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consumer

Misleading and deceptive conduct under the FTA

Key Takeaway

New Zealand's Fair Trading Act 1986 prohibits misleading or deceptive conduct by businesses 'in trade'. The Consumer Guarantees Act 1993 provides rights and remedies for consumers when goods or services fail to meet guarantees of quality or fitness. Both Acts protect consumers from unfair practices and provide avenues for redress against traders.

Understanding Misleading and Deceptive Conduct in New Zealand Consumer Law

New Zealand consumer law aims to protect individuals when they purchase goods or services. Two primary pieces of legislation, the Fair Trading Act 1986 (FTA) and the Consumer Guarantees Act 1993 (CGA), establish rules, rights, and obligations concerning business conduct and product quality. While distinct, these Acts often work together to provide comprehensive consumer protection.

Fair Trading Act 1986 (FTA): Prohibiting Misleading Conduct

The Fair Trading Act 1986 is designed to protect consumers from misleading and deceptive conduct and unfair trading practices by businesses in trade. The phrase in trade refers to activities relating to a business, profession, or occupation [Source: Fair Trading Act 1986, s 2(1)].

The General Prohibition on Misleading and Deceptive Conduct

The cornerstone of the FTA is the prohibition against misleading or deceptive conduct:

  • No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9].

Conduct is interpreted broadly and can include statements, actions, omissions, advertising, packaging, or even silence where there is a duty to disclose information. Misleading or deceptive means conduct that leads or is likely to lead an ordinary, reasonable consumer into error. The intention of the person engaging in the conduct is not relevant; it is the effect or likely effect of the conduct that matters [Source: Fair Trading Act 1986, s 9].

Specific Prohibitions and False Representations

Beyond the general prohibition, the FTA also outlines specific types of misleading conduct:

  • False or Misleading Representations: It is illegal to make false or misleading representations about goods or services, including their nature, quality, price, fitness for purpose, or endorsements [Source: Fair Trading Act 1986, s 13]. For example, claiming a product has certain characteristics it does not possess or is endorsed by a particular organisation when it is not.
  • Unsubstantiated Representations: A person must not, in trade, make a representation about a good or service without having reasonable grounds for making the representation [Source: Fair Trading Act 1986, s 12A]. This means businesses must be able to back up claims they make about their products or services.

Remedies and Enforcement under the FTA

If a breach of the FTA occurs, various remedies may be available:

  • Damages: A court may order the person who engaged in the misleading conduct to pay damages (monetary compensation) to the injured party [Source: Fair Trading Act 1986, s 43(2)(d)].
  • Injunctions: A court can issue an injunction, which is a court order requiring a person to stop engaging in certain conduct or to perform a specific act [Source: Fair Trading Act 1986, s 42].
  • Corrective Advertising: A court may order a person to publish corrective advertising to undo the effects of misleading conduct [Source: Fair Trading Act 1986, s 43(2)(e)].
  • Pecuniary Penalties: For serious breaches of certain provisions, such as false representations or unsubstantiated representations, the Commerce Commission can seek pecuniary penalties (fines) [Source: Fair Trading Act 1986, s 40].

The Commerce Commission is the primary enforcement body for the Fair Trading Act 1986 and can investigate complaints and take legal action against businesses that breach the Act [Source: Fair Trading Act 1986, Part 5].

Consumer Guarantees Act 1993 (CGA): Rights for Consumers

The Consumer Guarantees Act 1993 provides a set of automatic guarantees that apply to goods and services supplied to consumers by businesses in trade [Source: Consumer Guarantees Act 1993, s 2, s 4]. A consumer is generally defined as a person who acquires goods or services for personal, domestic, or household use or consumption, and not for resupply or use in trade [Source: Consumer Guarantees Act 1993, s 2(1)].

While the FTA addresses the conduct of traders, the CGA focuses on the quality and performance of the goods and services themselves. The CGA operates independently of the FTA, meaning that even if there was no misleading conduct, a consumer still has rights if a product or service fails to meet its guarantees.

Key Guarantees for Goods

When a consumer buys goods from a business, the CGA provides guarantees including that:

  • Goods are of acceptable quality: This means they must be fit for all purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6].
  • Goods are fit for a particular purpose: If a consumer makes known a particular purpose for acquiring goods, and the supplier represents that they are fit for that purpose, they must be fit for that purpose [Source: Consumer Guarantees Act 1993, s 7].
  • Goods match their description: The goods must correspond with any description given by the supplier [Source: Consumer Guarantees Act 1993, s 9].
  • Goods match any sample or demonstration model: If goods are sold by reference to a sample or demonstration model, the goods supplied must correspond with that sample or model [Source: Consumer Guarantees Act 1993, s 10].
  • The supplier has the right to sell the goods: The supplier must have the right to pass ownership of the goods to the consumer [Source: Consumer Guarantees Act 1993, s 5(a)].

Key Guarantees for Services

When a consumer acquires services from a business, the CGA guarantees that:

  • Services will be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Services will be fit for any particular purpose [Source: Consumer Guarantees Act 1993, s 29].
  • Services will be completed within a reasonable time (if no time is agreed) [Source: Consumer Guarantees Act 1993, s 30].
  • The price charged for the services will be reasonable (if no price is agreed) [Source: Consumer Guarantees Act 1993, s 32].

Remedies for Failed Guarantees under the CGA

If goods or services fail to meet one or more of these guarantees, a consumer has rights to a remedy. The type of remedy depends on whether the failure is minor or substantial:

  • Minor failure: If the failure can be remedied, the supplier may choose to repair the goods, replace the goods, or refund the money [Source: Consumer Guarantees Act 1993, s 18]. For services, the supplier must remedy the failure within a reasonable time [Source: Consumer Guarantees Act 1993, s 31].
  • Substantial failure: If the failure cannot be remedied or is of a substantial character, the consumer may choose to reject the goods and seek a refund or replacement, or keep the goods and claim compensation for the drop in value. For services, the consumer may cancel the service agreement and seek compensation for any reduction in value [Source: Consumer Guarantees Act 1993, s 21, s 32].
  • Consequential loss: Consumers may also claim for any reasonably foreseeable loss or damage resulting from the failure, beyond the value of the goods or services themselves [Source: Consumer Guarantees Act 1993, s 20, s 32].

Interplay between the FTA and CGA

The FTA and CGA are distinct but complementary. Misleading or deceptive conduct under the FTA can often lead to a product or service failing a guarantee under the CGA. For example, if a business falsely claims a product is waterproof (breaching the FTA), and the product then leaks, it would also fail the guarantee of acceptable quality and potentially fitness for purpose under the CGA.

A consumer can pursue remedies under both Acts depending on the circumstances of their complaint. The FTA addresses the conduct of the business before and during a transaction, while the CGA addresses the quality and performance of goods and services after the transaction.

When to Seek Independent Legal Advice

Navigating consumer law can be complex. If a consumer believes their rights have been breached under the Fair Trading Act 1986 or the Consumer Guarantees Act 1993, and they are unsure about the available remedies or how to proceed, it is recommended that they seek independent legal advice. This may involve contacting a legal professional, their local Community Law Centre, or the Citizens Advice Bureau to discuss their specific situation and understand their options.

Key Resources