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All traders and businesses operating in New Zealand must comply with the Fair Trading Act 1986 (FTA), which sets out rules to protect consumers from being misled or treated unfairly. It also enforces product safety standards and states when a business must disclose information about certain products to consumers. This article sets out the main points to help your business comply with these rules.

Deceptive or Misleading Conduct

As a trader or business, you must ensure that the information you provide to consumers is accurate and you must not withhold important information. In particular, the FTA prohibits deceptive or misleading conduct, including statements about:

  • the standard, quality, price, quantity, style, place of origin, history or previous use of a product or service;
  • the suitability for a particular purpose;
  • sponsorship, approval, endorsement or benefits; and
  • the availability, nature, terms or conditions of a job offer.

Unsubstantial or False Representations

You cannot make claims about products or services that you cannot show to be true or which you know to be inaccurate. This means that you must have reasonable grounds to make a claim about a product or service at the time you make the claim, irrespective of whether it is true or not. Reasonable grounds can come from information you hold, or by a reputable manufacturer or supplier, or from other credible sources such as scientific evidence or medical study. 

For example, a shop runs an offer claiming “30% off all kitchenware!”. To satisfy the reasonable grounds requirement, the shop should have sufficient pricing and sales data to show that the price of the kitchenware items during the offer period is 30% less than the cost of the items for a reasonable time before the offer. 

A representation does not need to be substantiated if a reasonable person would know that it is exaggerated (known as puffery).

A claim can be made verbally or in writing and can be express or implied. Failing to disclose certain information is also prohibited under the FTA. 

For example, not telling a consumer that the price of a product excludes GST is prohibited.

Unfair Practices

Further examples of practices that, as a trader or business, you cannot do, include:

Unfair Practice

Description

Falsely Providing Free Items

You cannot offer gifts, prizes, or other free items if you do not intend to provide them, or not provide them as offered.

Bait Advertising

Advertising products or services that you cannot supply is prohibited. This is known as bait advertising. You should only advertise products or services at the specified price and quantity that you are able to offer, and for the period as stated in the advert (or as reasonable if not stated).

Referral Selling

You cannot induce another person to buy products or services on the basis that they will receive some form of benefit, such as a rebate or commission, in return for providing the names of prospective customers. This is known as referral selling.

Providing Incorrect Products

Demanding or accepting payment without intending to supply the product or service is prohibited if you provide a product or service that is very different from the one the consumer ordered.

Unsolicited Requests

You cannot request payment for products or services that are unsolicited (that is to say that a consumer did not ask for them). This is other than the provision of gas and electricity.

False Statements

You cannot make false or misleading statements about the profitability or risk of a business activity that involves working from home, or requires someone to work or invest money.

Force and Harassment

You cannot use physical force or harassment to supply products or services, or to collect payment for products or services.

Importation

Importing goods into New Zealand with inaccurate labels is prohibited.

Product Safety Standards

Products must comply with specific safety standards. If they do not, they might be recalled or banned. If that happens, you may be required to:

  • inform consumers why and how a product is unsafe;
  • offer to repair or replace it; or
  • provide a refund.

Additionally, there are minimum safety standards for certain products, such as:

  • bikes;
  • toys; and 
  • children’s night clothing.

Suppliers and manufacturers of these products must notify consumers of this product safety information. The FTA imposes similar safety requirements for the performance of certain services.

When Does the Fair Trading Act Apply?

The FTA almost always applies, including to overseas businesses that supply services or products in New Zealand, and online sales. You cannot contract out of the FTA. That is to say, that you cannot decide not to comply with the FTA rules unless:

  • both parties operate as a business;
  • the agreement is in writing; and
  • it is fair and reasonable for them to agree to contract out of the FTA.

Key Takeaways

Under the FTA, you must always provide accurate information about your products or services to consumers. Further, avoid withholding important information as this may mislead consumers and ensure that all claims about your products and services are substantiated before you make them. Inform consumers of the safety standards for your products, including:

  • how a product may be unsafe; and 
  • how a consumer can get their product repaired, replaced or receive a refund. 

There are significant financial and criminal penalties if you fail to comply with the Fair Trading Act. If you have any questions about understanding your rights and obligations under the Fair Trading Act, contact LegalVision’s business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is the Fair Trading Act?

The Fair Trading Act 1986 sets out rules to protect consumers from being misled or treated unfairly. It also enforces product safety standards and states when a business must disclose information about certain products to consumers.

When does the Fair Trading Act apply?

The FTA almost always applies, including to overseas businesses that supply services or products in New Zealand, and online sales. You cannot contract out of the FTA.

What are the consequences of breaching the Fair Trading Act?

You could face significant financial and criminal penalties if you fail to comply with the Fair Trading Act.

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