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If your business sells goods or services to consumers for personal or domestic use, you will need to comply with the Consumer Guarantees Act. This sets a minimum standard for your business to follow when selling to consumers so that they can get a fair deal. If you do not meet this minimum standard, then you must provide a remedy for your customers. Failing to do so could result in both reputational and legal consequences. For some guidance, this article will detail six tips for complying with the Consumer Guarantees Act in New Zealand.

1. Know Your Consumer Guarantees

You need to know what the consumer guarantee law requires that you give your customers, and ensure that your staff know these guarantees as well. If you sell goods, then you must ensure that they:

  • are of acceptable quality;
  • meet their intended purpose;
  • match any descriptions or demonstrations you give;
  • are a reasonable price where you have not given a price beforehand;
  • are delivered on time and in good condition; and
  • are sold legally.

If you provide services, you need to:

  • carry them out with reasonable care and skill;
  • ensure they fit the purpose the customer asked for;
  • complete them within a reasonable time frame; and
  • charge reasonable prices where there was no set price.

2. Clearly State When You Are in Trade

The Consumer Guarantees Act applies to anyone that is ‘in trade’. It does not apply to private sales between individuals. Indicators of being in trade include:

  • selling goods or services regularly;
  • being GST registered;
  • purchasing or making goods for the purpose of selling them; or
  • having sales staff.

In most cases, it will not be an issue determining whether a trader is ‘in trade’ according to the law. However, as eCommerce becomes more popular, it may not be as apparent to customers that they are buying from someone in trade. Therefore, particularly if you sell online, you need to ensure you display your in trade status somewhere. This is so that customers know that consumer guarantees apply to any of their transactions with your business.

For example, Trade Me has a special badge for sellers to indicate they are in trade on their webpage.

3. Develop a Clear Returns Policy

If you fail to meet one of your consumer guarantees, then you need to provide a customer with a remedy in the form of a:

  • return;
  • repair; or
  • refund.

To avoid confusion and better streamline the returns/refund process, have a clear returns policy that you display in-store or on your website. Customers should be able to identify when they are eligible for a remedy and who to contact to begin that process. If you allow returns outside of what the Consumer Guarantees Act requires, detail this as well.

4. Duly Investigate Customer Complaints

Customers will complain to your business if they think you have broken one of your consumer guarantees, and you must promptly investigate each complaint as they come. However, you do not legally have to remedy every complaint. You only need to remedy a complaint when you have failed to meet the minimum standard. Therefore, take the time to confirm the validity of a complaint. Ask for proof of purchase (such as a receipt) and respond to the situation as appropriate. 

For example, say that a customer complains of a faulty good and demands a refund. However, after proper investigation, you discover that the product was only faulty because the customer ignored instructions and misused it. In that situation, you would not need to provide a remedy under the Consumer Guarantees Act.

5. Listen to What the Customer Wants

One of the consumer guarantees requires that the goods or services you sell must be fit for their intended purpose. Therefore, you need to ensure that anything you sell will meet the reasonable expectations of the customer.

For example, if you sell heavy-duty outdoor clothing, customers would reasonably expect that they could hold up to windy and cold weather conditions.

Listen to what the customer asks you for, and provide a product that you think will suit that purpose. However, if a customer disregards your instructions or is unclear about what they want, then this particular consumer guarantee will not apply in most cases.

6. Negotiate Your Contracts With Third Parties

Depending on the nature of your business, you will likely contract with multiple parties to provide goods or services to your customers. These may include:

  • manufacturers;
  • suppliers; or
  • couriers.

If something goes wrong and a product you sell does not meet its consumer guarantees, then you are a customer’s first point of contact for a complaint. You are responsible for remedying that complaint.

This applies even when your manufacturer or supplier caused the fault. Therefore, you need to ensure you have appropriate contractual safeguards with relevant third parties so that you do not foot the loss if something goes wrong on their end.

Key Takeaways

When you sell to consumers, you need to ensure that you comply with the Consumer Guarantees Act. This means providing a remedy when you break your consumer guarantees and maintaining a proper standard for your goods or services. If you would like more information or help with your compliance with the Consumer Guarantees Act, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is the Consumer Guarantees Act?

The Consumer Guarantees Act is one of New Zealand’s laws that regulates how businesses can sell to consumers. Its purpose is to ensure that customers get by they pay for by imposing minimum guarantees for sellers.

What is a consumer?

A consumer is someone that buys products or services for their own ordinary personal or domestic use. For example, a consumer would buy a bed for their personal use.

Does the Consumer Guarantees Act apply to my business?

If you run a business selling goods or services to consumers, then the Consumer Guarantees Act will apply to you. Consumer law applies to anyone who is in trade. The Act focuses on consumer protection and consumer rights.

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