Understanding consumer laws is crucial for you as a start-up owner. These laws govern the relationship between you and your consumers and ensure that your business meets consumer rights. Consumer laws dictate how and what you can sell, and understanding consumer laws is crucial for startup owners. These laws govern the relationship between you and your consumers and ensure that your business meets consumer rights whilst securing consumer protection. Consumer laws dictate how and what you can sell, influence the advertisements, marketing, and materials your business can make, and govern how your business must handle customer complaints. This article will outline the primary consumer laws that affect startups.
Consumer Guarantees Act (CGA)
The CGA applies to any person in trade or business that makes, imports or sells products to consumers in New Zealand for personal or domestic use. Under the CGA, customers are assured that they get what they pay for and can get a repair or refund if the product is faulty or does not function as promised.
Consumer Laws when Selling Products
You have obligations to offer products that:
- are of acceptable quality;
- are fit for purpose;
- match the description given;
- match any samples or demonstrations given;
- are sold at a reasonable price if a price was not agreed to beforehand; and
- are able to be legally sold.
You must also ensure that any deliveries arrive at the agreed time and in an acceptable condition. If there are delays in delivery, your consumers should be regularly informed of the status of such delays. If your products do not arrive within a reasonable period of time, you should honour any requests for refunds.
To the extent possible and depending on the nature of the product, your startup should have spare parts available and a way to offer repairs. If spare parts and repairs are unavailable, you must notify the customer before purchasing the product.
If a customer buys a good that turns out to be faulty, they are entitled to a remedy under the CGA. Remedies can include:
- repairs;
- refunds; or
- replacements.
Consumer Laws when Selling Services
If your start-up is offering a service, then you must provide services that:
- are performed with a reasonable level of skill and care;
- are fit for purpose;
- cost a reasonable amount; and
- are completed in a reasonable time.
Consumer Complaints Under the CGA
If a customer finds a problem with your service, then you can offer them:
- to have the service redone;
- compensation; or
- a refund.
When conducting business activities, you must not:
- knowingly sell faulty products or substandard services; or
- delay an investigation if the customer complains.
In addition, you are not required to simply accept that a product or service is faulty when a customer complains (unless it is blatantly obvious). You are allowed to investigate before offering the customer a remedy.
Under the CGA, the obligations and remedies covered above will not apply if the customer:
- got what they asked for but changed their mind;
- misused or altered the product in a way that caused the problem;
- damaged, lost, or disposed of the product after delivery;
- knew about the fault when they bought the product;
- took an unreasonable time to return the product or cancel the service; or
- experienced a service problem outside your control, such as a natural disaster.
Contracting out of the CGA
It is important to note that the purpose of the CGA is to protect consumers. If your startup works directly with other businesses in trade, you can contract out of your consumer law obligations. To ensure the CGA does not apply to your dealings with businesses, both parties must enter into a written agreement acknowledging that it is fair and reasonable for the CGA to not apply to the arrangement.
Fair Trading Act (FTA)
The FTA is a law that protects consumers in New Zealand from unfair business practices. It prohibits misleading information, unfair practices, and unsafe products. Under the FTA, you must communicate fairly and honestly about what you sell, whether in person, in print, or online. You cannot make false promises or representations to your customers. The FTA covers any statement you make about your startup and the products or services you offer, including in advertising, on your website, and social media.
Under the FTA, you must:
- accurately represent your good or service;
- only provide accurate information about your startup (which can be substantiated);
- make sure you and your employees are familiar with your goods or services and what they can and cannot do;
- meet product safety requirements; and
- give certain required information to customers, such as GST, extra fees and country of origin.
Moreover, under the FTA, you must act fairly with your customers and cannot:
- oversell your product or service (meaning you keep it up for sale when you know you cannot provide the product or service);
- mislead customers about a product or service;
- fail to tell customers crucial information;
- fix prices with other businesses;
- sell extended warranties as a “no hassle” option against future issues; or
- sell products or services using unfair practices or contract terms.
Essential reading for anyone building their startup. This free guide includes practical advice and seven real-life case studies.
Privacy Act
The Privacy Act 2020 (‘the Privacy Act’) applies to all businesses, including startups, that collect, use, and store personal information. Personal information can identify a person, such as a name or a phone number. The Privacy Act ensures your customer’s personal information is safe, secure, and protected from misuse. To comply with this Act, you must:
- only collect the information you need for business purposes, such as contact details;
- tell people how, when, and why you are collecting their information;
- tell people what will happen if they do not provide you with their personal information;
- keep customer’s personal information safe;
- only use the personal information if you know it is accurate and up to date; and
- let people see their information and allow them to correct any mistakes.
When dealing with personal information, you cannot:
- ask for more information than you need;
- let information be leaked, hacked, or copied;
- keep information for longer than you need it; or
- pass information to another business without the person’s permission.
If a customer feels that your start-up has broken any of these rules, they can make a complaint under the Privacy Act to the Privacy Commissioner. The Commissioner will look at the complaint and decide if they will investigate or not. As a remedy, you may be asked to apologise, delete the customer’s information, and/or pay the consumer compensation, depending on the nature of the breach. Beyond these remedies, reputational damage can often be the most harmful outcome of a privacy breach.
Key Takeaways
Your startup must comply with consumer laws when it trades. The most notable laws include the CGA, FTA, and Privacy Act. Such laws protect customers and ensure that you treat them fairly. By complying with these laws, you can build a better relationship with your consumers and avoid legal issues.
If you need help complying with consumer laws, our experienced startup lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
Frequently Asked Questions
The CGA ensures that customers get what they pay for and that they can be provided with a remedy if the product is faulty or unfit. You may also need to provide remedies if your service is substandard and not done with sufficient skill and care.
To comply with the FTA, you must ensure you do not mislead consumers about your products or services. You must accurately represent your goods and services and provide all necessary information.
We appreciate your feedback – your submission has been successfully received.
