Warning: the contents of this column may be dangerous to your health. I’m currently working through submissions on the Consumer Law Reform Bill (which are due by March 29). Now, in January I mentioned that this was in the offing. It’s now open for submissions to the Commerce Select Committee. And, to be fair, it’s mostly pretty good, including a lot of updating of existing law to address changing times and changing technology. For example, in a move supported by Trade Me, internet “auction” sales of goods by traders to consumers will be subject to some or all the Consumer Guarantees Act guarantees. That plugs a loophole that will have created a sore point with many of you who have online or bricks and mortar stores.
But here’s a worry: the Bill proposes a new offence: making an unsubstantiated representation in trade. That is a representation “made by a person who does not, at the time of making the representation, have reasonable grounds for the representation, irrespective of whether or not the representation is in fact false or misleading”. So you can make a representation in trade that is actually correct, but because you didn’t have a file full of background information (credible? accurate? detailed?) supporting it, you are a criminal and subject to a fine on conviction of $200,000 for a company or $60,000 for an individual.
You will have a few defences – such as reasonable reliance on information supplied by another (that still means you have to get some information). Another is reasonable mistake – but that still means you will need to have a clear and regular procedure of asking all of your suppliers to provide full information substantiating their claims.
There are some matters that a court has to consider in making its decision, such as what the actual or potential effect of the representation would be. But it’s a bit difficult for them – if the claim is unsubstantiated, this is more likely to go to how much you should be fined rather than whether or not it what you advertised was unsubstantiated by you.
This is pretty scary stuff for importers, distributors and resellers alike. The provision doesn’t specify the position in the supply chain that it applies to. You could be tenth in line, and you still have to go through all of this work. Ah! But they say this is to raise the standard of New Zealand business conduct in order to give consumers more confidence. In practical terms, this will affect new products most severely. I’m not sure how your suppliers will react to being asked for all of their technical or test information to be supplied to you and made available.
Because, you see, this approach is unique. In other countries, like Australia or the US, the enforcement body has to have reasonable grounds to believe that the claim is misleading or deceptive (or equivalent) and can then ask for proof of substantiation. Some countries do have special provisions for high risk products such as medicines and health foods, but these are supported by clear policies which specify what level of substantiation is required. That makes it a lot simpler than it will be for a small New Zealand reseller who is requiring an unknown level of data from a large overseas manufacturer. On the other hand, if you are an overseas-based internet trader, it won’t exactly be a problem.
If you think this will be a problem for you, you can look at the Consumer Law Reform Bill on www.legislation.govt.nz and make a submission on clause 9 – you can read all about submissions on http://www.parliament.nz/en-nz/PB/SC/MakeSub/.
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 firstname.lastname@example.org.