The Fair Trading Act

Fair Trading Regulations in NZ
If you are in business, it is important that you understand how the Fair Trading Act affects your day-to-day operations.
The Act applies to all aspects of the promotion and sale of goods and services — from advertising and pricing to sales techniques and finance agreements.

This document aims to provide guidance on how to operate your business without breaking the law. It gives examples of unlawful trade practices which breach the Act, and explains the role of the Commerce Commission in enforcing the Act and product safety and consumer information standards.

Compliance with the Act benefits consumers. It also protects traders who ensure they comply with the Act. In addition to any action the Commerce Commission might take in relation to a breach, consumers and competitors can take their own legal action against a trader breaching the Act.

The Fair Trading Act
The Fair Trading Act came into force on 1 March 1987, replacing earlier laws relating to misleading and deceptive conduct, unfair trading practices and consumer information.When making claims about products you manufacture or sell, you must remember that your audience will include some people who are more easily misled than others.

The courts have said the Act is there to protect everyone, including those who may be gullible, of less than average intelligence or poorly educated.

Certain groups, by reason of language difficulties, age or lack of education, may be susceptible to being misled or deceived. If your customers include such people, you must take this into account and be especially careful when preparing your advertising.

What the Fair Trading Act does

  • prohibits people in trade from engaging in misleading or deceptive conduct generally (section 9);

  • prohibits certain types of false or misleading representations about employment (section 12), goods or services, including false claims that goods or services are of a particular price, standard, quality, origin or history or that they have particular uses or benefits or that they have any particular endorsement or approval (section 13);

  • prohibits certain unfair trading practices (sections 17 to 24); and

  • provides for consumer information and product safety standards (sections 27 to 33).

In practice, if you are found to have breached the Fair Trading Act, it is likely you have breached both the misleading and deceptive conduct provisions and the false or misleading representations provisions of the Act. You can therefore face both criminal and civil actions.

Important points to note about the Act

  • it protects both consumers and law-abiding traders;

  • in most cases it is not relevant whether a trader intended to deceive or mislead, rather the issue is whether their actions did or could deceive or mislead;

  • it does not need someone to suffer or be directly affected by the trader's behaviour for action to be taken, as the Act applies not only to conduct which has actually misled or deceived somebody, but also to conduct likely to mislead or deceive.

  • both companies and individuals can be prosecuted for breaching the Act. Where a copany acts unlawfully, the directors, managers and employees can be held liable. Anyone else who aided and abetted the offending conduct may also be held liable. This includes, for example, advertising agents who design and prepare misleading or deceptive advertisements for their clients, or wholesalers and retailers who sell misleadingly or deceptively labelled goods.

Summary of Fair Trading Act

1. Trade Practices Covered by the Act

False or misleading advertising
False or misleading representations about price
Sales techniques, finance agreements and unfair practices

2. Consumer Information Standards

Country of origin labelling
Fibre content labelling
Care labelling

3. Product Safety Standards

Bicycle safety standard
Children's night clothes safety standard
Toy safety standard
Unsafe goods notices

4. Enforcement of the Fair Trading Act

Consequences of contravention
Defences to action from the Act
Specific defences provided by the Act
The role of the Commerce Commission
Developing a compliance programme