Finance Minister Nicola Willis strengthens the Fair Trading Act, enhancing its ability to crack down on companies that run misleading promotions.
Willis said the Fair Trading Act framework in the country is no longer up to date. Under existing legislation, companies that advertise a special promotional price but do not apply it at the checkout can be fined up to $600,000.
However, the penalty doesn’t sufficiently deter potential wrongdoers. Willis plans to increase it to $5 million and would go even further for more serious cases of misleading consumers.
Companies found misleading customers about pricing will soon face a fine amounting to three times the value of the commercial gain made or loss avoided.
“Business, play by the rules. If you don’t, there will be consequences,” Willis said.
The recent law change follows a Commerce Commission report showing an almost 23% increase in the number of fair trading complaints over the past five years.
The rule changes have received backing from Commerce Commission Deputy Chair Anne Callinan.
“We’re really pleased to hear that the penalties will increase, and we think that that will make a huge impact in terms of being able to set deterrents against illegal conduct,” Callinan said.
Consumer NZ Chief Executive John Duff has also expressed support for the law reform.
“We’re often talking about multinationals here who are facing far stiffer penalties in other jurisdictions. So it’s really important that our penalties provide a deterrent that’s similar to overseas jurisdictions,” Duff said.
Duff has also urged the government to prohibit company directors from obtaining insurance to cover penalties.
“That puts us quite out of step with overseas jurisdictions and effectively says to those businesses that can afford good insurance, ‘Hey, you don’t need to really worry about Fair Trading Act compliance because you’ll be covered by insurance anyway,” Duff said.
After consulting with business and other groups, Willis said the government has chosen not to move forward with proposals to prevent directors from taking out insurance or indemnifying themselves against penalties under the Act.
“We have also opted not to progress proposals to expand infringement fees and unfair contract terms provisions,” Willis said.