The Fair Trading Act is getting a major overhaul, with a focus on cracking down on misleading promotions. The government is sending a clear message: ‘Play by the rules or face the consequences.’
The penalty for companies that advertise special promotion prices but fail to charge them at the checkout is being significantly increased from $600,000 to $5 million. This is just the beginning; the fines can be even higher for more serious cases of misleading consumers.
The new law states that companies will be fined three times the value of the commercial gain made or loss avoided if found guilty of misleading customers over pricing. This is a major shift from the current system, which many argue is not doing enough to deter bad actors.
The Commerce Commission has reported a 23% rise in fair trading complaints over the past five years, highlighting the need for stronger regulations. This has led to criminal charges against supermarkets for incorrect pricing and misleading specials.
Consumer NZ Chief Executive John Duff welcomes the law reform, emphasizing the importance of penalties being comparable to those in other countries. In Australia, for example, the maximum financial penalty is AU$50 million, which is three times the benefit obtained or 30% of turnover.
However, Duff also calls for a more radical step: making it illegal for company directors to take out insurance against penalties. This proposal aims to prevent companies from using insurance as a get-out-of-jail-free card, ensuring that directors are personally accountable for their actions.
Despite initial consultations, the government has decided not to proceed with these proposals, opting instead to focus on other aspects of the Fair Trading Act. The Finance Minister, Nicola Willis, emphasizes the importance of balancing regulation with practical considerations.