Franks Stephen: Fair Trading Amendment Bill (No 3) — Second Reading 
Franks Stephen: Fair Trading Amendment Bill (No 3) — Second Reading 
[Volume:607;Page:4720] 
STEPHEN FRANKS (ACT NZ) 
: 
 There are some parts of this bill that make sense—the abolition of the prohibition on trading stamps for example. That was a fairly embarrassing provision. It treated New Zealanders as being more gullible more credulous and more foolish than almost everyone else in the world where trading stamp schemes were permitted. New Zealanders were thought to be incapable of understanding them. 
There is some upgrading of the penalties but it is not done in a very intelligent way. It could have been done by looking at the gains that people make and determining the penalty by a multiplier of the gain or by in some other way relating the penalty to the difficulty and cost of getting a conviction. For example it would be recognised that many of these things will come to light only if there is a whistle hunter or a bounty blower—sorry a whistle-blower or a bounty hunter. [ 
Interruption 
] Those members like the “blower bounty”. If the penalties had been looked at in terms of getting the right incentives to chase and catch people who were breaking a law that is not easy to enforce then the penalties would have been related to making sure that enforcement was worthwhile. 
Clause 10 is of much more dubious value. It exempts the Commerce Commission from having to take account of the damage it might do by granting an injunction lightly. That really puts into the hands of a regulator a power that could destroy a business. Elsewhere the commission has exemptions from liability. At present the court is able to take into account and balance the risk and the cost and to require an undertaking as to damages. This measure is without any proper reasoning. ACT believes that there should always be a balance and that people should certainly not be exposed to the arbitrary power of State agents. The power to search is unexceptionable. 
I want to come back to a provision that Mr John Key just made a key point of his address. Before that a member whose name I always forget but whom I think of as the “beagle boy”—the member from Christchurch Mr Clayton Cosgrove—focused his address on an alleged improvement to the law about pyramid selling. There is only one change in that provision. It adds the words “whether personally or through an agent” to an existing provision on pyramid sales. 
That provision is entirely redundant. Section 45 of the Fair Trading Act already covers actions by or through an agent. It states: “(4) Any conduct engaged in on behalf of a person other than a body corporate—(a) By a servant or agent of the person acting within the scope of that person’s actual or apparent authority; or (b) …with the consent or agreement (express or implied) of a servant or agent … shall be deemed for the purposes of this Act to have been engaged in also by the first-mentioned person.” In other words the change to the pyramid selling scheme provisions has absolutely no purpose and does absolutely nothing. 
We have just heard about 25 minutes of complete and despicable drivel from people who have no idea about what this bill can do and no idea about pyramid selling. It was kicked off by a man who when he was the chair of the committee on which I sat that first opened an investigation into prime bank schemes wasted the time of the Securities Commission and the Commerce Commission. Mr Clayton Cosgrove as chair of that committee invited those commissions along to give submissions on fraud and on schemes that financially defraud consumers. Those poor bodies thought that that was a genuine request. They sent along people whose time was valuable and they prepared pages and pages of submissions on what they wanted to see by way of improvement in the law to protect people from fraud. I happened to attend a meeting of the committee on the day those people turned up and I could see their utter bewilderment— 
Mark Peck 
: That has nothing to do with the bill. 
STEPHEN FRANKS 
: It has everything to do with the bill because the origin of that alleged change to pyramid-selling schemes— 
Mark Peck 
: It hadn’t even been reported to the House. 
STEPHEN FRANKS 
: That happened at another committee I say to Mr Peck but it has everything to do with this bill. Those bodies made the submissions that they were called upon to make to that committee and they carefully explained to Mr Clayton Cosgrove who has made such a feature of pyramid selling in this legislation that this law has absolutely nothing to do with pyramid selling. 
Hon Pete Hodgson 
: Is there anything to do with privilege? You are not in any trouble with privilege now. 
STEPHEN FRANKS 
: I say to Mr Hodgson that I have no idea about that. If Mr Hodgson wants to suppress the account of this matter by alleging privilege he should go ahead. 
Hon Pete Hodgson 
: I just brought it to your attention that you shouldn’t be cavalier with the rules of the House. 
STEPHEN FRANKS 
: This committee which had the Commerce Commission and the Securities Commission in front of it had a series of interrogations on a subject matter that had absolutely nothing to do with the question that was put to those bodies. 
Those interrogations were very very similar to the wild allegations just made by members who spoke in this debate earlier. They purported to inquire about commercial fraud prime bank paper and all the kinds of schemes that I knew about because I was on the Securities Commission and we put earnest effort into trying to stop them. The language used was precisely the language that Mr Clayton Cosgrove has just used in relation to the amendments to section 24(2)(a) inserted by clause 5. He made a disgrace of this House. He embarrassed anyone of integrity who sat on that committee by totally baffling the witnesses and he did the same tonight when he spoke on clause 5. 
Mr Cosgrove addressed no element that is in this bill at all. He did not address any of the hard questions such as the distinction between franchises and pyramid schemes. He did not bother to consider the comparison between Lotto Telebingo and the other State-subsidised-and-promoted gambling schemes that cause a guaranteed loss to those who participate in them. He did not try to compare anything that the select committee stated it was doing in that area with what the Government is actually doing in other areas—areas in which it regards punishment and penalties as not working. The Government is embarrassed that it sets up fines that it does not bother to collect. If this bill had a provision that allowed for effective enforcement of fines—and indeed if the enforcement of fines had been seen as a topic on its own—we might not have $427 million of uncollected fines in a blowout from $325-odd million over the term of this Government. 
Mr Cosgrove’s ranting— 
Sue Kedgley 
: Ranting. 
STEPHEN FRANKS 
: Is that how one pronounces it? I do not want to sound Australian. 
The ranting on pyramid-selling schemes had nothing to do with any effective amendment to the Fair Trading Act. The Act itself suffers from the same enforcement difficulties that all our law suffers from. The people who can look menacing who are prepared to hide and who do not worry about the bailiff or fines will not suffer. Whether people get a $60000 or a $30000 fine will make a real difference only to those people who are honest who have their assets in their own name who probably did not intend to commit an offence and who have been caught up in a law that they did not understand. The “shrewdies” will not have their assets available to be seized under this bill; they will not even have to go to the bother of defending themselves. The “shrewdies” will not have records that the Commerce Commission can go out to requisition and search. 
Hon Harry Duynhoven 
: Why didn’t you back my inquiry into motor vehicle dealers? 
STEPHEN FRANKS 
: There should be the same principle across all this law. If we want to have proper enforcement of our law we should focus on enforcement not on political slogans or on the completely empty exercise of ranting about non-existent or possibly existing fraud schemes that had no involvement from anyone who will ever respond to any kind of order in this bill.