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Changes in consumer law resellers should notice

Changes in consumer law resellers should notice

Marketing brief

Well, the holidays are over, and it's back to work for all of us. I hope that you all had a great time and were able to get away from the dreaded emails and messages. And for those of you who worked through, your good times will come.

2013 will be an interesting year for resellers, particularly those of you working at the retail end of the supply chain. The Consumer Law Reform Bill had its second reading in Parliament before Christmas, and is scheduled to have its third and final reading pretty soon, probably in February. There is a lot of good stuff in this Bill, particularly with respect to online “auction” trading and increased flexibility in the Consumer Guarantees Act's guarantee of acceptable quality. I'll let you know when it is due to come into effect, because there are two new areas which could affect resellers quite significantly.

The first is that extended warranties that are sold separately from the goods will be subject to some significant regulatory requirements. The key driver is the fact that extended warranties often overlap with consumers' rights under the Consumer Guarantees Act 1993, but it’s not clear to consumers where the overlap is. So there is a real risk that consumers don't know whether they are paying twice for remedies that they would be entitled to as of right under the CGA.

When the bill comes into effect, “warrantors” will have to list the extra benefits of the extended warranty, so that consumers know what they are paying for, and consumers will have five working days to cancel. And “warrantor” means both the person who provides the extended warranty (eg an insurer) and the reseller who sells it to the consumer.

This shouldn’t affect the abilities of resellers to contract out of the CGA as long as it is clearly limited to business-to-business supplies. There are fines of up to $10,000 individual/$30,000 corporate for getting the extended warranty details wrong. But it is a (separate) breach of the Fair Trading Act to mislead consumers as to their rights, and the fines for these kinds of breaches are set to increase to from $60,000 individual/$200,000 corporate to $200,000 individual/$600,000 corporate. And yes, a reseller who sells misleading warranties could be liable directly or as a party to the insurer’s offence. So don’t take any extended warranty lightly – get it checked independently.

And the second big change is my old favourite (or is it nightmare?) prohibitions against unsubstantiated claims. Yes, at the time of writing it’s still on the books: you will be a criminal if you make a claim in trade that you haven’t made reasonable efforts to substantiate, even if it is correct. It's different in Australia, where the equivalent of the Commerce Commission can hit you with a notice requiring you to substantiate the claim, which would enable you to drag your brand-owner in to assist. But that would be far too late in the proposed New Zealand context.

So we would have the bizarre situation where you, the reseller (not the brand-owner) are left defending your actions as reasonable steps to substantiate. The court decides. So even if the claim is correct and can be substantiated by the brand-owner after the event, your breach has already occurred and your best defence will be to persuade the court that reliance on the brand-owner’s word was reasonable. Don’t ask me what you do if you trade in both Australia and New Zealand…. We’ll just have to hope that Parliament will see the consequences as the bill goes through its final reading next year. Happy New Year!

Rae Nield is a solicitor specialising in marketing law. This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at raenield@marketinglaw.co.nz.


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