Clark DavidFAIR TRADING AMENDMENT BILLFirst ReadingHon Dr DAVID CLARK (Minister of Health) on behalf of the Minister of Commerce and Consumer Affairs: I move That the Fair Trading Amendment Bill be now read a first time. I nominate the Economic Development Science and Innovation Committee to consider the bill.The Fair Trading Amendment Bill amends the Fair Trading Act 1986 to introduce new protections for businesses and consumers against unfair commercial practices. Firstly it introduces a prohibition against unconscionable conduct in trade. Secondly it extends existing protections against unfair contract terms in non-negotiable consumer contracts or take it or leave it" consumer contracts to also apply to business contracts with a value below $250000 in a given year. Thirdly it strengthens the ability of consumers to require uninvited sellers to leave or not enter their premises including through the use of "do not knock" stickers. The bill also makes a number of technical changes to the Act to improve its functioning and to support consistency with other legislation enforced by the Commerce Commission.This bill supports this Government's goal of building a more productive sustainable and inclusive economy. An important part of achieving this goal is ensuring that New Zealand has a trading environment where both businesses and consumers are treated fairly. At its core a fair economy is one where businesses and consumers trust each other where businesses compete on their merits where businesses have a reasonable opportunity to grow and thrive and where consumers are protected from high levels of detriment.New Zealand already has a number of protections against unfair practices including those contained in the Fair Trading Act. However when consulted in 2018 on whether these protections went far enough many submitters told us that they did not. We've heard about firms who are bullied by their larger suppliers or business customers. We've heard about cases where the larger business unilaterally buries the terms of the contract including price and we've heard about countless examples of businesses who have had to wait very long times to be paid sometimes up to 90 days and beyond after the work has been done or products supplied.This stuff matters because it makes it hard for New Zealand businesses to focus on what really matters: developing their products and services innovating and growing their businesses. Instead businesses have to spend hours reviewing contracts to ensure there are no unfair terms. They have to work with their accountants to deal with cash-flow issues arising from late payments—which is no reflection on their accountants—and they have to deal with the stress that comes from being bullied or harassed by their suppliers or business customers. This has flow-on effects also for other parts of the economy especially for the families and communities that these businesses support. We've also heard about real consumer harm as well. We've been told about businesses preying on vulnerable consumers in shopping malls in their homes and even in mental health units. We won't get to a more productive sustainable and inclusive economy with these sorts of practices in the market place.I'd like to talk about some aspects of the bill in more detail: firstly the bill's prohibition against unconscionable conduct. Unconscionable conduct is serious misconduct that goes beyond what is commercially necessary or appropriate. The bill does not define exactly what is unconscionable; however the prohibition is based on provisions in the Australian Competition and Consumer Act 2010. The bill is designed to make clear that the prohibition goes beyond the narrow concept of unconscionability that currently exists in the New Zealand courts. In Australia the courts have said that conduct is unconscionable if it goes against conscience by reference to the norms of society. The courts have stated that such norms include honesty and fairness. The bill provides a list of factors for determining whether the conduct is unconscionable such as whether parties acted in good faith whether a trader used any unfair pressure or tactics and whether the person affected was in a position to protect their own interests.Unconscionable conduct will be an offence subject to penalties of up to $200000 for individuals and $600000 for bodies corporate. This prohibition is necessary to deal with a very small minority of businesses that take advantage of the vulnerabilities and lack of bargaining power of consumers or other businesses. However any business that acts fairly and reasonably should have no reason to be concerned that they are in danger of breaching this new prohibition.Secondly the bill extends the current protections against unfair contract terms in consumer contracts to also protect small trade contracts. Unfair contract terms are defined as terms that are imbalanced unnecessary and that would cause detriment. Small trade contracts are broadly non-negotiable contracts between businesses that form part of trading relationships that have an actual or expected total value of less than $250000 in any 12-month period.A standard form contract is a non-negotiable contract presented on a "take it or leave it" basis. For example a standard franchise agreement used by a restaurant franchiser or a standard lease agreement offered by a large commercial property owner for office space. The bill provides that if the Commerce Commission seeks and receives a High Court declaration that a contract term is unfair then parties may not include or enforce such terms in their non-negotiable contracts. The extension of the unfair contract terms protection to businesses recognises that like consumers some businesses can face a complete lack of bargaining power when dealing with other businesses. This leaves them with no real choice but to accept unfair terms in contracts because the alternative might be for their main customer or supplier to walk away from them and leave their business and livelihood in jeopardy.The unfair terms that we are seeking to address aren't ones that are necessary to conduct business. In some cases they are put into contracts simply because the dominant party knows it can get away with it. It is not reasonable to expect small businesses to be able to pick through routine contracts with a fine-tooth comb to try and detect any unfair contract terms particularly when they may not have the bargaining power to have them removed in any case.At the same time the $250000 limit on the protections recognises that when businesses enter into large strategic contracts they do have an obligation to do their own due diligence seek legal advice and make their own decisions about whether the risks being placed on their businesses are acceptable or not. I'm already aware of feedback about this threshold and I would encourage those submitters who wish to place their feedback to the select committee. These new protections will require businesses to review and potentially amend their contracts but I am confident that the protections should not significantly inhibit businesses' ability to enter into fair and reasonable contracts with each other.Thirdly the bill provides that if an uninvited seller is on or approaching residential premises for the purpose of selling something the seller must leave or not enter if directed by a consumer. A direction can be written or verbal and can be specific or general such as a "do not knock" sticker on a letterbox so if a mobile truck shop shows up and tries to knock on a consumer's door despite seeing a "do not knock" sticker the trader would be legally obliged to leave the premises or face penalties. The provision originates from a concern identified in our review of consumer credit law in 2018. It found that consumers are often preyed upon by mobile traders and that measures that they take to deter such traders at present—such as putting up "do not knock" stickers—do not have a legal effect currently. This is a result of the way the courts have interpreted the Trespass Act 1980. The courts have stated that broadly worded notices such as "do not knock" stickers are not legally enforceable under the Trespass Act.Under this proposal ignoring a direction to leave or not enter will be subject to penalties of up to $10000 for individuals and $30000 for businesses. This will be enforced by the Commerce Commission. I expect that the Commerce Commission will generally only take action in respect of systemic commercial offending by mobile traders. Any concerns relating to safety would be dealt with by police as at present.To conclude this bill draws a line in the sand in respect of commercial conduct. It makes clear this Government's expectation that business in New Zealand will be conducted honestly and fairly. At the same time the protections are designed to ensure that businesses can continue to compete effectively negotiate firmly and freely enter into contracts that reflect their wishes. I commend this bill to the House."