I was very pleased to be able to support the Consumer Law Reform Bill when it came up for its second reading last week. I know that many others are interested in the changes that the bill will make so I have posted the speech I gave in the house below.
The main win for consumers in my mind is the restrictions on making ‘unsubstantiated claims’ – so that businesses have to be able to back up the things that they say with evidence. I met with the Commerce Commission to discuss if they are confident they have the tools they need to enforce this new provision and they assured me that they did.
The Green Party is pleased to be supporting the Consumer Law Reform Bill.
We are supporting this bill, which proposes the most significant changes to consumer laws in more than 20 years, because it increases protections for consumers and provides for more effective enforcement of these laws.
We all know someone who has been ripped off or exploited in some way to buy a product or service under pressure that they didn’t need, was quoted a misleading price, or the product didn’t perform as expected .
This bill will help address some of the more significant gaps and loopholes.
I would like to mention here that I was impressed with the level of engagement with this bill by committee members who put political differences aside and worked for the best possible outcome. I also want to acknowledge the high quality advice that the committee received from the Ministry who seemed to be able to produce a swathe of experts for different aspects of the bill, from consumer goods to auctions, from unconscionable conduct to third party payments. The submissions process was interesting as there were very few submissions from individuals: the bulk of submissions were from businesses, energy companies, retailers and the like as well as community and consumer groups, reflecting in part the detailed and complex nature of this bill.
We are pleased that the bill makes explicit that that the Consumer Guarantees Act applies to internet sales sites and requires all traders selling goods or services to consumers on internet sites to identify themselves as such. The Green Party is also particularly pleased that the bill significantly expands the powers of the Commerce Commission which will enable it to be more effective in carrying out its work. The committee has recommended compulsory interview powers for the Commerce Commission. We strongly support this move as these compulsory interview powers are needed to assist the Commission with obtaining documents and information that will allow them to properly investigate a company in a timely and cost effective way.
Some people have raised concerns that these powers are too heavy handed. We are satisfied that there are adequate safeguards in the bill in that:
- The powers only apply to investigations of serious offenses
- The person being interviewed is protected from their statements being admissible (except for perjury charges), if the case was to proceed to a court.
In addition to the increased powers for the Commerce Commission, there are a number of areas in the bill that the Green Party is particularly pleased to see in this Bill. Including:
- Tripling the penalties for breaches of the Fair Trading Act
- Provisions preventing unfair contract terms in standard form contracts
The change that the Green Party is most pleased to see in this bill is the proposed prohibition on making “unsubstantiated representations”. This provision will help address an area that the Green Party has been concerned about for a long time. Many consumers base their purchasing decisions around claims such as having a reduced impact on the environment, 100% renewable energy, being biodegradable, resourced from sustainably managed forests and so on. Such conscious consumers will often be willing to pay a premium for a product or service making such a claim. One of the really frustrating things for conscious consumers is the difficulty in sifting through these claims to separate the greenwash or misleading or untrue claims from the valid claims. Effectively consumer groups or consumers either become detectives, cross-checking claims, or we have to cross our fingers and hope that the claim is true. We consider it fundamental right of consumers to be confident that claims made on a product are based on truth. Unsubstantiated claims also disadvantage businesses that do make the effort and do the research to ensure that their claims are based on fact.
Currently the difficulty with the law as it stands is that it can be very hard to prove a claim false, a situation which has proved time consuming and costly for the Commission to investigate. The crucial aspect about the proposed change is that the onus of proof about a claim will shift from the Commerce Commission onto the business instead. Just imagine! Businesses will have to prove the claims that they make about their products are true. It was disappointing that a significant number of businesses, such as Meridian Energy, argued that it would impose “significant compliance costs” and be too expensive to require them to provide evidence for their claims.
The solution to this is simple, if you don’t have good reason or evidence to believe that the claim is true – don’t make that claim!
However the Committee did take on board concerns about the possible impact on advertising creativity by recommending new clauses that it clear that the provision does not cover representations that a reasonable person would not expect to be substantiated. I am sure that the promoters of a certain high profile product will be relieved that they do not have to provide evidence of wing growth!
The Green Party did have a concern that the Commerce Commission would not have sufficient powers to effectively enforce the prohibition on unsubstantiated representation, a point made by Consumer NZ. We considered moving an amendment to give the Commerce Commission the ability to issue power of substantiation notices, as is the case in Australia. We sought advice from the Commerce Commission on this issue and have been reassured by their view that the substantiation provision in this bill is superior to that in the Australian Consumer Law because it is simpler, more easily enforceable and a better education tool.
They have also informed us that they do not feel they need specific substantiation notices powers because they expect to be able to use existing information gathering powers in the Fair Trading Act along with (if necessary) the new compulsory interview powers to support the new prohibition on unsubstantiated claims. We are happy with this reassurance from the Commerce Commission that they are confident that they will be able to enforce the prohibition on unsubstantiated representation and are pleased to be wholeheartedly supporting this bill.