arise relates to
cigarette lighters. There have been occasional calls in the past to
introduce a mandatory standard requiring all disposable lighters to be
child resistant. Australia has recently decided to take this approach
but we have not followed suit.

Action timeframe


As mentioned earlier, product-safety
issues occur unpredictably. Currently, there appear to be no major
issues requiring attention - although this may of course change.

The Consumer Advice Service

As mentioned earlier, the Ministry's
Consumer Advice Service provides advice and information to consumers,
with particular emphasis on targeting low- income, Maori, and Pacific
Islands consumers.

The issue


Demand for the Ministry's Consumer Advice Service has increased rapidly
since the introduction of the Consumer Guarantees Act 1993. There were
49,122 calls handled in the 1995196 financial year, compared with
28,566 in the year immediately preceding the introduction of the Act
(1992193). 7here has been no increase in resources over that time.

The Service has also had difficulties in
reaching its target groups. A survey undertaken in 1994195 showed that
less than 20 per cent of callers were low income, Maori or Pacific
Islands consumers.

Developments so far

To deal with both these issues, a major refocusing exercise began at
the start of 1996 - the first of its kind since the Advice Service was
established in 1988.

The exercise is looking closely at how the
Service can become more relevant to its target consumers. We believe
that a tighter focus on their needs will ease the problem of excessive
demand (which is largely coming from articulate middle income
consumers).

We will be consulting representatives of
our consumer target groups on ways the Service might better reach them,
and on the impact that any proposed changes to the Service might have
on them. We will also be consulting consumer-advisory groups such as
Citizens Advice Bureaux and Budget Advisory Services about this.

Action timeframe

Operations staff are currently providing a
limited 4-day-a-week Service in order to work on the refocusing
exercise. The timeframe for completion is mid to late 1997: we expect
to know by March 1997 what changes should be made, and will implement
these changes progressively during the year.

Changes To The Motor Vehicle Dealers Act 1975

The Motor Vehicle Dealers Act 1975 gives a range of statutory rights to
consumers who buy vehicles from licensed motor vehicle dealers. These
rights include good title to the vehicle, a warranty, some standardised
information about the vehicle, and an independent tribunal for
disputes.

The issue

Reform of the Motor Vehicle Dealers Act
(which is administered by the Ministry of justice) has been an issue
for some considerable time. The Act has become increasingly outdated,
and is not relevant to the needs of consumers in today's motor-vehicle
market.

Developments so far

In 1993 the Ministry completed an
examination of the Act, as part of providing evidence to support the
need for a comprehensive review of it.

Following this, Cabinet requested that a
full review of the Act be carried out by an interdepartmental team from
justice, Treasury, Commerce and Consumer Affairs - with assistance from
Police and Ministry of Transport.

In late 1995, the Government made final
decisions on the review. As a result, the Motor Vehicle Dealers Act
will become much more specific, and will more clearly bring general
consumer laws such as the Fair Trading Act and the Consumer Guarantees
Act into the range of legislation that dealers must comply with.

Most existing barriers to entering the
industry will be removed. But dealers will entering the industry still
be required to be above a minimum age, have no relevant criminal will
be removed conviction, and not be bankrupt.

The statutory role of the Motor Vehicle
Dealers Institute has been removed, as has the statutory provision for
a Motor Vehicle Dealers Fidelity Fund.

The removal of the fidelity fund is a
contentious issue. Currently, the fund provides back-up where a
consumer (or in limited situations, a financier) has a financial claim
against a licensed dealer who will not pay or who has gone into
liquidation. We view the fund as a very efficient form of insurance
against non payment of debts ($50 per dealer per year) and therefore an
effective consumer protection measure. Many consumer groups have
indicated that they are planning to relitigate this decision at the
select committee stage.

The Ministry of justice recently completed the drafting instructions and sent them to Parliamentary Counsel.

The existing Act's requirements for
disclosure of information will be moved into the Fair Trading Act, in
the form of a consumer information standard. This has benefits in that
the Fair Trading Act is enforced by the Commerce Commission and the
second-hand motor vehicle market is one of its proactive areas of
interest.

Action timeframe

It appears likely that this issue may require fairly immediate action.

We have become aware that the three key industry groups - the Imported Motor Vehicle Dealers Association, the Motor Vehicle Dealers Institute and the Motor Vehicle Manufacturers Association - are dissatisfied with the Act's review, and have said that they plan to lobby the new Government to reconsider the review and the draft legislation.

Trans Tasman Mutual Recognition

The Trans Tasman Mutual Recognition Arrangement (TTMRA) between New
Zealand and Australia has recently been signed. Its objective is to
reduce regulatory barriers to the movement of goods and services
between New Zealand and Australia. It will mean that:

  • If goods can be legally sold in New Zealand they may be legally sold in an Australian jurisdiction (and vice versa).
  • If a person is registered to practise an occupation in New
    Zealand, then they will be entitled to practise an equivalent
    occupation in an Australian jurisdiction (and vice versa).

Our interest in TTMRA is directly related
to the areas of the Fair Trading Act that are impacted on. They are
product safety and consumer information standards.

The issue

The most significant New Zealand issue so far is "country of origin" labelling. (Other issues may yet develop, including some which are of more concern to Australia.)

Through a Consumer Information Standard made under the Fair Trading Act, all clothing and footwear sold in New Zealand must be labelled to show the country of origin. Australian country-of-origin labelling regulations are different. While they require all imported clothing and footwear to show country of origin, they do not require Australian-made clothing and footwear to do this.

This means that it will be possible for clothing and footwear manufactured in Australia to be sold in New Zealand with no country-of-origin labelling. Clothing and footwear manufactured in New Zealand and sold in New Zealand will need to be labelled to show country of origin, as at present.

Developments so far

Some industry groups which support country-of-origin labelling have expressed concern about the consequences of TTMRA, claiming it makes enforcement difficult. They also point out that it makes a nonsense of the New Zealand law to allow unlabelled Australian product into the market while requiring New Zealand (and all other countries' products) to show country of origin.

Action timeframe

The TTMRA will come into operation once implementing legislation is
passed and comes into force in both countries. This is expected to
happen in the first half of 1997.

The Ministry is discussing the implications of the country-of-origin labelling issue with the Manufacturers' Federation, the Retail and Wholesale Merchants' Association, and the Commerce Commission. We expect to report by December 1996 on possible options for dealing with this issue.

The Limitation Period In The Fair Trading Act

The Fair Trading Act 1986 attempts to ensure that all trading activities are based on accurate and honest information. It also gives consumers a three-year period (the limitation period) in which to bring a civil case against a trader whom they believe has misled them. The three years starts from the time the misleading conduct occurred, not when it was discovered.

The issue

The issue here is the length of the limitation period: often, it is too short for
today's marketplace realities.

This is particularly true for domestic housing, and for financial transactions such as superannuation policies and long-term investment. For example, the way information is presented about how an investment is likely to perform may mislead a customer; but this is unlikely to be discovered within three years.

Developments so far

During
1994 the Ministry investigated the need for amending the Fair Trading
Act limitation period. Following extensive consultation with business
and consumer groups and government agencies, we concluded that the best
option would be the reform of the Limitation Act as proposed in 1988 by
the Law Commission. As the Limitation Act takes precedence over the
Fair Trading Act, changes to the Limitation Act would then apply to the
latter Act.

The Ministry of justice is now preparing a Cabinet paper proposing the
introduction of a Limitation Defences Bill. This Bill allows the
limitation period to be extended beyond three years in certain
circumstances, in particular where the claimant (the consumer) shows
that they did not know that an act of damage had occurred. The Bill
would repeal section 43(5) of the Fair Trading Act rather than amend
the Fair Trading Act.

The
Bill, however, only applies to civil proceedings. So we are considering
whether an amendment is needed to the Fair Trading Act limitation
period for criminal proceedings (section 40(3)), to keep it in line
with the limitation period for civil action.

Action timeframe

The Limitation Defences Bill is a priority, and the Minister of Justice should be
urged to introduce it into the House as soon as practicable.

We will be reporting on a limitation period for criminal proceedings by the end of the 199611997 year.

Redress Through The Disputes Tribunals

Effective
means of redress for consumers is of major importance in helping
markets work effectively. Through redress mechanisms, consumers can
exert pressure on traders and ensure that they perform more
efficiently. Providing redress is also of benefit to the industry
itself since it provides invaluable information on what problems are
being caused by particular industry practices.

The issue

There is concern - most recently voiced at the Consumer Issues Forum - that Disputes Tribunals could operate more effectively. This applies particularly to the handling of complaints under self-regulation and self-enforcing consumer legislation.

Developments so far

As
a first step, we initiated a comprehensive review of the operation of
Disputes Tribunals from a consumer perspective. This was completed in
July 1994, with over 40 recommendations.

As
a result of our review, the Department of justice (as it then was)
obtained Cabinet approval for further work to be carried out in four
key areas:

  • The establishment of a Principal Referee to ensure procedural fairness
  • The establishment of a consumers charter that outlines users'
    rights and expectations and provides ways for it to be monitored and
    observed
  • An increase in the monetary jurisdiction of Disputes
    Tribunals from a maximum of $3,000 to a maximum of $5,000 (and from
    $5,000 to $7,500 with the consent of both parties)
  • An extension to the tribunals' substantive jurisdiction, to include credit disputes.

During
1995 the newly established Department for Courts carried out further
work on these issues, including comprehensive consultation with
consumer and community groups.

The
establishment of a consumer charter was incorporated in a separate
project focusing on the development of a consumer charter for the
entire court system. While this project was due for completion by June
1996, we understand from the Department for Courts that it has been
delayed.

Cabinet approved the increase in both monetary and substantive jurisdiction. Disputes Tribunals will he able to hear:

  • Disputes under $5,000 (or $10,000 with the consent of both parties)
  • All credit disputes within the monetary limit.

These changes form part of the Courts and Criminal Matters Miscellaneous Bill which is yet to be introduced into the House.

Cabinet
decided, however, not to establish the position of Principal Referee.
This decision (in April 1996) was disappointing, as the position had
the potential to deal with a wide range of matters such as
administrative inconsistencies, better training of referees, and
liaison with community groups. Some consumer groups. such as the
Citizens Advice Bureaux, have said they will raise their concern at the
&gloss" of this position at the select committee stage of the
Courts and Criminal Matters Miscellaneous Bill.

The
Department for Courts is looking at alternative ways of developing a
position that could fulfil some of the tasks envisaged for the
Principal Referee. They are currently working on a proposal which
includes setting up a Council of Referees to oversee the operation of
Disputes Tribunals as a whole.

We
are working on a policy position about the Principal Referee. This will
take into account the Department for Courts' finalised proposals on
alternatives to the Principal Referee.

Action timeframe

The
Minister for Courts should he urged to introduce the Courts and
Criminal Matters Miscellaneous Bill into the House as soon as
practicable.

The
timing of our policy position on the Principal Referee is dependent on
the Department for Courts releasing its proposals on alternatives to
the Principal Referee.

Consumer Credit Legislation

Credit
is becoming the primary currency for major consumer transactions. It
allows consumers to take advantage of special offers and opportunities
to buy goods and services they could not otherwise afford. It allows
traders to offer goods for sale that they otherwise could not afford to
have in stock. This flexibility strengthens the retail market and
contributes to a dynamic and growing economy.

Unfortunately consumers do not always receive the benefits available under an openly competitive credit market.

The issue

Consumer
and community groups consider credit to be the most widespread and
severe of all problems faced by consumers. These views are borne out by
the Ministry's Consumer Advice Service, where it has been found that
problems with credit have severe consequences.

For
example, credit agreements frequently involve considerable amounts of
money - the hire (credit) purchase of a vehicle may be the most
expensive transaction that a consumer ever makes. Incorrect information
given about the true cost of credit can have punitive consequences for
the person "buying" that credit.

Credit
transactions are also high risk. Consumers may be required to assign
their household possessions as security for the agreement, or they may
enter into agreements that overcome them financially.

Low-income consumers are especially vulnerable in the consumer credit market.
They are more likely than other consumers to use less-reputable credit products,
many of which are offered by non-mainstream credit providers who have no
incentive to comply with the law and who take advantage of low-income
consumers' need for credit. Low-income consumers are also least likely to be able
to afford appropriate redress.

Given
such severity of outcome, it is essential for consumers and traders to
have credit legislation which provides clear rules, certainty and
fairness. Existing credit law in New Zealand is unclear, inconsistent,
and consequently unfair.

Present
credit law (the Credit Contracts Act 1981, Hire Purchase Act 1971 and
Chattels Transfer Act 1924) shows many of the characteristics of poor
consumer law. It is:

  • Complex, with different standards for different credit contracts
  • Out of date, in relation to changes in the credit market
  • Not easily enforced, with widespread non-compliance
  • Almost impossible to understand, with redress being difficult for consumers
  • Expensive, with high transaction costs for both businesses and consumers.
Developments so far

The Ministry has consulted widely on credit issues over a period of years as issues have been progressively identified.

In
1995 Cabinet approved some ad hoc amendments to credit laws in the
areas of credit advertising, insurance, guarantees, and repossessions.
This work was done jointly by justice and Consumer Affairs officials.

One
part of these amendments - changes relating to repossessions - has been
introduced into the House as the Credit (Repossession) Bill 1996. This
Bill, which was introduced by the Minister of justice, brings together
all repossessions under the Hire Purchase Act, Credit Contracts Act and
Chattels Transfer Act. It improves the protection for consumers by
increasing the period of notice before repossession, by establishing
reasonable times and methods for repossessions, and by enhancing
debtors' rights after repossession. It also puts the statutory notices
to consumers into plainer language than previously.

Action timeframe

The
ad hoc amendments approved by Cabinet in 1995 are currently being
drafted by Parliamentary Counsel. It would be desirable to have this
legislation introduced into the House as soon as possible.

The Credit (Repossession) Bill is currently before the Commerce Committee.

We
intend developing a framework for consumer-credit law during the third
quarter of the 1996197 year, and are planning to recommend that Cabinet
approval be sought for:

  • Carrying out a full review of the credit market as it relates to consumer transactions
  • Making appropriate recommendations for reform.

Weights And Measures Review

The Weights and Measures legislation prescribes the conditions under
which manufacturers and traders are required to operate when producing
goods sold by weight, measure or number for trade in New Zealand.

The legislation was last amended in 1991.
This amendment introduced a system of "accredited persons" - where
private-sector agents can be empowered to control the use of weights
and measures and weighing and measuring instruments. It also introduced
the concept of infringement offence notices and certificates of
accuracy.

The issue

Amendments are necessary both to the Act
and to regulations made under it, in order to make sure that legal
requirements are relevant to current market practice.

Developments so far

In February 1996 following Cabinet
approval, we released a public discussion paper that outlined the areas
we saw as requiring review.

In August 1996, following consideration of
the comments received, Cabinet approved a number of changes to the
Weights and Measures legislation.

These changes covered:

  • Extensions to the infringement offence notice (ION) scheme and for infringement offence fees
  • Amending the fee structure for verifying and approving weights, measures, and weighing and measuring equipment
  • Deleting the term "cord" from the list of derived metric
    units, making the use of the word "net" optional for packaged goods
    sold by weight, and revoking certain requirements for unwrapped bread
  • Updating technical requirements for weights, measures, and weighing and measuring instruments.

The drafting of amendments to the Act is proceeding but awaits advice on the Government's legislative programme.

Drafting instructions for amendments to regulations were recently forwarded to the Office of the Parliamentary Counsel.

Action timeframe

The amendments to the Weights and Measures
Act should be introduced into the House as soon as practicable. The
amendments need to be passed before one or two consequential amendments
to regulations can proceed.

A New Measuring System For Pre-Packaged Goods

The method of determining a deficiency in
packaged goods is at present administered by what is known as a Minimum
Quantity System. In general terms, a package that indicates the
quantity it contains must have at least that quantity.

The Weights and Measures legislation
nevertheless allows the contents of any one package to be up to 5 per
cent less than stated, provided the contents of that package and eleven
other randomly selected packages of the same kind show no aggregate
deficiency.

The issue

Over the years, international trade in
packaged goods has significantly increased, bringing pressures to
harmonise to international standards and so reduce barriers to trade.

The Average Quantity System (AQS) has
broad international support, and both New Zealand and Australia are now
looking at AQS with a view to introducing it. (The adoption of AQS was
initially raised by us as part of harmonising TransTasman trading
relationships.)

AQS has three operating conditions. In
general, the average quantity across packages in a single production
run must be at least that stated on each package. However, up to 2.5
per cent of packages in a production run may contain less than the
prescribed "tolerable error" for that size of packaging although no
package is to have a deficiency greater than twice the prescribed
tolerable error.

This will in effect give consumers a 97.5
per cent assurance of buying a package that contains at least the
amount stated on the package.

The main issue now is whether New Zealand manufacturers and packers will agree to change from the current system, to AQS.

A subsidiary issue is whether Australian manufacturers and packers will also agree to change.

Developments so far

Discussions have been held with our
counterparts in Australia, at federal and state level, and
consideration of AQS is now at the consultation stage.

In July 1996, a public discussion paper
was distributed to all interested business and consumer groups in New
Zealand, calling for responses by 30 September. The responses have been
received and are currently being analysed.

Action timeframe

We will be presenting a report to the
Minister of Consumer Affairs on responses to the discussion paper by
the end of December 1996.

If there is broad support for the change
to AQS, we will be recommending that the Government approve an
amendment to the Weights and Measures Act.

Electricity Consumer Contracts

Whenever consumers have power connected to their household, they enter into a contract with their electricity supplier.

The issue

The Ministry is evaluating the terms and
conditions of domestic consumers' electricity supply, in the context of
recent industry changes.

The results of the evaluation will be used
to inform the industry of areas where there is consumer concern, and to
provide power suppliers with some practical steps they can take to
improve the level of service to their domestic customers.

Developments so far


The Ministry's evaluation covers existing
domestic-supply contracts and complaints-handling procedures. It also
looks at whether meters are accurate, and how to ensure that they are.

Information has been obtained from power
suppliers, and the analysis and writing-up of the findings has been
completed. The report is with the industry.

Action timeframe

The final report will he ready for release in late December 1996.

Corrective Advertising In The Fair Trading Act

Section 42 of the Fair Trading Act 1986 allows for traders to be required to correct false or misleading information that they have given to consumers whether orally, or through advertising. A court order must be obtained before a trader can be required to do this.

The issue

Most court actions taken under the Fair Trading Act are heard in the District Court. However, orders to correct misleading or false information can be made only in the High Court.

As well, obtaining a High Court order can be a lengthy process in itself.

Developments so far

We are investigating whether corrective advertising orders could be heard in the District Court, and are discussing this with other government agencies.

Action timeframe

We will report on the outcome of our investigations by the end of the 1996197 year.

"Direct" And "Distance" Selling

Marketing techniques that eliminate the
need for consumer's to visit a retail store are becoming increasingly
common. They include traditional direct-selling techniques such as
door-to-door selling, direct marketing and mail order - and the more
recent development of electronic shopping by telephone (using 0800 and
0900 numbers), television or the Internet.

The issue

There are two issues here.

  1. It is questionable whether New Zealand's existing direct-selling legislation (the Door to Door Sales Act) is adequate for dealing with marketing and selling techniques which did not exist when the Act was passed.
  2. Electronic shopping raises significant issues, especially if the shopping is "cross-border":
    • security of payment
    • redress if goods and services are not received, or if they do not match their description.
Developments so far

In 1993 it was decided that a review of the Door to Door Sales Act 1967, then being undertaken jointly by Commerce and Consumer Affairs, should be broadened to a review of the entire direct and distance selling field. The review was to consider what if any specific regulation should apply to direct and distance selling and, if so, what form this regulation should take.

A discussion paper was released in October 1995 and consideration of the submissions received is under way.

However, by
the start of this year our awareness of electronic shopping issues had
developed to the extent that we decided to separate direct and distance
selling issues and initiated a specific project in the area of distance
selling. The Electronic Consumer project has as its aims:

  • To extend public knowledge about the consumer perspective in electronic commerce
  • To improve business understanding of consumer interests in this area
  • To inform policy advice given to the Government on key national and international consumer policy issues in electronic commerce
  • To identify education priorities on electronic commerce.

The Ministry
is also maintaining a close interest in international (OECD)
developments to do with electronic shopping, including a forthcoming
international conference specifically focused on this.

Action timeframe

The Ministry believes this will be a significant area of work over the next few years.

A public seminar on issues arising from the Electronic Consumer project is planned for March 1997.

The review of direct selling (including the Door to Door Sales Act) is expected to be completed by June 1997.

Personal Property Securities

Personal property securities relate to security interests over goods. A security interest can arise in a number of ways, most commonly through taking certain goods as security in a credit transaction. Examples of personal property securities include secured loans, debentures, floating charges, and liens.

The issue

The law relating to personal property securities is contained in a mixture of statute and common law, without a coherent statutory framework.

There also needs to be more easily accessible registration and search facilities. A more efficient system for registering who has interests over goods and a more simple system for searching whether there are encumbrances on goods will certainly benefit consumers.

As well, consumers need protection that takes into account the relative inequality of bargaining power and knowledge between consumers and traders.

Developments so far

The Ministry of Commerce is currently reviewing the area of personal property securities, with the aim of merging registration for both personal property and motor vehicles into one coherent system.

As part of this, we have proposed to Commerce that the current consumer protections in the Motor Vehicle Securities Act 1986 and the Chattels Transfer Act 1924 be retained. These Acts require that, in consumer transactions, any existing security interests are extinguished in favour of the consumer.

Action timeframe

The Personal Property Securities review is planned to continue well into 1997, with major consultation on the exact shape of proposed legislation yet to take place.

Telecom Performance Indicators

Performance indicators of telephone services for domestic consumers are extensively used overseas. They are designed to guard against the incidence of real price increases being forced on the monopoly domestic market through the downgrading of service quality.

The issue

In 1990 we negotiated an agreement with Telecom Corporation of New Zealand for the regular six-monthly disclosure of performance indicators for domestic consumers. We then monitor and analyse these, on behalf of consumers

.

Developments so far

In September 1995, the Ministry and Telecom completed a review of the indicators. As a result, there are now more up-to-date indicators with increased coverage and depth.

Action timeframe

This is a regular Ministry activity. Reports from Telecom are due in about November and May each year.

Annex 1
'Relationship Letter' Between the Ministries Of Commerce and Consumer Affairs

Annex 1
'Relationship Letter' Between the Ministries Of Commerce and Consumer Affairs

3 October 1996

Paul Carpinter
Secretary of Commerce

Relationship - Ministry of Consumer Affairs and
Ministry of Commerce


As we have discussed, it is appropriate to clarify the relationship between the Ministry of Consumer Affairs (MCA) and the Ministry of Commerce (MCM). This should assist each Ministry to understand and gain maximum advantage from the other.

Introductory issues


MCA is an operating division of MCM. The ownership Minister for both is the Minister of Commerce. The vote Minister for MCA is the Minister of Consumer Affairs.

In accordance with the purchase agreement between the Minister of Consumer Affairs and the Secretary of Commerce and the Head (General Manager) of MCA, the General Manager of MCA is accountable to the Minister of Consumer Affairs for the delivery of annually agreed outputs to the quality, quantity and cost specified and the Secretary of Commerce is responsible for monitoring the delivery of those outputs.

Relationship - Secretary and General Manager of MCA


The Secretary is responsible for employing the General Manager of MCA through an employment contract and for managing the performance of the General Manager MCA through an annual performance agreement.

The performance agreement sets out key outputs and management strategies for MCA and will reflect the outputs and management strategies agreed between the General Manager, Managers and staff of MCA.

In this context, the Secretary seeks to ensure that

  • The General Manager of MCA manages MCA appropriately to ensure that policy advisory and operational functions are undertaken to an appropriate level of quantity, quality and within budget
  • The General Manager of MCA provides appropriate strategic direction and leadership on policy advisory and operational matters

In
addition, the General Manager will inform the Secretary of matters of
note, specifically those that involve public comments, statements or
positions in respect to the work of MCA.

In
practice, the General Manager of MCA is directly accountable to the
Secretary for the efficient and effective management of MCA, and
receives delegated authority from the Secretary in the same way as
other MCM General Managers. The Secretary is responsible for ensuring
that MCA has access to good quality corporate services such as Human
Resource services, Legal services, Financial services and IT services.

On
policy advisory and operational matters relating to consumer affairs
issues, the General Manager of MCA reports directly to the Minister of
Consumer Affairs and has an independent voice (from MCM) on consumer
matters.

The
Secretary expects the General Manager, managers and staff of MCA to
make a full contribution to the operation and management of the
Ministry of Commerce, as is appropriate to their level of
responsibility and available resources, and at all times to be good
representatives of MCA and Commerce.

MCA
welcomes feedback from the Secretary on matters relating to the quality
of its work, its management strategies and external relationships. The
Secretary will at all times ensure that such feedback is constructive
and timely. Such feedback may be provided through the General Manager
or directly to MCA staff, in which case the General Manager will be
informed of the feedback by the Secretary.

Relationship - MCA and MCM


The relationship between MCA and MCM flows from the purpose and mission of each Ministry.

They are set out below:

The Ministry of Commerce's mission is:

"By being professional, dynamic and innovative, Commerce will be recognised as
a leader both in the delivery of services to business and consumers, and in the
provision of policy advice to Government on business and consumer issues"

The Ministry of Commerce focuses principally on issues affecting the operation of business, in the interests of efficiency and ultimately consumer benefit.

The purpose and mission of the ministry of Commerce encompasses the purpose and mission of the Ministry of Consumer Affairs by its references to 'consumers' and 'consumer issues'.

However, as set out below the Ministry of Consumer Affairs has a more direct and detailed interest in consumer issues.

MCAs mission is:

  • To provide high quality advice to Government on key laws, practices and policies affecting consumers
  • To enhance consumers' ability to function effectively and equitably in the market by providing information, education and advice
  • To ensure that market transactions based on weight and measurement are accurate and fair
  • To promote improved market practices and encourage compliance
    with codes, standards and laws in the interests of consumers and
    business

MCA
focuses on issues which affect consumers. MCA's view is that informed
and empowered consumers are an integral and critical part of an
efficient market.

Conclusion


The General Manager MCA and the Secretary are committed to a constructive and effective working relationship that will

  • Enable appropriate and effective integration of consumer and business issues,
  • Generate joint benefits from each Ministry's skills, experiences and external relationships, at a policy and operational level, and
  • Create joint benefits for staff in career paths and developmental opportunities.

Overall, this commitment recognises the importance of a proper balance between independence of approach and effectiveness in integration.

Keith Manch Paul Carpinter
General Manager Secretary
Fair Trading Act 1986

The Fair Trading Act aims to maximise consumer protection in the "pre-sale period (before a purchase is made). It attempts to ensure that all trading activities are based on accurate and honest information.

The Act has five major parts.

Part I prohibits misleading and deceptive conduct in trade, false representations, and certain unfair trading practices. Part II provides for the making of consumer information standards, so that pertinent information can be supplied to consumers to help them in their purchasing decisions. Three such standards have been made so far:

  • Country of origin labelling for clothing and footwear products
  • Fibre content of clothing and textiles
  • Care labelling for clothing and textiles (minor amendments to
    this standard have been approved and are currently being drafted by
    Parliamentary Counsel).

A further standard is being developed for information on second-hand motor vehicles.

Parts III and IV deal with product and service safety standards. Product-safety standards exist for children's nightwear, children's toys (inhalation and ingestion hazards to children under the age of three) and bicycles. No service-safety standards exist, nor are any contemplated.

The Minister is required under the Act to consult with interested and affected parties, and to consider their views before recommending the making of a consumer information or a product safety standard.

Unsafe products may also be banned or compulsorily recalled by the Minister of Consumer Affairs under powers granted by Part III of the Act.

Part V provides for enforcement and remedies. Enforcement of the Act is carried out by the Commerce Commission.

The Consumer Guarantees Act

The Consumer Guarantees Act covers consumer protection in the "post-sale" period (after a purchase is made). It creates a statutory guarantee that is automatically conferred each time a consumer purchases a good or a service from a trader. A consumer is defined as a person who buys goods or services of a kind ordinarily bought for household, domestic or personal use. The Act also provides clear remedies for consumers if a breach of the guarantee occurs.

The Act has four major parts.

Part I sets out the guarantees for goods. These guarantee that the goods:

  • Are of "acceptable quality" (which is defined in the Act)
  • Are fit for their particular purpose
  • Comply with their description
  • Comply with the sample shown to the consumer
  • Are of a reasonable price (if no price is set before the sale)
  • Will have spare parts and repair facilities available (but
    only if the consumer is the initial purchaser of the goods within New
    Zealand).

Part II sets out buyers' rights when the goods do not meet the statutory guarantees. Buyers can reject the goods if the fault is serious or cannot be fixed. They can accept a repair or replacement if the fault is minor. In both instances, they can claim money for loss suffered as a result of the fault. If the original supplier will not remedy the fault, or cannot in a reasonable time, the consumer can get a third party to do so, and can claim the cost of repairs from the original supplier.

Part III sets out rights against the manufacturer or importer of goods which do not meet the guarantees. This right is significant in that it cuts across the traditional rule of contract privacy, which meant that consumers could only claim against a party with whom they had a contractual relationship i.e. the person who sold it to them.

Part V sets out the guarantees for services. These guarantee that the service is:

  • Carried out with due skill and care
  • Fit for a particular purpose
  • Completed within a reasonable time (unless previously agreed)
  • A reasonable price (unless previously agreed).

Consumers can reject the service if the fault is serious or cannot be remedied. They can ask for repairs if the fault is minor. They can also get a third party to remedy the fault (if the original supplier will not) and claim the cost of repairs from the original supplier.

Subject to limited exceptions relating to business transactions any attempt to contract out of the Consumer Guarantees Act is a breach of the Fair Trading Act.

The Consumer Guarantees Act replaced the Sale of Goods Act 1908 for consumer transactions.

Unsolicited Goods and Services Act 1975

The Unsolicited Goods and Services Act provides protection for people who receive unsolicited goods, or invoices for unordered goods or services.

The Act sets out procedures that consumers should follow when they receive unsolicited goods they do not want. If the sender of the goods has not taken them back after the end of these procedures, the recipient can treat the goods as an unconditional gift and can keep them.

The Act makes it an offence to send invoices for unordered goods or services, or to make demands for payment where there is no obligation to pay.

Layby Sales Act 1971

The Layby Sales Act sets out rules for "layby sales" - where the goods being bought are not available to the buyer until the purchase price is paid off (usually by instalment). The purchaser only pays the cash price; there is no credit involved.

The Act does not apply to layby sales where:

  • The purchase price exceeds $1,000
  • The goods are a motor vehicle and the seller is a licensed dealer.

The Act has three main effects.

The layby can be cancelled by the purchaser at any time before the final payment is made. Consumers are entitled to a refund of the money they've paid, less a certain amount to reimburse the seller for any selling costs and any loss in the item's value while it has been laid aside.

The Act also provides "rules of priority" when a seller winds up the business or goes into receivership or bankruptcy.

The buyer is entitled to a current financial statement about the layby, and the seller may charge a fee for this.

Hire Purchase Act 1971

The Hire Purchase Act give certain protections to consumers who enter into the "hire purchase" agreements.

Most hire purchase agreements are a type of credit agreement (unless they are interest-free). When a hire purchase involves credit, then the Credit Contracts Act 1981 also applies. The Credit Contracts Act is administered by the Ministry of justice.

Schedules to the Act. It also requires that the agreement disclose certain information such as the amount of instalments, the number of instalments and financial details such as the finance rate. Debtors who repay the agreement earlier than
agreed are entitled to a statutory rebate, the equation for which is
also set out in the Act.

The Act also regulates the way in
which a seller or financier can repossess goods if the debtor defaults
in payments or breaches another term of the agreement.

The repossessions provisions of this Act have been substantially altered by the Credit (Repossessions) Bill 1996.

The Act also sets out rules for insurance of goods bought on hire purchase. It also sets out the rules relating to guarantors of hire purchase agreements.

Weights and Measures Act 1987 and amendments

The Weights and Measures Act protects New Zealand's system of weights and measures. It is an essential element in encouraging the fair, accurate and competitive exchange of goods in the marketplace.

The principal Act has six major parts.

Part I sets out the metric system of weights and measures to be used in New Zealand. It also specifies standards to be used in weights and measures and in verifying weighing and measuring equipment. The standards themselves must be uniform and accurate, and so they are verified at set intervals to ensure they comply with international standards.

Part II prescribes the use of weights and measures for trade. It requires that the metric system must be used for goods sold or advertised for sale in New Zealand. It also requires that imported goods not originally using metric weights or measures must have their weights recalculated before being sold here.

Part III defines the sale of goods by weight, measure or number. It requires all pre-packaged goods sold by weight, measure or number to have a statement of their weight, measure or number, and that goods meet their stated weight. It also specifies that net (and not gross) weight or measure must be used in statements of weight or measure.

Part IV sets out procedures for the verification and approval of weights and measures, and weighing and measuring equipment. All new types of equipment must undergo extensive testing to ensure they are accurate under all conditions (such as extreme temperatures) and that they cannot be manipulated for fraudulent use.

Part V deals with administration, and Part VI specifies penalties for offences.

The 1991 amendments to the Act made three main changes, introducing:

  • Accredited persons
  • Infringement offence notices
  • Certificates of accuracy.

"Accredited persons" are appropriately qualified individuals and firms who are accredited by the Trade Measurement Unit (TMU) to undertake the verification and certification responsibilities formerly done by TMU itself They come mainly from companies already in the business of servicing weighing and measuring instruments.

To be accredited, they are required to provide and operate a quality management system which can be audited by TMU or other competent bodies or organisations. To date, 40 organisations and 300 individuals throughout New Zealand have become accredited.

"Infringement offence notices" (I0Ns) are part of an active strategic enforcement programme. They provide for an immediate $500 fine, and are an effective alternative to formal prosecution. Since their introduction in 1991, over 300 infringement notices have been issued.

"Certificates of accuracy" are an option for traders who wish to make sure their weighing or measuring equipment continues to be accurate. While all equipment is required to be verified (by an accredited person) when it first comes into use, the owner of equipment is responsible for its continuing accuracy and can be fined or prosecuted when equipment is inaccurate.

Traders now have the option of having their equipment tested every 12 months. If the equipment is accurate, it receives a certificate of accuracy - which provides a defence against prosecution if the equipment is found to be inaccurate at some point over the 12 months that the certificate is valid for.