Tamihere John: Fair Trading Amendment Bill (No 3) — Second Reading 
Tamihere John: Fair Trading Amendment Bill (No 3) — Second Reading 
[Volume:607;Page:4714] 
Hon JOHN TAMIHERE (Minister of Youth Affairs) 
 on behalf of the  
Minister of Consumer Affairs 
: I move  
That the Fair Trading Amendment Bill (No 3) be now read a second time 
. I thank the Commerce Committee for its thorough consideration of the bill. I also acknowledge the efforts of those who made submissions. The Fair Trading Act of 1986 is a key piece of consumer legislation designed to protect consumers from misleading and deceptive conduct and unfair practices by traders. It also provides for the disclosure of consumer information relating to the supply of goods and services and product safety standards to protect against unsafe products. 
This bill updates and strengthens the Fair Trading Act with a particular focus on its penalty and enforcement regime. The Act has been in force since 1987 and since then barriers to its effective enforcement have become increasingly evident. The fines imposed by the courts are too low to deter offending. In fact the fines are so low that many traders regard them as merely a cost of doing business. This is especially true of pyramid-selling schemes at least two of which have generated revenue exceeding $1 million. The maximum penalty—$30000 for an individual and $100000 for a company—does little to stop the promoters of these scams. Notably in the vast majority of cases the courts have imposed fines that are well below the maximum penalty level. Increasing the maximum fines will send a clear signal to the courts that the fines they are imposing are too low. 
Problems with the legislation however extend beyond the issue of fines. Procedural impediments have been preventing the Commerce Commission from seeking remedies available under the Act. The requirement for the Commerce Commission to give undertakings as to damages when seeking interim injunctions is a significant disincentive to the commission seeking a remedy that can have an immediate and positive impact for consumers. Corrective advertising orders are another remedy that is seldom sought by the commission as procedural requirements result in time delays that make those orders ineffective. 
The purpose of this bill is to strengthen fair trading law. There are four key measures designed to achieve that purpose. First the bill substantially increases general penalties and creates a much tougher penalty regime for pyramid-selling schemes. The pyramid-selling penalty regime includes a commercial gain penalty up to the value of the revenue obtained from the offending. This will enable the courts to wipe out the profits made by rogue individuals who mercilessly rip off ordinary Kiwis. Second it extends the Commerce Commission’s search power to enable it to enforce the new commercial gain penalty. It also introduces a new notice power that provides the commission with an alternative to the search power. That is a less intrusive power designed for use when seeking information from witnesses who are not hostile. Third the bill removes the procedural barriers that have prevented the commission from fully utilising corrective advertising orders and interim injunctions. It also reforms the limitation period within which the commission may take a prosecution. Fourth the bill updates the Act to reflect modern trading practices and modern variations on scams by amending the definition of pyramid-selling schemes and repealing the prohibition on trading stamp schemes. 
The committee heard several submissions opposing the removal of the requirement for the Commerce Commission to give undertakings as to damages when seeking interim injunctions. Some submitters were concerned that innocent traders would be left without a remedy if they suffered a loss as a result of the commission seeking such an order. The committee carefully considered that issue and decided that the judicial process provided adequate protection against the commission making unreasonable applications for interim injunctions. It was noted that the amendment provided consistency with an earlier amendment to the Commerce Act which exempts the Commerce Commission from giving undertakings as to damages when seeking interim injunctions under the Commerce Act. 
Another issue raised by submitters was the extension to the criminal limitation period. Those submitters were concerned that the amendment would extend liability indefinitely for some traders. The committee was satisfied that sufficient remedies were available through the courts to protect traders from stale claims. The criminal limitation period will now be consistent with the civil limitation period. 
I would like to thank all members of the select committee for the work they have put into this bill. It is a very timely bill that represents a worthy step towards improving the effectiveness of New Zealand’s core consumer legislation. I commend the bill to the House.