The Fair Trading Act (FTA) specifically prohibits certain types of behaviour by businesses or anyone in trade.

Know your rights

The FTA prohibits the following types of trader conduct:

Misleading conduct is prohibited generally as well as specific false or deceptive representations. This covers anything written or said about products or services including advertising, any impressions from images and also what is left out if this may create a false impression.

To decide if something is misleading or deceptive ask:

  • is it true?
  • what sort of consumer is relying on the conduct and their level of knowledge
  • was anything undisclosed that may create a false impression?

It does not matter if a trader did not intend to mislead. It is whether their actions did so. It is not sufficient to rely on fine print in advertising or contracts to correct a misleading overall impression or hide important conditions.

The Act also bans conduct that is liable to mislead or deceive:

  • about the nature, manufacturing process, characteristics, or quantity of products, or about their suitability for a particular purpose
  • about the nature, characteristics, or quantity of services, or about their suitability for a particular purpose
  • in relation to an offer of employment as to the availability, nature, terms, conditions, or any other matter relating to the employment.

The FTA also bans false or misleading representations or statements (including advertising) about products or services related to :

  • price, standard, quality, origin or history
  • particular uses or benefits, endorsements or approval.

In practical terms this means that:

  • quotes or estimates should be done carefully and based on a reasonable estimate
  • interest free and free credit promotions must equal the cash price
  • pricing comparisons with other businesses must be based on actual market prices in the same region
  • any products advertised as free must be truly free
  • if GST is not included this should be clearly stated
  • future projections have any assumptions clearly stated
  • surveys or tests relied must be have been reliably undertaken
  • claims about qualifications and skills that employers, employees or tradespeople have must be true including any membership or approval by trade or professional organisations.

See also the Commerce Commission’s factsheets:

Traders can’t make unsubstantiated claims about products or services if they don’t have reasonable grounds for it at the time. This rule applies even if the representation is true and not misleading. However it doesn’t apply if a reasonable person would know it was mere exaggeration or puffery. What is reasonable depends on the nature of the products or services, the nature of the representation, eg quantity or quality, any research or information the trader relied on, and the effect of the representation on you.

See the Commerce Commission’s factsheets to find out more including:

Certain unfair practices are banned such as:

  • Bait advertising (misleading incentives): advertising products and services traders can’t supply. These must be available in reasonable quantities for a given period of time or a reasonable time if not set. A rain-check system will help to avoid any breach. Any limits should be clearly stated with any offers.
  • Harassment and coercion: including physical force to try to sell products, services or land or to get payment for them. This can be a fine line with hard-sell techniques where you feel forced to buy.
  • Pyramid Selling: you get financial rewards for recruiting new people to pay into the scheme. Often these are financial scams with high promised rates of return. Multi-level marketing schemes are legal though as they involve the sale of rights to sell products in different market levels.
  • Referral selling: you get some form of reward for the names of others who then buy products or services. But not if the offer is made after the first paying customer gets a rebate or other rewards.
  • Pro-forma invoicing and inertia selling: when traders supply products or services to you without you agreeing to the sale and then bill you for them.
  • Accepting payment without intending to supply: the same products or services, or very different products or services from those ordered, or the supplier does not believe they will be able to supply the items within a specified period or within a reasonable timeframe if none agreed.
  • Making false or misleading representations: about the profitability, risk or other relevant aspect of a business activity that is said to be able to be carried on from a person's home.
  • Inviting people to engage or participate in a business activity: requiring work or work and investment, while misrepresenting the profitability, risk or other relevant aspect of the business activity
  • Importing products with inaccurate labels on them.
  • Unsolicited products or services: that you receive when you haven’t ordered or asked for them or anyone on your behalf, except for piped gas or electricity. 
    Your rights include:
    • you don’t have to pay for them unless you want to keep them
    • you’re not responsible if they’re lost, destroyed or damaged unless you did so deliberately
    • the seller must collect unwanted items, if you make them available at any reasonable time during the 10 working days after you received them, if they want them back
    • you must be given information with the items explaining your rights and obligations with them if the seller is a business
    • you can keep the products free of charge, if the sender doesn’t collect them within 10 working days, as long as you’ve made them available to be picked up
    • you can’t keep the products if unless you knew or should reasonably have known that they weren’t intended for you, eg addressed to someone else.

It’s a criminal offence for a trader to try to claim that they have a right to be paid for them or to send you an invoice, unless this clearly states that you have no obligation to pay.

Read the Commerce Commission’s factsheets to find out more including:

You can apply to the Commerce Commission to have a term reviewed in a standard form consumer contract. This is a contract that you accept on a take it or leave it basis and there is no negotiating the terms. The Commerce Commission then decide if they will seek a declaration from the District Court that a term is unfair.

There are certain factors that the Court must be satisfied with when dealing with an application. This includes whether the term is in a consumer contract and, if so, is it also a standard form contract.

The Court must also then be satisfied that the term in the contract:

  • would cause a significant imbalance
  • is not reasonably necessary to protect legitimate interests
  • would cause detriment if applied.

Some terms are exempt and can’t be declared unfair if they:

  • define the main subject matter of the contract such as the services or products to be supplied
  • set the up-front price payable under the contract
  • are expressly allowed by law.

The contract as a whole is looked at so there may be other benefits that outweigh the unfairness, such as a lower price. The supplier would have to show their legitimate interest can’t reasonably be protected by any other means.

The Commerce Commission has set out a grey list that they presume to be unfair where only the supplier can:

  • terminate, vary or renew the contract
  • penalise you for breach or termination
  • avoid or limit liability or enforcement rights.

This may be proven to be fair if you have an ability to terminate, are given adequate notice, or have a reciprocal right.

See also:


 

Need more help?

Contact us for more guidance.