Intent of the Act
The Fair Trading Act (FTA) exists to:
- promote fair competition
- make sure consumers get accurate information before buying products and services
- promote product safety.
The FTA makes it illegal for businesses to mislead or deceive you, and requires them to make sure the information they provide is accurate, and that they don't withhold important information.
The Act also gives you special rights if you buy products or services on layby or by uninvited direct sales, or you buy extended warranties that fall within the FTA's definitions.
Fair Trading Act(external link) — Legislation.govt.nz
If you bought something online from an overseas seller, the Fair Trading Act still applies, but it could be difficult to enforce.
The Fair Trading Act makes these types of trader behaviour illegal:
Deceptive or misleading conduct and false representations
Businesses must not mislead or deceive you about the things they sell. This covers anything written or said about products or services, including:
- any impressions from images
- information that's left out if this may create a false impression.
It doesn't matter if a trader didn't intend to mislead, and they can't rely on fine print in advertising or contracts to correct a misleading overall impression or hide important conditions.
This includes statements or conduct that's liable to mislead or deceive about:
- the nature, manufacturing process, characteristics, quantity, price, standard, quality, origin or history of a product or service
- suitability for a particular purpose, benefits, endorsements or approval
- the availability, nature, terms or conditions of a job in an offer of employment.
Claiming you’re something you’re not(external link) — Commerce Commission
Quotes and estimates may be considered misleading conduct if the final cost is bigger than you expected.
Quotes and estimates
If a business displays an item with an incorrect price, the trader doesn't usually have to sell it at that price. If the incorrect pricing was a genuine mistake, they have the right to ask you to pay the correct amount. Read about what happens if you're undercharged:
Misleading prices or advertising
Traders can’t make unsubstantiated claims about products or services.
This means a trader needs to have reasonable grounds to make a claim about a product or service at the time they make the claim. They're breaching the Act if they make a claim they can't back up with evidence, even if it later turns out to be true.
This rule doesn't apply if a reasonable person would know the claim was just exaggeration (also known as puffery).
Making accurate claims(external link) — Commerce Commission
Jargon, exaggerations and puffery(external link) — Commerce Commission
Unfair sales practices
Unfair practices banned by the FTA include:
- Bait advertising (using misleading incentives) — when a trade advertises products and services they can’t supply. These must be available in reasonable quantities for a given period of time (or a reasonable time if no time is set). Any limits on the offers should be clearly stated.
- Harassment and coercion — using threats, physical force or other controlling tactics to sell products, services or land, or to get payment. There can be a fine line with hard-sell techniques where you feel forced to buy.
- Pyramid selling — where you get financial rewards for recruiting new people to pay into the scheme. Often these are financial scams with high promised rates of return. Pyramid schemes are illegal, but multi-level marketing schemes are legal. (Multi-level marketing participants earn commission from selling products. Pyramid sellers earn money solely or primarily by introducing other people into the scheme.)
- Referral selling — where you are encouraged to buy something because of a promised reward for giving the names of other potential customers.
- Pro-forma invoicing and inertia selling — when traders bill you for products or services you didn't agree to buy. You don't have to pay if you never agreed to the sale. Your silence does not show agreement.
- Unsolicited products or services — when you receive products or services you didn't ask for or order. The only exceptions are electricity and piped gas.
- Taking payment without intending to supply — or supplying very different products or services from those ordered. Traders must give you what you have agreed to buy, or a reasonable substitute if you agree.
- False or misleading representations about the profitability, risk or other relevant aspect of a "work from home" business activity, or a business activity requiring you to work or invest money.
- Importing products with inaccurate labels.
Selling online(external link) — Commerce Commission
Pyramid selling and multi-level marketing claims(external link) — Commerce Commission
Buying goods and services(external link) — Commerce Commission
Unfair contract terms (UCT)
A standard form consumer contract is a contract you accept on a take it or leave it basis — you can't negotiate the terms. If you think a term is unfair, you can apply to the Commerce Commission under the FTA to have it reviewed.
The Commerce Commission then decides if they will ask the District Court to declare the term unfair. The Court must be satisfied that the term in a contract:
- causes a significant imbalance between you and the business
- is not reasonably necessary to protect the business's legitimate interests
- would cause detriment if enforced.
The contract as a whole is considered, as it might offer benefits that outweigh any unfairness.
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.
Once a contract is agreed to or signed, cancelling it can be difficult. Early cancellation fees are common. This is considered fair if it is a reasonable estimate of the loss the business will suffer from the cancellation.
For more information on contracts, your rights, cancellations and common tricky words and phrases, see:
Contracts and sales agreements
Unfair contract terms guidelines(external link) — Commerce Commission
Ways to buy and pay
The Fair Trading Act also outlines the rules and your rights for:
Laybys and buy now, pay later
Telemarketing and door-to-door sales
Rules on safety and information
The FTA also has rules about product safety, and what suppliers and manufacturers must tell consumers about certain products, eg cars, children's toys and clothing.
Product safety standards and unsafe goods notices
Product safety standards, product bans and unsafe goods notices are issued by the government:
- Product safety standards aim to prevent or reduce the risk of injury.
- Unsafe goods notices (product bans) stop the sale of unsafe goods, which will or may cause injury. Bans are for 18 months, unless they're withdrawn earlier. After 18 months, the ban can be renewed or imposed indefinitely.
Consumer information standards
These are rules on information that must be given for certain consumer products and services, including:
- care labels
- country of origin labels on clothing and shoes
- fibre content labels
- used motor vehicles
- water efficiency labelling scheme.
When the Act applies
The FTA applies to anyone in trade, including:
- all commercial activities, trades, professions and businesses
- overseas businesses that supply goods, services or grant interests in land within New Zealand
- online sales.
The FTA applies to all aspects of the promotion and sale of goods and services — from advertising and pricing to sales techniques and financing.
It also applies to certain activities whether or not the parties are 'in trade' — such as employment advertising, pyramid selling, and the supply of products covered by product safety and consumer information standards.
All online sellers who operate as traders must make it clear to potential buyers that they are traders, including when selling through an intermediary website like Trade Me.
When the Act doesn't apply
The Fair Trading Act almost always applies.
Traders can’t get you to agree that the rules against misleading or unfair trading won’t apply to you, even if you sign a contract with a clause to that effect. It is illegal and the clause is not enforceable.
Businesses cannot contract out of their obligations under the Act, except for a limited exception for business-to-business transactions that meet certain requirements.
Contracting out of the Fair Trading Act(external link) — Commerce Commission
If things go wrong
Report a trader to the Commerce Commission
The Commerce Commission is responsible for enforcing the FTA. Reports from the public help it identify traders suspected of regularly breaking the rules.
Making a complaint(external link) — Commerce Commission
The Commission can investigate traders and take steps to ensure they stick to the rules by either:
- giving advice on how to comply with the law
- issuing warnings
- taking them to court.
The Commission can't act on your behalf about your specific issue. If you can't resolve the issue with your lender, complain to the lender's dispute resolution scheme.
Take legal action
You can also take legal action of your own against a trader under the FTA.
If you bring a claim in the Disputes Tribunal or the District Court they may grant a number of orders, including:
- the trader pays damages to you if you have suffered some loss or damage
- a contract be altered or made void
- money be refunded
- products be repaired or services supplied.
Enforcement of the Fair Trading Act(external link) — Commerce Commission