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consumer

What is the Fair Trading Act (FTA) 1986?

Key Takeaway

The Fair Trading Act 1986 prohibits misleading and deceptive conduct in trade, ensuring businesses are honest in their representations. The Consumer Guarantees Act 1993 provides guarantees for goods and services purchased by consumers, ensuring they are of acceptable quality and fit for purpose. Both acts protect consumer rights in New Zealand.

New Zealand consumer law is primarily governed by two key pieces of legislation: the Fair Trading Act 1986 (FTA) and the Consumer Guarantees Act 1993 (CGA). These Acts work together to protect consumers by ensuring fair business practices and quality goods and services.

The Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 (FTA) is designed to protect consumers from misleading and deceptive conduct, false representations, and unfair practices by businesses. Its purpose is to promote fair competition and truthful advertising in New Zealand trade [Source: Fair Trading Act 1986, s 1A].

Key Prohibitions and Requirements under the FTA

  • Misleading and Deceptive Conduct: No person in trade shall engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This applies to any conduct that could create a false impression, regardless of whether there was an intention to deceive.
  • False or Misleading Representations: Businesses must not make false or misleading representations about goods, services, or prices. This includes claims about quality, standard, grade, composition, style, model, history, or previous use of goods [Source: Fair Trading Act 1986, s 13]. It also covers representations about services, such as the nature, standard, quality, or quantity of services [Source: Fair Trading Act 1986, s 13(d)], and the availability of facilities for the repair of goods or spare parts [Source: Fair Trading Act 1986, s 13(g)].
  • Unsubstantiated Representations: A person in trade must not make a representation about goods or services without having reasonable grounds for making that representation [Source: Fair Trading Act 1986, s 12A]. This means businesses must be able to back up their claims with evidence.
  • Unfair Practices: The FTA prohibits specific unfair practices, including:
    • Bait advertising: Advertising goods or services at a specified price when there are reasonable grounds for believing the advertiser will not be able to supply them at that price for a reasonable period and in reasonable quantities [Source: Fair Trading Act 1986, s 19].
    • Pyramid schemes: Promoting or operating a pyramid selling scheme [Source: Fair Trading Act 1986, s 21]. A pyramid scheme is a marketing scheme where participants are required to make payments to participate, with the right to receive payments primarily for recruiting new participants rather than for the sale of goods or services.
    • Referral selling: Offering a rebate, commission, or other benefit as an inducement to a consumer, in return for their assistance in finding other customers, if the receipt of the benefit is contingent on an event occurring after the agreement is made [Source: Fair Trading Act 1986, s 18].

Enforcement of the FTA

The Commerce Commission is responsible for enforcing the FTA. Breaches can result in fines, injunctions, or corrective advertising orders [Source: Fair Trading Act 1986, Part 5]. Consumers may also be able to seek compensation for losses suffered due to a breach of the FTA [Source: Fair Trading Act 1986, s 43].

The Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 (CGA) provides a set of guarantees for goods and services supplied to consumers. A consumer is generally defined as a person who acquires goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption, and not for the purpose of resupplying them in trade or using them in a manufacturing or repair process [Source: Consumer Guarantees Act 1993, s 2].

Guarantees for Goods

When a consumer buys goods from a supplier in trade, the goods come with several automatic guarantees, regardless of any manufacturer's warranty:

  • Acceptable Quality: Goods must be of acceptable quality, meaning they are fit for all the 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].
  • Fit for a Particular Purpose: If the consumer makes a particular purpose for the goods known to the supplier, the goods must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 7].
  • Match Description: Goods must match any description given, whether in advertising, on a label, or verbally [Source: Consumer Guarantees Act 1993, s 8].
  • Match Sample or Demonstration Model: If goods are supplied by reference to a sample or demonstration model, they must correspond with that sample or model in quality, state, or condition [Source: Consumer Guarantees Act 1993, s 9].
  • Reasonable Price: If a price has not been agreed, the consumer is not liable to pay to the supplier more than a reasonable price for the goods [Source: Consumer Guarantees Act 1993, s 10].
  • Repairs and Spare Parts: The manufacturer guarantees that facilities for the repair of the goods and the supply of spare parts are reasonably available for a reasonable period after the goods are supplied [Source: Consumer Guarantees Act 1993, s 12].
  • Clear Title: The supplier guarantees that they have the right to sell the goods and that the consumer will have undisturbed possession [Source: Consumer Guarantees Act 1993, s 5].

Guarantees for Services

When a consumer obtains services from a supplier in trade, the services also come with automatic guarantees:

  • Reasonable Care and Skill: Services must be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Fit for Particular Purpose: If the consumer makes a particular purpose for the services known, the services must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 29].
  • Completed Within a Reasonable Time: If no time for completion is agreed, the services must be completed within a reasonable time [Source: Consumer Guarantees Act 1993, s 30].
  • Reasonable Price: If a price has not been agreed, the consumer is not liable to pay more than a reasonable price for the services [Source: Consumer Guarantees Act 1993, s 32].

Remedies for Failed Guarantees

If goods or services fail to meet a guarantee, the consumer is entitled to a remedy. The type of remedy depends on whether the failure is minor or substantial:

  • Minor Failure: For minor failures, the supplier may choose to repair the goods, replace them, or provide a refund [Source: Consumer Guarantees Act 1993, s 18(2)]. For services, the supplier may remedy the failure [Source: Consumer Guarantees Act 1993, s 32(b)].
  • Substantial Failure: A substantial failure is one that a reasonable consumer would not have acquired the goods or services had they known about the failure, or if the goods are unsafe or depart significantly from the description or demonstration model [Source: Consumer Guarantees Act 1993, s 21]. For a substantial failure, the consumer can choose to reject the goods and get a refund or replacement, or keep the goods and claim compensation for the drop in value [Source: Consumer Guarantees Act 1993, s 18(3)]. For services, the consumer may cancel the agreement or obtain compensation for the reduction in value of the services [Source: Consumer Guarantees Act 1993, s 32(c)-(d)].
  • Consequential Loss: Consumers may also claim for any loss or damage resulting from the failure, provided it was reasonably foreseeable [Source: Consumer Guarantees Act 1993, s 19 (for goods), s 32A (for services)].

Contracting Out of the CGA

The CGA generally prevents suppliers from contracting out of its guarantees. However, a business may contract out of the CGA when both parties are in trade, and they agree in writing to do so, provided it is fair and reasonable for them to do so [Source: Consumer Guarantees Act 1993, s 43(2)]. This exception typically applies to business-to-business transactions, not consumer transactions.

When to Seek Independent Legal Advice

When a consumer believes their rights under the Fair Trading Act 1986 or the Consumer Guarantees Act 1993 have been breached, or if they are a business facing a dispute under these Acts, it is important for them to seek independent legal advice. This information is general in nature and does not constitute legal advice. For specific guidance, individuals can contact Community Law Centres throughout New Zealand for free advice (https://communitylaw.org.nz/) or consult with a qualified legal professional.

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