Fair Trading Amendment Bill (No 3) — In Committee 
Fair Trading Amendment Bill (No 3) — In Committee 
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Fair Trading Amendment Bill (No 3) 
In Committee 
Clause 1Title 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: In speaking to the title clause of this bill I would like first to cover the fact that the National Party wants to raise with the Minister a number of concerns about this bill. In particular there are four areas of concern that we will be debating during the Committee stage. My colleagues and I will be seeking several calls on each. We are concerned about increasing the level of fines in an ad hoc and non-comparative way. It is clear that the Government has been doubling the fines involved in this legislation with no reference to any of the increases or lack thereof of similar fines in other commercial legislation. 
We are concerned about the criminal limitation period—that it may inadvertently lead to greater contingencies for business. We do not support exempting the Commerce Commission from the consequences of over-zealous actions by its officers in applying for interim injunctions and we are concerned about the increased compliance costs from demanding certain information and documents from those people that the Commerce Commission or the appropriate authority is investigating. We want to say to the Minister that there is no regulatory impact or compliance cost statement attached to the bill and that is a breach of the Government’s own guidelines. 
We have moved a number of amendments to the title of the bill. We do not think the title is a fair reflection of what is contained in the bill. Our amendments include incorporating the fact that some action will be taken on pyramid selling through some subtle word changes that will widen the ambit of the bill. However we do think that it fails to recognise some quite considerable additional changes that are being proposed in the bill. 
This Parliament needs to realise that this is not just an inconsequential Fair Trading Amendment Bill; this bill proposes to change the limitation period from 3 years after a breach or otherwise may have happened to 3 years from when it was discovered or ought to have been discovered. We think that that has some risks. For example if someone advertised a product in an inadvertent way or in a way that had since been corrected then an aggrieved consumer could raise a number of issues through the judicial process that could lead to significant costs for business but also because business will not know when its limitation period has expired it will be required to carry considerable contingent liabilities resulting from any warranties or any advertising that may have occurred. We think that this has not been thought through by the committee. We think that the title of the bill should be amended to reflect more correctly the fact that a number of enforcement and procedural provisions are incorporated in the bill. For example the bill will require companies to provide documents and information— 
The CHAIRPERSON (Ann Hartley) 
: I remind the member to keep to the title debate. 
Hon TONY RYALL 
: Madam Chair I am sure you were listening to my speech because what I actually said was that the title of this bill does not fairly reflect. It is very easy for people to jump in and say to speak to the bill but if people were listening to the debate they would know that I have been speaking to it. The point I was making before I was interrupted was that this bill requires companies to provide information and documents that do not exist. That is why the title should be amended to include the fact that enforcement and procedural provisions that are quite draconian in nature are included in the bill. I draw the Committee’s attention to the amendment to clause 1 in the name of Lindsay Tisch that covers that very point. 
The concern is that if the commission requires a company to provide documents or information that do not exist then that is a considerable expense to business. There is no ability for those businesses to recover the cost of generating documents and information that do not exist. In other procedures in the bill the Commerce Commission will be excused from having to reimburse or carry the cost for some of their decisions. That is why we are proposing amendments to the title of the bill. 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: I would like to pick up from where my colleague left off. The title of the bill “Fair Trading Amendment Bill (No 3)” is fairly innocuous. It is important that the title of a bill—and I think it is recognised these days—should accurately reflect as far as is possible the content of a bill. For example with income tax amendment bills we do not just have Income Tax Amendment Bill (No 1) Income Tax Amendment Bill (No 2) (No 3) and (No 4). Let us go broader than income tax—if it is a taxation amendment bill we are referring to we try to build into the title what is covered in the bill. For example we might have a “Taxation (Annual Rates GST Provision something else and something else) Amendment Bill”. The beauty of that kind of title is that it gives the public a reasonable guide as to what is contained in an amendment bill. 
The problem with this bill is that the title gives no guidance as to a couple of very significant items in it. The Opposition is not opposed to this bill—in fact we are totally supportive of the part of the bill that clamps down on pyramid schemes. It would be quite useful if the title indicated that it is this bill amending the Fair Trading Act that actually does deal with pyramid schemes. It would help people using our statutes were the name to incorporate things like that. That is the first issue in respect of the title. 
The second issue and my colleague the Hon Tony Ryall has mentioned this is that clause 8(3) contains a very significant issue relating to what is commonly called the statute of limitations or the period of limitation. A very major change has been made in shifting from a period where action can be taken 3 years after an event to 3 years after an event was discovered. That is a huge difference because an event may not be discovered for a period of 5 6 7 8 or 10 years. So that is a huge difference. When we do get to debate Part 2 there will be some issues that I hope the Minister in the chair can really cover in respect of that. 
Again I come back to the title. An issue as significant as changing the period of limitation during which action can be taken is a significant change. If it were just being altered from 3 years to 4 years after an event occurred that is not a huge change. Maybe one would not need to argue that the title should cover that but this issue is big. This could change the period of liability from 3 years to 13 years. To have a change as big as that contained in a bill with such a bland title is not satisfactory. That is why I would argue that the title of the bill should really give greater guidance as to the key changes that are contained in the bill. 
There are two of them—the pyramid-selling schemes and the changes to the limitation period after which action cannot be taken. It is not good enough for the Government to get titles right in some areas of legislative activity like in taxation. It is getting titles better in that area but in this area I do not think enough thought has been given to the title. The title of the bill the “Fair Trading Amendment Bill (No 3)” could mean absolutely anything yet the bill has some very very significant things in it. 
Another area that is obviously very significant for business is the doubling of penalties. Again the title gives no guide that this bill doubles the penalties for certain breaches of the law. Again it would be useful if the title were to indicate that that is another major element contained in the bill. So there are a number of key issues. If the bill goes through the way it is the Commerce Commission may not be accountable for certain actions it takes. Again that is a hugely significant issue that we will be asking a number of questions about when we get on to the particular clause—is it clause 10—that covers that. Again in Part 2 I shall be asking about a number of issues around that. The title is really pretty unsatisfactory. 
LINDSAY TISCH (NZ National—Piako) 
: As my colleagues have mentioned we will be supporting this bill. However some provisions need to be looked at more closely and during the Committee stage we will ask the Minister to answer these questions. First the bill stands in the name of the Hon Judith Tizard and is titled the “Fair Trading Amendment Bill (No 3). We always believe that the title of a bill should fairly reflect what the bill states. Nothing in this title articulates the very important changes that the bill purports to make. As I said we will be supporting those changes. My colleague the Hon Tony Ryall has mentioned that this bill allows that there will be documents that do not actually exist and sets out the power that the Commerce Commission will have. Nowhere in the title do we see anything that relates to that. If we go back to the first and second readings there was much debate about pyramid-selling schemes and they are covered in clause 5. One of the amendments that the Hon Tony Ryall has tabled which is a very good amendment to the title would delete all the words after “the” and insert “Fair Trading (Pyramid Selling Schemes and Additional Powers) Amendment Bill”. This is significant. There is a change here although it is only a minor change. If we were to go back to the principal Act—and we will be talking about that later on when we get to clause 5 in Part 2 at some length—if the title were to reflect what is actually in the bill then there is an opportunity to be able to look at that amendment. 
The Hon Tony Ryall has another amendment to the title to delete all the words after “the” and insert “Fair Trading (Miscellaneous Provisions) Amendment Bill”. That probably more reflects that there are some miscellaneous changes that we believe are important. I have gone one step further in my amendment to the title—that we delete all the words after “the” and insert “Fair Trading (Enforcement and Procedural Provisions) Amendment Bill”. Of course this does allow for enforcement proceedings and in clause 8(2) there is the liability that every person who contravenes section 24 commits an offence and is liable on summary conviction to a fine not exceeding $200000. So there is a provision that I have put in my amendment that talks about the enforcement side of this bill. 
Dr the Hon Lockwood Smith made a very important point about clause 8(3) which provides that proceedings under section 40 “may be commenced at any time within 3 years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered.” That is opened-ended and that is one of the real concerns we have about this bill. Although we are supporting it we really have a concern about that subclause and we will be looking at that one far more closely when we are debating Part 2 and clause 8(3) in particular. 
There are a number of other provisions but I come back to the point I made about making sure that the title which we are supporting fairly reflects what the bill is about. I have mentioned the amendment I have put forward and the two amendments that the Hon Tony Ryall has put forward. 
Hon JOHN TAMIHERE (Minister of Youth Affairs) 
: I move  
That the question be now put 
. 
STEPHEN FRANKS (ACT NZ) 
: I am not at all surprised that the Hon John Tamihere tried to close this debate down. He knows all about scams if anyone does. When this bill came in it was described as being about fair trading. It was described as a bill to amend the Fair Trading Act and it was described in extremely flowery language. I would like to read here from the Government Minister Rick Barker who described the issues involved but first perhaps I will have a look at what Mr John Tamihere who is here in the House said: “The true issue in the Fair Trading Act is the clause defining misleading or deceptive conduct which states: ‘No person shall in trade engage in conduct that is misleading or deceptive’ ”— 
The CHAIRPERSON (Ann Hartley) 
: I am sorry but I need to bring the member back to the title. The bill has been to the select committee. It is a narrow debate. 
STEPHEN FRANKS 
: I am discussing the title. I believe that this is a misleading title. There was a claim that it was about fair trading. There was a claim that it was about pyramid selling. There is an amendment before the Committee that suggests that the title refer in particular to pyramid selling. I am concerned that that amendment might be adopted and I want to argue that in fact the bill’s title should remain as it is because it is innocuous. It does not tell us anything and it does match in effect what the bill does. This bill was introduced as part of a Labour Party scheme to throw mud. This was part of an attempt to legitimise to use the time of the House to legitimise an attempt to go behind the Standing Orders and throw mud. 
The person doing it Mr John Tamihere made a great point of integrity. He spoke on 2 May 2002 about the integrity credibility and ethics to stand up and publicise scams. This bill was promoted. It involved officials it took the time of the Ministry of Economic Development people it took the time of Securities Commission people and they came along to speak to a bill called the Fair Trading Amendment Bill (No 3) when in fact the whole discussion they had to endure was about a non-existent pyramid-selling scheme. The National Party’s amendment to change the title so that it refers specifically to pyramid selling would play into its hands. Because the bill actually has next to nothing to do with pyramid selling. Even the clause that refers to pyramid selling does not deal with pyramid selling. 
The true effort that went into this bill was disclosed in the report of the select committee in the very last two sentences when we see that hearing evidence took 30 minutes and consideration took 55 minutes. So hearing evidence took 30 minutes and consideration took 55 minutes. This is a committee that according to Rick Barker was “going to make many investigations of the issues it raises and the issues concerning fair trading. I want to see a very rigorous investigation of those issues and I am absolutely confident that the Labour members on the committee will dig deep on that investigation. They will drill all over the place and many things will be flushed out for the benefit of the whole community.” 
I do ask the National Party to consider when it votes on the title and on its own amendments not to be taken in by the references that were made to pyramid selling. There was absolutely no intention ever to look into pyramid selling. There was in fact no looking into pyramid selling. One of the National Party amendments urges the change to refer to pyramid selling. I suggest that there is a far better amendment in the name of the National Party that one could easily vote for—that is that the title simply read “Fair Trading (Miscellaneous Provisions) Amendment Bill”. Certainly ACT will support the National Party’s motion in that regard but should not support the earlier one because this bill I will go so far as to say is a fraudulent waste of Parliament’s time. 
MAHARA OKEROA (NZ Labour—Te Tai Tonga) 
: I move  
That the question be now put 
. 
JOHN KEY (NZ National—Helensville) 
: I am delighted to take part in the title debate of the Fair Trading Amendment Bill (No 3) which is as members know a bill that refers primarily to pyramid schemes. I am not surprised the Labour Government has introduced this bill because it knows lots about pyramids—people being at the top and everybody else flows down. It knows a lot about those schemes. I am not surprised that the Labour Government has introduced this legislation. 
Hon Rick Barker 
: “John Pharaoh Key”. 
JOHN KEY 
: Let us face it: I certainly like riding around on camels and humps deserts and things like that. I do not mind hot weather. 
 I have never actually been to Egypt though I might add. I have been to a number of other countries but I have never single-handedly seen the pyramids and I would like to go. 
It is not too late to change the title of this bill. Labour members could get the caucus in there have a little chinwag about it and come out and say that this title is not the right one. The title “Fair Trading Amendment Bill (No 3)” is far too vague. Do members of the New Zealand public up and down the country know what the Fair Trading Amendment Bill (No 3) is? Do they even know what the No. 1 bill or the No. 2 bill is? No they do not. Government members looking at me at the moment are terribly confused about the title. They are saying to me: “Thank goodness that National member is on his feet with some sound suggestions.” 
The Minister for Small Business could well put this on his website while he is out there slashing costs for small businesses—despite the fact that the other 19 members of Cabinet are increasing compliance costs. It is like Team New Zealand bailing water out of the boat—it did not matter. There he is trying to chuck off a few compliance costs. He has the bucket and he is pouring the water out but it did not do Team New Zealand any good—it nearly sank—and it will not do any good for small-business costs in New Zealand. 
Hon Judith Tizard 
: What about the title? 
JOHN KEY 
: But we are not here to talk about the costs that are drowning New Zealand’s small businesses. We are not here to talk about the failure of the website that the Minister for Small Business has. He is embarrassed by it but we are not here to talk about that. We are here to talk about the title which is the “Fair Trading Amendment Bill (No 3)” and why the bill is so shamefully titled. What a disgrace this title is! I am on my feet and at no charge I will come up with a far better title. I would not be surprised if during the dinner break—or even before—all 120 members of this House come down here and argue vigorously in support of my new title. 
So what is my new title going to be? It is like the Oscars is it not? They rip open the envelope and read out the title—but they do not want to say it upfront and straight away because no one is there for the punchline. One has to get suspense going and say: “What is the title?” 
Pansy Wong 
: What is the title? 
JOHN KEY 
: That is a very good question. It is the “Stop Pyramid Selling in New Zealand Bill”. There is no point in being ambiguous or beating about the bush. The Minister for Small Business does not beat about the bush on his website. He says: “These are ways to cut compliance costs in New Zealand” even if his colleagues are adding compliance costs. It does not matter—he is not ambiguous in what he is says and we should not be ambiguous with this legislation. 
The Fair Trading Amendment Bill (No 3) which in large part covers the closing down of pyramid schemes in New Zealand should be up in lights so that when people are considering ripping off harmless and law-abiding New Zealanders with despicable pyramid-selling schemes they should be able to flick through the website. Using their Yahoo search engine with “l” for legislation and “p” for pyramid they would come straight up with my wonderful title the “No Pyramid Selling Schemes Bill” or the “Anti-Pyramid Selling Schemes Bill” or the “Stop Pyramid Selling in New Zealand Bill”. I think that last one was the one I thought of but I have so many good ideas that I should not be restricted to one. 
If people read the title “Stop Pyramid Selling in New Zealand Bill” they would see that yes it is illegal in New Zealand. They would see that the Labour Government had finally done something of use and stopped pyramid-selling schemes. With a great deal of relief people would say: “I will not go out there and rip off poor New Zealanders.” They would understand that but will they ever find out with a title like the “Fair Trading Amendment Bill (No 3)”? No of course not. They will go to the No. 1 bill and that will put them to sleep. When they wake up they will have a look at No. 2 and that will be a huge yawn. Then they will finally come to the No. 3 bill—the Fair Trading Amendment Bill (No 3). 
DARREN HUGHES (NZ Labour—Otaki) 
: I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 69 
Labour 52; Green Party 9; United Future 8. 
Noes 45 
New Zealand National 25; New Zealand First 13; ACT New Zealand 7. 
Motion agreed to. 
The question was put that the following amendment in the name the of Hon Tony Ryall to clause 1 be agreed to: 
to omit the words “Fair Trading Amendment Bill (No 3) and substitute the words “Fair Trading (Pyramid Selling Schemes and Additional Powers) Amendment Bill”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 25 
New Zealand National 25. 
Noes 89 
Labour 52; New Zealand First 13; ACT New Zealand 7; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 1 be agreed to: 
to omit the words “Fair Trading Amendment Bill (No 3)” and substitute the words “Fair Trading (Miscellaneous Provisions) Amendment Bill”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 32 
New Zealand National 25; ACT New Zealand 7. 
Noes 82 
Labour 52; New Zealand First 13; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Lindsay Tisch to clause 1 be agreed to: 
to omit the words “Fair Trading Amendment Bill (No 3)” and substitute the words “Fair Trading (Miscellaneous Provisions) Amendment Bill”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 32 
New Zealand National 25; ACT New Zealand 7. 
Noes 82 
Labour 52; New Zealand First 13; Green Party 9; United Future 8. 
Amendment not agreed to 
Part 1 Preliminary provision 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: There are a significant number of amendments to the commencement date of this bill and although I know Madam Chairperson that you are very quick to try to keep National and other Opposition members to the title I indulge your patience so that you can see the thread of my argument about why we need to change the dates. 
There are a number of amendments but I want to talk in particular about the amendment in the name of Lindsay Tisch. It says that the bill should not come into force in toto until section 81 comes into force on a date to be appointed by Order in Council. If we look at section 81 we see that it is the section covering fines. I would like to explain to members why there needs to be a delay in the commencement date to allow for a review of the fines. These fines have not been amended since 1986 and during that time the cost of living has risen 54 percent. The Government proposes to adjust those fines by 100 percent. 
 Now one can make an argument that the Government wants to send a signal to the judiciary that the fines currently being applied are inadequate. The Government proposes that the mechanism for that should be a doubling of the fines. I would draw the Minister’s attention to my amendment to insert new section 40A in a new clause 8A which would provide a principle in the bill that duplicates the principle in the Sentencing Act that says to judges that they must impose a penalty near the maximum prescribed for the offending that is near the most serious. That means that the current penalties could be sufficiently adequate but judges would be encouraged to use the full range of the penalties. 
The second argument I would make about why we need to defer implementation of the penalties is that there has not been a comprehensive review of the penalties regime applying to commercial law in this country for about 12 years. There are now several pieces of commercial legislation that have different levels of fines with no correlation to each other. So there are some bills where the maximum fine is $10000 for quite serious commercial breaches and now there is another bill where the maximum fine may be up to $200000 for comparatively less serious offences. 
Hon Judith Tizard 
: It is $100000 now. 
Hon TONY RYALL 
: Well it is $200000. 
Hon Judith Tizard 
: Yes but it is $100000 now. 
Hon TONY RYALL 
: That is right but I am telling the member that her proposal is $200000. I am saying that we should delay that until this Government has undertaken a full review of the various commercial legislation penalties regimes. In that way we would be saying to the commercial community that there is a consistency across the penalties regime. It is ridiculous that in some pieces of legislation quite serious criminal behaviour solicits a $10000 maximum fine but under this Government’s proposal one could get a $200000 fine for something that could be comparatively much less offensive. So we say let us defer the commencement date of this bill to provide for a review of the regime of penalties across commercial legislation. It is currently quite ad hoc and we think that we should provide for a review. I draw the Minister’s attention to my other amendment to clause 8 that would require her as Minister to provide for a review of the level of financial penalties in comparison with penalties included in other commercial legislation within 6 months of the assent of this bill so that we could do something about that. 
A further reason that we have other amendments to defer the commencement date is that we believe business needs to take legal advice on how to deal with the removal of the 3-year limitation period—because as Dr the Hon Lockwood Smith said 10 years down the track businesses might now find that they are subject to a fair trading action in respect of something that happened 10 years ago that they have no contingent liability in their system for. We think the dates should be deferred for that reason—to allow business to get appropriate legal advice on how they can deal with the removal of the 3-year limitation period from date of action. We do not support this amendment that says that it should be 3 years from discovery. 
BRENT CATCHPOLE (NZ First) 
: New Zealand First agrees with the bill targeting pyramid selling and with it broadening the target to incorporate the new forms of pyramid selling schemes that have developed since the Fair Trading Act was implemented. Such schemes include those whereby participants buy or sell an investment opportunity and use agents provided by the scheme’s operator to recruit other participants on their behalf instead of having to recruit new participants themselves. We also welcome the updates to the penalties. New Zealand First however has already expressed its concern about clause 14 in earlier speeches— 
The CHAIRPERSON (Ann Hartley) 
: I draw the member’s attention to the fact that we are debating Part 1 which is fairly narrow. 
BRENT CATCHPOLE 
: Are we on Part 1? 
The CHAIRPERSON (Ann Hartley) 
: Yes and it is the preliminary provision for the commencement. 
BRENT CATCHPOLE 
: I beg your pardon. I will take a call on the other part. 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: In speaking to clause 2 “Commencement” I would like to draw the attention of the Minister in the chair to a serious matter. It has become clear in recent years—and when I say “recent years” I mean a period covering probably the last 20 years—as we have made changes to our commercial law in this country that there have been serious issues around commencement dates and transitions. I am sure the Minister in the chair is aware of some quite serious problems that have resulted from the transition from the Commerce Act of 1975 to the Commerce Act of 1986. 
It is quite clear from the commentary that the bill has not been taken very seriously by the Commerce Committee and that worries me. I think it was my colleague from ACT who pointed out that the hearing of evidence took 30 minutes and consideration took 55 minutes. What worries me about the commencement is the issue around the change to the period during which a business may be liable—in other words the provisions of new section 40(3) inserted by clause 8. I would like the Minister in the chair to explain to the Committee how this will work under the commencement arrangement. For example will the new provision in new subsection (3) work if a business sells a service or an item or does anything under the Fair Trading Act as it now is—will it apply to some action taken after the commencement? For argument’s sake let us say that this bill goes through tonight and gets the royal assent tomorrow. After the bill receives the royal assent will new subsection (3) apply to an action that happens from then or could it apply to something that happened say 4 years ago but is not discovered until after this bill receives the royal assent? I think that is quite a serious issue in respect of transition because there are clearly two different circumstances. I do not see how this legislation makes clear which would apply. I hope the Minister in the chair is hearing what I am saying as the question I have is to me quite an important one. Will new subsection (3)—that is the change to 3 years after discovery as distinct from 3 years from the action—apply to actions that happen after the royal assent or will it apply to discoveries that happened after the royal assent? There is a big difference there and it could have a very significant impact on business. 
The bill should make it clear what the Government intends. The Government may say that it is not sure what it intends and that the courts will sort it out. The courts could read the law as I have read this amendment bill as meaning that anything that is discovered after this legislation receives the royal assent would be caught up in the new provision in new subsection (3). The dilemma for those involved under the Fair Trading Act is that without knowing it they could face a greater liability than they did under the previous Act. That is because the action may have taken place 2 years previously when they were operating under the existing Fair Trading Act. Yet with this amendment they could be caught by this changed provision. 
For people selling a service or a good or taking action under this Fair Trading Amendment Bill (No 3) from here on there is no problem because they will know that it will apply to actions that take place after the bill receives the royal assent. They would know the law they were operating under. But I am not sure that this bill makes clear which way it works for events that have already taken place and I would appreciate the Minister taking a call to clarify for the Committee the way it works. It may be that we should amend the provision to make the intention of the transition arrangements more specific on the face of the legislation. 
LINDSAY TISCH (NZ National—Piako) 
: The points that Dr Lockwood Smith and the Hon Tony Ryall have brought up concerning the commencement date are very important ones. We are trying to add value to the bill. We are supporting the bill and we think we can improve it significantly by allowing the amendment in my name to go ahead. For the notice of the Committee I want to make very clear what I am talking about. My amendment inserts after the word “assent” the words “except section 8 (1) which will come into force on a date to be appointed by Order in Council.” What is significant there is that as the bill stands at the moment the royal assent could in fact take place on Friday because the bill will pass through all its stages today. We will have the third reading later on and the bill will come into effect. But there is absolutely no provision that takes account of clause 8—and new subsection (3) in particular—because the point that has been made in new subsection (3) is that the provision there now is that: “proceedings under this section may be commenced at any time within 3 years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered.” 
So if this provision were to come in in its current form—and it is absolutely retrospective—we do not know the impact that that would have on business. There could well be a contingent liability and a business would be faced with something that might have happened a couple of years or 3 years ago that it knows nothing about today. We are saying that that is unfair. There could be huge compliant costs associated with an action of 2 or 3 years ago because of this clause—[ 
Interruption 
] Well the member over there says that they are taking care of business compliance costs with the ministerial panel. We have a Minister for Small Business who I would like to think might take a call on this matter because I do not know that the ministerial panel on compliance costs has considered the impact of a contingent liability under new subsection (3) inserted by clause 8. As I said National is supporting this bill and trying to make it user-friendly. We want a win-win situation that does not put business in a conflict situation—because this bill could well do that. We want to know whether the provision is about action or discovery. It is our view that if a contravention was discovered it means we could be dealing with something retrospective that business does not know about today. 
As the Hon Tony Ryall has mentioned there are so many different penalty regimes in place out there at the moment and in this case the fines are increasing from $10000 to $200000. That is a huge increase in fines—100 percent. The question would be: “Why have they doubled?”. If we looked at the consumer price index since December 1986 we would see that the increase on that index is only 54 percent. Yet in this case these fines are being doubled—from $100000 to $200000. There are so many penalty regimes out there at the moment and we are asking for an account and review of what they are. We could do that if we were to make sure that when this legislation came into force it would be on a date appointed by Order of Council not on a date—as it says in the bill at the moment—that could be early as Friday. We say that that is unfair. 
We say that from a business perspective there needs to be some transparency. There needs to be some consultancy over this. We need to know whether these businesses will have a liability because of new subsection (3). That is the real concern we have about that provision which states: “proceedings commencing within 3 years after the matter giving rise to the contravention was discovered.” That is the issue and we say that that needs to be reflected in the commencement date. As I have said and I will repeat it we are supporting this bill. 
Hon JOHN TAMIHERE (Minister of Youth Affairs) 
: I move  
That the question be now put 
. 
STEPHEN FRANKS (ACT NZ) 
: I rise to support the National Party’s amendments to the commencement clause. This bill has been sitting around for more than a year and it has been given virtually no attention at all. The Commerce Committee record is 30 minutes’ hearing of evidence and 55 minutes’ consideration which was probably mainly consumed in considering the spelling and typos in its report. 
Hon Tony Ryall 
: And here we are in urgency. 
STEPHEN FRANKS 
: And here we are in urgency trying to pass a bill that will take effect the moment it gets the royal assent and it is a bill that takes away existing rights. It is a bill that extends the power of the State. It is a bill that has some vagueness in it which the committee blithely told us would not matter because most people would not be affected by the odd definition of pyramid-selling schemes as most franchise schemes are not unfair to many participants. So we have a bill that will actually require franchise organisations to go out and advise their agents. 
There is a principle of law that says that nobody should be convicted on the basis of law that they have not had an opportunity to know about. There is a principle of course that one is deemed to know the law but how will people who are subject to this legislation know the law when it becomes effective the moment it has royal assent and when this Government has allowed the system for publishing bills to fall into such disarray that no one will be able to get this law until well after the time it has had the royal assent? Of course they could be like us and beg. The very helpful staff of this institution give us a green assent copy so that we can know what the law is. But how many citizens out there will be able to find out exactly what the law is the moment the royal assent is given? Therefore it is high-handed legislation. It set out mainly to be cosmetic in an attempt to attack the ACT party and others. Of course it backfired and we are hearing silence. 
There is no commentary coming from the other side during the Committee stage despite this commencement clause which states: “This Act will come into force on the day after the date on which it receives the Royal assent.” We do not hear anyone from the other side trying to explain this bill now. The noisiest member when the thing was introduced the Hon John Tamihere does not really want to talk about scams these days. He does not want to get back into the rhetoric he recorded in May last year. So the Government wants to rush this bill through and bring it into force before anyone has had much of a chance to know about it because what was supposed to be a triumph has become an embarrassment. 
The amendment proposed by the National Party is perfectly reasonable. It defers commencement by only a couple of months but that couple of months is vital in terms of principle. No law should tell people from now on that the Commerce Commission can seek injunction proceedings against them and be totally unreasonable and not have any sanction by way of compensating the person if the commission were wrong. No such law should come into force on the day that the royal assent is given. This is a law that purports to be tough on offenders but in fact will quite possibly be tough on ordinary business people and ordinary franchise operators because it has been so badly drafted. 
This law had only 30 minutes’ consideration of the evidence that people had laboured long and hard to bring forward. This law had a lot of technical evidence in writing despite the cursory 30 minutes that the Commerce Committee—I think chaired by Mr Mark Peck—gave it. [ 
Interruption 
] He was obviously under instructions but he lost the role of course. Perhaps it was some kind of judgment on not having used this bill as the opportunity it was supposed to be to drag people out and investigate pyramid selling. But we do have a very sensible deferral of some 2 months until 1 August brought forward by the National Party which for reasons I cannot fathom says that it will in the end vote the bill. Nevertheless that party has brought forward a sensible amendment and it would be proper for all parties in this Parliament to support a change of that kind in the interests of fairness and in the interests of standing up for the principle that people should not be adversely affected by law that they can have no chance of knowing about. 
PANSY WONG (NZ National) 
: Some good questions have been raised. Even though the National Party supports this bill we do want to make sure it is being implemented properly. One does have to question why the bill has to be passed urgently right now and take effect maybe in a few days’ time. Has some news come to the attention of the Government that there are some rampant pyramid schemes or other mischievous schemes out there that need to be unravelled as soon as this bill is passed? I call for the Minister to reconsider the decision not to be receptive to the suggested amendment to the implementation date. My colleague Lindsay Tisch has made some good suggestions about having a fixed date such as August or September for implementation. I am quite sure that the business community particularly or people who will be affected by this legislation have not become aware that the legislation has come before the House will be passed under urgency and will take effect immediately. How are they going to learn about the impact of this legislation? 
If I might just take an example let us say clause 3 in Part 2 where we see that instead of the wording Falsely represent” the amendment bill will substitute the words “make a false or misleading representation”. We all know what lawyers are like. They know how to interpret words that seem clear to a layperson like me. They seem to be able to read a lot more into those words. I think the business community will need time to understand the difference between the expression “falsely represent” and “make a false representation”. Sometimes it seems to us that expressions mean just the same but in my past experience in this Parliament what we thought were obvious clear precise English words might actually mean something quite different just through the order they present or the context. So people who are likely to be affected by this legislation need to have a very precise time frame as to when it is going to come into effect. Then they could approach Business New Zealand or the Auckland Chamber of Commerce to conduct seminars so they can fully understand whether very minor changes on the surface of a particular clause will affect them. 
But of course there are some major concerns that have been very capably raised by my colleague Dr the Hon Lockwood Smith about how to interpret this limitation period. When is the 3-year period going to start from? Is it after this bill has been passed or is it on the original date the particular action was taken? These are important and serious questions. This Labour Government is well known to be hostile to the business community and it would show a lot of grace and goodwill by accepting an amendment to have a fixed date so that the business community would have some certainty rather than not knowing how those two changes I have just raised would impact on businesses. 
Some members may not remember—or perhaps they were not in the House because I am sure it was in the last term—when the Labour Government was caught out very badly by refusing to accept the National Party’s suggestion on the Commerce Committee of providing for a transitional period during the passage of the Commerce Amendment Bill which led to a court case that the Government subsequently lost. 
DARREN HUGHES (NZ Labour—Otaki) 
: I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 69 
Labour 52; Green Party 9; United Future 8. 
Noes 46 
New Zealand National 25; New Zealand First 13; ACT New Zealand 8. 
Motion agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 2 be agreed to: 
to omit the words “day after the date on which it receives the Royal assent” and substitute the words “1 August 2003”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 46 
New Zealand National 25; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Lindsay Tisch to clause 2 be agreed to: 
to omit the words “day after the date on which it receives the Royal assent “ and substitute the words “1 September 2003”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 46 
New Zealand National 25; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Lindsay Tisch to clause 2 be agreed to: 
to add the words “except section 8(1) which will come into force on a date to be appointed by Order in Council”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 46 
New Zealand National 25; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
Part 2 Amendments to principal Act and miscellaneous provision 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: National Party Opposition members have proposed a number of amendments to the Fair Trading Amendment Bill (No 3) which will improve it. I make it very clear that the Opposition has quite a number of points it wants to cover on this debate and I am sure that you Madam Chairperson provided that Opposition members are addressing the issue will ensure that the Opposition has an opportunity to debate its proposed amendments sufficiently. [ 
Interruption 
] 
The CHAIRPERSON (Ann Hartley) 
: That comment was completely unnecessary. Mr Benson-Pope will stand withdraw and apologise. 
David Benson-Pope 
: I withdraw and apologise. 
Hon TONY RYALL 
: We have proposed a number of amendments to this part to deal with a number of issues that the National Party has raised. We have an amendment to make it clear that franchise schemes should not be considered pyramid schemes. ACT National and New Zealand First speakers have made the point that there may be confusion about whether franchise schemes are involved and that it could lead to a significant compliance cost as they seek to redefine the terms of their operations and the conditions of their agreements and we think Parliament should move to make it clear that franchise schemes are not pyramid schemes. 
We have a number of amendments to address the issue of fines and we would like to take different calls to explain those amendments in detail. We will move an amendment that will require the Minister of Consumer Affairs to undertake a review of the various penalties that apply across commercial law to offending. We will also move an amendment that seeks a principle that would guide courts in their application of the Fair Trading Act. That is an amendment based on the wording in the Sentencing Act principles which states: “In sentencing or otherwise dealing with an offender the court—(d) must impose a penalty near the maximum prescribed for the offence if the offending is near to the most serious cases for which that penalty is prescribed unless circumstances relating to the offender makes that inappropriate;”. 
We seek the Government’s support for that because the Government has voted for that wording previously. The Commerce Committee made it clear that the Government wanted to double the fines because the courts were not imposing fines at a sufficient level. We think a more appropriate remedy would be to provide a guidance to the courts that they should be more willing to use the full range of the penalties that are currently available within the law and we seek the Government’s support to deal with that. 
We are also concerned about the removal of the right of parties to seek compensation from the Commerce Commission if it takes an interim injunction against a party. If someone is going lawfully about his or her business the Commerce Commission gets a complaint and the commission then seeks an interim injunction of the court to stop that action there are surely consequences. The Commerce Commission thinks that any alleged offending might stop but it also has an impact on the commercial operation its profitability and the reputation of the people the injunction has been taken out against. 
We say that the Commerce Commission should have to carry the cost of that if it has got it wrong. If the Commerce Commission takes an injunction against a perfectly law-abiding business in the belief that there has been a breach of the law and it then takes no action because it cannot find a breach there will have been a negative effect on the business—it might affect the reputation or the profits—the Commerce Commission should pay. It should compensate for the disruption to the business and reputation that taking that interim injunction would have cost. 
If I took an interim injunction against a company I would have to pay if I took it wrongly and so should the Commerce Commission. Why should businesses have to suffer because Commerce Commission staff have been over-zealous? It should be a basic right as Business New Zealand told the select committee to seek redress for suffering damages as a result of another person’s actions and we will move an amendment to withdraw the exemption the Commerce Commission will have from having to pay for any costs. I will touch on another amendment briefly. How long have I got? 
The CHAIRPERSON (Ann Hartley) 
: Thirty seconds. 
Hon TONY RYALL 
: I may have to take another call to explain it. The amendment is in respect of what happens when the Commerce Commission comes into someone’s business and says it wants a particular document but that document does not exist. Recently there was a case in which the Commerce Commission went into a company under investigation and said that it wanted a document. But that document did not exist and the company had to change its computer programs and write new ones in order to generate that document. The Commerce Commission did not pay. 
BRENT CATCHPOLE (NZ First) 
: New Zealand First agrees with the targeting of pyramid selling in the Fair Trading Amendment Bill (No 3) and broadening the target to incorporate newer forms of pyramid selling that have developed since the Fair Trading Act was originally implemented. Such schemes include those where the participants buy or sell an investment opportunity and use agents provided by the scheme’s operators to recruit others to participate on their behalf instead of having to recruit the new participants themselves. 
We also welcome the updates of the penalties. However as mentioned earlier New Zealand First has difficulty with clause 14 “Power to search”. The current wording of section 47 of the Fair Trading Act provides that the Commerce Commission can search to ascertain whether a person has contravened the Act. Clause 14 of this amending legislation extends the commission’s powers under section 47 of the principal Act so that the commission may obtain warrants to search for evidence to demonstrate the nature and extent of the breach of the Act. That is to assist the commission in gathering evidence for the courts. They “may” search. 
The wording of the subparagraphs of new subsection (2) in clause 14 refers to any conduct that “constitutes or may constitute” a contravention of the Act. It is the “may constitute” the contravention of the Act that we have difficulty with because it is very vague and not specific enough to allow the Act to operate properly. New Zealand First does not support that provision which gives vague extensions to the power to search because it gives the commission unfettered powers to undertake “fishing expeditions” in the search to endeavour to find evidence of the conduct that “may” constitute a contravention of the Act. In other words it is undertaking a search on a hunch. We feel that that is not good enough and we have put a Supplementary Order Paper forward that removes the word “may” and replaces it with the word “will”. 
People undertaking legitimate activities such as for example stamp collecting may trade a particularly valuable stamp sell it and use those proceeds to buy a car that is way beyond the means of their income. On the grounds of the wording of that provision it could be considered that that stamp collector’s activities “may constitute” a contravention of the Act and therefore would be subject to a search. That goes against the whole principle of this bill because it takes in too wide a scope and leaves room for abuse. 
We would like to see that clause given a tighter wording as in section 312 of the Crimes Act which deals with applications for interception warrants. That section sets out extensive and definite parameters for the search warrant rather than leaving the parameters vague and easily misinterpreted—or worse abused. The amendment on our Supplementary Order Paper tightens that up. We would prefer it tightened up more along the lines of the Crimes Act but we will be content to see the wording changed from “may” to “will”. 
SUE KEDGLEY (Green) 
: I would just like to make a few comments on Part 2 of the Fair Trading Amendment Bill (No 3). First I will make a few general remarks because the Green Party has not spoken at all on this bill to say that we will be supporting it slightly half-heartedly because we believe that it is so narrow in its purpose and there are so many serious issues relating to the Fair Trading Act that would be of great benefit to consumers if the law were strengthened. But this bill focuses on a couple of issues that really I believe miss the main concerns that consumers might have about the Fair Trading Act. 
 So in other words we see it as rather limited in its purpose. We certainly support the idea of strengthening the powers in respect of pyramid selling. The member from ACT argues that the powers already exist and that it is rather pointless but we will take it at its face value and say that this certainly spells it out. So we support that and some of the other provisions in this bill. 
We are deeply disappointed that the bill has not dealt with fundamental issues. For example the bill does not even establish a consumer’s right to know what is in a product that he or she purchases. There are all sorts of other flaws in the legislation that need strengthening and we are concerned with clause 14. The member from New Zealand First has pointed out the very wide broad—and some would say sweeping—powers that that provision gives such as the power to search given to the Commerce Commission and we are extremely concerned about the very far-reaching and unfettered nature of those search powers. So we will definitely be supporting the amendment from New Zealand First to tighten that amendment and to define precisely what we mean. 
As the previous speaker said under the Crimes Act one has to have very specific and serious reason to believe there is some infringement or whatever to get a search warrant. It is quite specifically spelt out whereas here it is extremely loose. It is all about saying that one must have reasonable grounds to believe that a search is necessary for the purpose of something that “may” constitute etc. 
The member from New Zealand First is moving an amendment that we support but one could drive a bus through this. I may be a little paranoid but I sometimes worry that with a small bill like this some technical amendments are slipped into a technical bill with the thought that some of us may not be paying a lot of attention to it then one finds that something is slipped in that significantly extends the search warrant provisions. They are then slipped through and we are told: “There’s a precedent for this.” If we suddenly find those provisions being slipped into other bills we may then be told “Well the precedent exists in the Fair Trading Amendment Bill (No 3).” so we worry. 
It may be that there is some other good reason for this very very loose wording but that has certainly never been spelt out to us. Whatever the reason may be the fact is that the unintended consequence of this very loose wording will be that the search warrant provisions are widened to the point where people could be going on a fishing expedition as the previous speaker said. Basically as it is at the moment the bill is giving unfettered search powers and I am not aware of any other search powers in any other legislation that give the same broad unfettered search powers—whether to the Commerce Commission or whatever. 
So I am delighted that the member for New Zealand First has drawn our attention to that defect in the legislation. We are grateful to him for drawing it to our attention and for coming up with a tightened wording. The Green Party will certainly be supporting the amendment and we hope that all other members in the House will also support it. As I say we will be supporting the bill—narrow though it is in its scope—but we bitterly regret that it does not deal with some of the more fundamental problems with the Fair Trading Act from a consumer’s point of view. 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: In speaking to Part 2 of this bill there are three clauses that I would particularly like to focus on. The first one is clause 8. During the debate on Part 1 I raised the issue of the transition in the new arrangements in respect of the limitation on liability. I note that in the commentary on this bill the Commerce Committee makes the comment that “This will not operate retrospectively.” It worries me that when one reads the bill one finds there is nothing to make that clear. 
Hon Judith Tizard 
: Clause 16. 
Dr the Hon LOCKWOOD SMITH 
: The Minister calls out “clause 16”. That clause entitled “Provisions as to proceedings already barred and pending proceedings” states: “Nothing in this Act—(a) enables any proceedings to be brought that were barred before the commencement of this Act;”. But I think the problem remains because within the last 3 years a person involved in a business knew that there was a 3-year limitation on the time in which an action could be taken if something had gone wrong. This bill will change that even though the event may have occurred before this legislation takes effect. I do not believe that clause 16 covers that and that is what worries me. As I read the bill including clause 16 I do not think that on the face of it the bill is clear on that transition. That just worries me because we have seen so many things go wrong with transitional arrangements in commercial law. 
Proceedings in respect of an event that has occurred within the last 3 years and that has not yet been found to be faulty are not barred by clause 16. The time period is extended by this legislation for something that may have occurred prior to the commencement of this legislation and that is retrospective. It has a retrospective impact on the person conducting the business. I would appreciate it if the Minister could take some advice on that. It should be made absolutely clear that the provisions of new subsection (3) inserted by clause 8 do not catch an event that occurred prior to the commencement date of this legislation even if the event occurred within 3 years of that date or otherwise the effect of this legislation will be retrospective. That is the first issue that I think the Minister should take a call on. 
The second issue I would like to comment on is clause 10. As a member of Parliament my experience of the Commerce Commission goes back many years and I believe it should not be exempt from the requirement to give undertakings as to damages. The Commerce Commission can have a profound impact on businesses. The actions of the Commerce Commission resulted in a certain business in my electorate going out of business—that is what that business believes and that is what a select committee minority report argues. Admittedly the bill is not about exactly that kind of situation but the Commerce Commission can have a profound impact on businesses in this country—it can put them out of business. An injunction taken out under clause 10 could result in a business going out of business. The Commerce Commission must not be exempt from undertakings as to damages when that is the possible consequence of its actions. I think we should hear an explanation from the Minister as to why the Government is taking that quite extraordinary step in this legislation when it is so clear that the actions of the Commerce Commission under clause 10 could put a business out of business. Once that has occurred that business has no come-back against the Commerce Commission. The situation is already hard enough. It is hugely difficult to take action against the Commerce Commission. The resources of small businesses are not remotely the same as those of the Commerce Commission and to make the Commerce Commission exempt from giving any undertakings as to damages tilts the balance in a most unfair manner in favour of it. 
Finally in respect of new section 47(2) inserted by clause 14 and the issue of the new powers to search I say that even the Inland Revenue Department does not have the same powers. As I read paragraph (b) of that section the Commerce Commission could have the power to take a computer from a business for the purpose of gathering or recovering evidence which is a power that even the Inland Revenue Department does not have. In recent legislation that has gone through this House under this Government a lot of care has been given by select committees to make sure that computer hard drives cannot be taken from businesses because some businesses could not operate if that was done. I do not see in this provision the protection that is provided in most recent legislation for other important bodies even in relation to provisions to combat terrorism. Other important bodies cannot take a computer without restraints around that yet I do not see here anything to constrain the Commerce Commission from taking a computer from a business as it seeks to recover evidence from the business. Why should the Commerce Commission have more powers to remove a computer from a business person than the Inland Revenue Department? That shows the hasty way that this bill has been drafted and it shows that the select committee has not adequately aligned this provision with those in other legislation recently passed by this Parliament. 
Hon JOHN TAMIHERE (Minister of Youth Affairs) 
: I move  
That the question be now put 
. 
Dr MURIEL NEWMAN (ACT NZ) 
: I am pleased to take a call on this bill on behalf of the ACT party. The ACT party will vote against this bill and when members look at Part 2 they will see why we will vote against it. The drafting of this legislation is fuzzy. We know for sure that it will have to be tested in the courts and the people who will have to pay for that of course will be small businesses. This is basically a bill that increases yet again the compliance costs on small business. This anti-business Government just wants to penalise small business as much as it possibly can and now it is doing so through the Fair Trading Act. 
When the Government is hostile to business we end up with law that is not good law. Referring to clause 5 in particular I very much support the amendment put forward by the National Party to make sure that that clause does not disadvantage franchise owners. I worry that new section 24(2)(a)(ii) inserted by clause 5 reads: “that to many participants in the scheme constitutes primarily an opportunity to buy or sell an investment opportunity whether personally or through an agent rather than an opportunity to buy or supply goods or services;”. So it refers to an investment opportunity rather than to goods and services. 
I would like the Minister in the chair the Hon Judith Tizard just to reassure members of the Committee on the question of whether that clause will trap people for example who sell Amway products. No I suppose it will not because that is actually a good or service. But Amway of New Zealand recruits other people into the business. What happens when it recruits people into the business and things do not work out as well as they thought they would? Will this bill disadvantage those people? Should the people who are in that Amway of New Zealand business be worried about that? What about timeshares? When people buy into timeshares they are actually buying into an opportunity to have a nice holiday and so on and sometimes they have to try to sell those off. But investments in timeshares are not actually a good or a service. It is sort of like a holiday or a dream. 
Can the Minister take a call just to reassure us that legitimate business will not be trapped by the provisions of clause 5? The point is that when one reads that clause one does not know what it means and that means a poor unsuspecting person who is involved in investment opportunities will find himself or herself caught by it. Labour as the prime party in the Government has a responsibility to make sure that the law is clear: that the law means what it states and that when lay people read it they can understand whether they could be caught by it. I would like to make mention of the fact that—because this bill is a bit fuzzy—what will happen is that an unsuspecting small business will get caught by the Commerce Commission taking a case against it. 
I worked in a company a number of years ago when the Fair Trading Act was first passed through Parliament. The Commerce Commission decided to pick on the company I worked for as a test case. I can tell the Minister in the chair that an enormous amount of stress and pressure was caused for that small business because the Commerce Commission itself did not understand the law. It was using that company in order to have the law interpreted for it. That was a huge burden of stress worry and cost for the small business that I worked for. At the end of the day it turned out that the Commerce Commission was totally wrong. It had got the wrong end of the stick altogether but we were the poor victims who had to help to have the law clarified. 
Because this bill is so badly drafted I know that in the future many small businesses in New Zealand will suffer because of the law that this Labour Government has forced on them. What is even worse is that new section 41(6) inserted by clause 10 states that the Commerce Commission does not have to pay damages if it has got things wrong. I can tell the Minister that many members of this Parliament know what happened to a poor couple when the Occupational Safety and Health Service decided to take a case against them—the Berrymans. Some members will have had the Berrymans attend their select committee to ask for compensation. What happened there was that the Occupational Safety and Health Service was taking a case against them to test the law and that just about destroyed their lives. The Labour Government should not be responsible for that. 
MAHARA OKEROA (NZ Labour—Te Tai Tonga) 
: I move  
That the question be now put 
. 
PANSY WONG (NZ National) 
: This is a substantial part of the bill and the Minister in the chair the Hon Judith Tizard should take a call on it. Many very worthwhile amendments have been put up and not just by National or ACT. The various political parties have put up a range of good amendments and most of those political parties including the National Party support the bill. Obviously when we support a bill and put forward amendments our only intention is to make sure the bill is more effective when it is implemented. The Minister should take a moment to reflect on the obvious good intention on the part of the Opposition parties and assess the need to amend the bill. 
First of all I would like to come back to clause 10 with regard to the Commerce Commission. The ACT party has put in an amendment to remove the word “not” which would make sure that in determining the Commerce Commission’s application for the granting of an interim injunction the court would take into account the fact that the commission is not required to give an undertaking as to damages. This is important. My good colleague Dr the Hon Lockwood Smith raised the point that unless there is a more level playing field any business organisation or anybody else can be required by the Commerce Commission to do all sorts of things and when the Commerce Commission take out an interim injunction if that is incorrectly done there will be no damages awarded for that. So this is not a level playing field. 
Of course my expectation that the Labour Government would take that into account has diminished somewhat. I am not as positive as my colleagues that the Minister or the Government will take into account such a sensible and correct amendment in the light of what occurred this morning when we saw the immigration bill being rushed through which gives total power to the Immigration Service’s chief executive officer and other officers to carry out all sorts of functions without having to explain or to justify that. But that does not make this measure correct. The Commerce Commission should be totally accountable for its actions so that if it has issued an interim instruction and happens to be incorrect then it should pay damages. That would serve as a reminder to Government organisations like the Commerce Commission to be very careful and really vigilant in making sure they have got everything correct before they issue an interim injunction. 
The other issues I want to raise are about the authority provided in clause 15 for the Commerce Commission to require a person to supply information or documents. 
Sitting suspended from 6 p.m. to 7.00 p.m. 
DARREN HUGHES (NZ Labour—Otaki) 
: I move  
That the question be now put 
. 
LINDSAY TISCH (NZ National—Piako) 
:  
Before the dinner break my colleagues Tony Ryall Dr the Hon Lockwood Smith and Pansy Wong were going through Part 2 and speaking about its importance. In essence this part is the most important part in the bill. In it we find all the nitty-gritty of what this bill is about. We agree with some of the clauses. Clause 4 “Trading stamp schemes prohibited” is one that makes sense and we have no difficulty with it. 
However we certainly have some difficulty—and I have mentioned this in previous contributions—with what is happening in new section 40(3) inserted by clause 8(3) which states that “proceedings under this section may be commenced at any time within 3 years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered.” That is open-ended which concerns us. What happens in a business environment if something is found to have been in contravention of the legislation a couple of years ago? There is and can be a contingent liability on that business. Who is to say at this stage that there is a liability? This clause makes the situation open-ended because as I said there will be or could be a liability on a business. We are concerned about that and have discussed it at some length. 
We are also concerned about clause 10 “Injunctions may be granted by Court for contravention of Part 1 Part II Part III and Part IV”. That clause gives huge powers to the Commerce Commission—powers that we think could be abused. Previous speakers have said that the impact of those powers could mean that businesses will close down. That is our major concern about clause 10. 
Clause 14 “Power to search” gives huge powers of access. In fact the powers of access under that clause are powers that even the Inland Revenue Department does not have and that is not right. There needs to be some conformity between this legislation and what other departments are involved in. Certainly in the case of the Commerce Commission huge powers are given in new section 47(1) which states: “The Commission may from time to time authorise an employee of the Commission to search under a warrant issued under subsection (2) any place named in the warrant for any of the purposes set out in that subsection.” We regard that as being open to abuse. We do not think such huge powers are acceptable. Although we have said all along that we will support this bill because it moves in the right direction I make those points very clearly. 
Clause 8 doubles the fines that can be imposed. New section 40(1A) in subclause (2) states: “Every person who contravenes section 24 commits an offence and is liable on summary conviction to a fine not exceeding $200000.” The current fine is $100000. Why are we talking about a doubling of a fine to $200000? The fines regimes for many businesses vary and we have argued as we did in the debate on the commencement date that we should have a review of all of the fines regimes. Some people would be paying $10000 and other figures for other offences but more important in relation to this bill we see there is a doubling of the fines from $100000 to $200000. As I quoted earlier the consumer price index has only gone up by 54 percent since 1986. So why are we talking about a doubling of the fines? 
TIM BARNETT (NZ Labour—Christchurch Central) 
: I move  
That the question be now put 
. 
STEPHEN FRANKS (ACT NZ) 
: Part 2 contains nearly all the substance of the bill—there is nothing else in the bill that contains any substance. There are three clauses that I believe the Committee must debate. I had to leave the Chamber briefly before 6 p.m. so I am not sure whether the Minister in the chair the Hon Judith Tizard has taken a call to explain those provisions. I imagine she will because this is the bill that her colleague Minister Rick Barker described as being “fantastic”. He told us that the Commerce Committee would make many investigations into the issues it raises stating: “I want to see a very rigorous investigation of those issues and I am absolutely confident that the Labour members on the committee will dig deep on that investigation. They will drill all over the place and many things will be flushed out for the benefit of the whole community.” I imagine that those Labour members are very well equipped to answer those serious questions. 
The first asks why the definition of pyramid selling schemes catches a good deal of the ordinary franchise work that this Government has said is a large part of the future. Branding and the ability to take advantage of locally produced or international brands is a major part of any modern industry. For some reason this bill seems to want to catch franchise agencies and franchise selling and the only explanation for that from the select committee was that other provisions will mean that we do not have to worry about bad words here because most franchise schemes are fair. Of course almost any scheme can be found to be unfair in hindsight but commercial certainty or indeed the rule of law depends on knowing what the law means in advance not after one has worked out that it did not turn out the way one expected. 
The second question is the one on which I have an amendment covering what I am sure must be a manifest error. Clause 10 contains a provision stating that the court may not require an undertaking as to damages—in other words on seeking an injunction. For hundreds of years the courts have made sure that people cannot abuse power by coming and getting an urgent remedy that could cause enormous damage to the other side unless they are prepared to say that if they are wrong they will compensate for any damage. The Government has now decided that the Commerce Commission will be exempt from that. It can use injunctions for harassment or it can kill someone’s business and it does not require the commission to give an undertaking as to damages. 
Then there is the provision in the clause that I believe must be an error and I certainly ask the Minister to check with her advisers whether it is. It states that: “the Court must not take into account”—in granting an injunction—“that the Commission is not required to give an undertaking as to damages.” It is inconceivable that the Government could mean what it is saying. Surely it should be taking into account that the other side could be utterly destroyed and that the Commerce Commission will be completely free from having to compensate when the court decides whether it is in the interest of justice to give an injunction. The word “not” in that provision must be an error. I say to the Minister that I believe that not only the House but also the people who believe in the rule of law and justice would expect some sort of answer if my amendment to remove the word “not” is not accepted. 
Thirdly there is another little drafting point that I suspect is a little less obvious. It is in new section 40A to be inserted by clause 9. Subsection (1) states that the court may order a wrongdoer to pay an amount not exceeding the value of any commercial gain resulting from the contravention—that is ordinary common sense; one can work that out. The problem is that the provision does not stop there. The next subsection states that the court should work out what the gain is but the first one goes on to say: “if the court is satisfied that the contravention occurred in the course of producing a commercial gain.” As I read them those words are entirely redundant. If they are not redundant the court will have to give them some meaning. How can a contravention not occur in the course of producing a commercial gain if in fact the commercial gain results from it? 
DAVID BENSON-POPE (Senior Whip—NZ Labour) 
: I move  
That the question be now put 
. 
The CHAIRPERSON (H V Ross Robertson) 
: No I will take one more. There are a lot of amendments in the name of the Hon Tony Ryall and I am prepared to listen to him. 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: Thank you Mr Chairperson. It is good that you have done that because Part 2 includes the substance of the bill and if we are to try to provide positive suggestions to the Government we need some opportunities to talk about them. We have a number of amendments to the bill that I would like to talk about. 
The first is that we want to limit the ability of the Commerce Commission to require companies to provide documents that do not exist. The law gives the Commerce Commission substantial powers to enter seize and demand information and documents. That will extend to requiring information and documents that do not exist within accounting systems or cannot be readily produced. There will be a significant compliance cost for business. Business New Zealand told the Commerce Committee of a recent case where a company had to produce reports that were not in its accounting system nor in its records. It did comply at a considerable cost of time and money and then the commission found that there was no case to answer. There is no compensation for that private business which had to spend thousands of its own dollars in doing that. 
Secondly we have put an amendment to stop the Commerce Commission and this Government from removing the basic right of New Zealanders to seek redress for suffering damages as a result of another person’s actions. This bill will allow the Commerce Commission to seek an injunction with no cognisance of the cost that the business may incur. The commission can go to court and require a business to stop trading but the commission does not have to compensate the business if it finds that there was no illegal activity. That is anti-business and just does not make sense. The Minister of Consumer Affairs should explain. 
We have also put amendments to the limitation period to try to improve the bill. The bill proposes that in relation to for example claims made in advertising companies are liable 3 years after a breach is discovered rather than when it actually happened. The commercial consequence of that— 
Hon Harry Duynhoven 
: That’ll scare the hell out of used-car dealers. 
Hon TONY RYALL 
: Mr Duynhoven said that will scare them. The commercial consequence of that is a number of businesses will have to carry quite significant contingent liabilities because businesses cannot be sure that the claims will come to an end. Dr the Hon Lockwood Smith made the point that this legislation is quite unclear whether that provision will apply retrospectively. The Government states in the commentary on the bill that it will not but if one reads the bill one sees that it is quite unclear how it will be prevented. So we have put amendments and we ask the Government to consider those. 
We are also concerned about the 100 percent increase in the fines. There is no justification of why that level of fine should happen. The Government says that the courts are not fining enough. Its response is to double the fines— 
Stephen Franks 
: Then not collect them. 
Hon TONY RYALL 
: Then not collect them! Its response is to double the fines and hope the judges will lift the amounts they are fining. I have proposed an amendment that uses the Government’s own words in the sentencing guideline in the Sentencing Act. My amendment suggests to judges that in the worst cases they use the full range of the penalty that can be applied. Those are the Government’s own words and I am asking the Minister to consider supporting those amendments. 
The National Party has been prepared to support this bill up until now because we thought that the Government would look upon our amendments as providing positive solutions to concerns that have been raised. But the Government has not even given us the courtesy of a response. The Minister said earlier on in the debate that she would respond at the appropriate time. This could very well be— 
Hon Judith Tizard 
: The third reading is the appropriate time. 
Hon TONY RYALL 
: Rubbish! If that Minister wants to continue having multiparty support for this bill she should take a call. When one goes through the weaknesses in this bill one becomes quite convinced that this bill should not go any further. 
Hon RUTH DYSON (Minister for ACC) 
: I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 69 
Labour 52; Green Party 9; United Future 8. 
Noes 46 
New Zealand National 26; New Zealand First 13; ACT New Zealand 7. 
Motion agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to insert new clause 5A be agreed to: 
to insert after clause 5 the following clause: 
5A 
Section 24 of the principal Act is amended by adding the following subsection: 
(3)Notwithstanding anything else in this section for the avoidance of doubt franchise schemes which are not manifestly unfair on account that these schemes do not rely on recruitment of additional participants to enable financial rewards are not considered pyramid selling schemes. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 46 
New Zealand National 26; New Zealand First 13; ACT New Zealand 7. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 8 be agreed to: 
to omit subclause (3). 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 46 
New Zealand National 26; New Zealand First 13; ACT New Zealand 7. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 8 be agreed to: 
to amend subclause (3) by adding to new subsection (3) of section 40 the words “For the avoidance of doubt this subsection will not apply retrospectively to matters which occurred 3 years before the commencement of this Act.” 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 8 be agreed to: 
to add the following new subclause: 
(4)The Minister shall present a report to the House within 6 months of Royal assent of this bill reviewing the level of financial penalties in comparison with penalties included in other commercial legislation. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to insert new clause 8A be agreed to: 
to insert after clause 8 the following new clause: 
8ANew section 40A inserted 
The principal Act is amended by inserting after section 40 the following section: 
40A 
Principles of dealing with offenders 
In fining or otherwise dealing with an offender the Court must impose a penalty near the maximum prescribed for the offence if the offending is near the most serious cases for which the penalty is prescribed unless circumstances relating to the offender make that inappropriate. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 10 be agreed to: 
to omit clause 10. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 10 be agreed to: 
to add to new subsection (5) of section 41 the words “unless the Court deems it appropriate”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 10 be agreed to: 
to omit from new subsection (5) of section 41 the word “must” and substitute the word “may”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 10 be agreed to: 
to omit new subsection (6) of section 41. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Stephen Franks to clause 10 be agreed to: 
to omit from new subsection (6) of section 41 the word “not” where it first occurs. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Brent Catchpole to clause 14 be agreed to: 
toomitfromnewsubsection(2)(a)(b)and(c) of section 47 thewords“constitutesormayconstituteacontraventionof” and substitute the words “contravenes or will contravene”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 56 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8; Green Party 9. 
Noes 60 
Labour 52; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 15 be agreed to: 
to omit clause 15. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Tony Ryall to clause 15 be agreed to: 
to add to new section 47G the following subsection: 
(3)In the event that no action is taken against any party the investigation of which the Commission required the supply of information or documents under this section then the Commission will reimburse the supplier of the information or documents for the reasonable costs of providing the required information or documentation. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 26; New Zealand First 13; ACT New Zealand 8. 
Noes 69 
Labour 52; Green Party 9; United Future 8. 
Amendment not agreed to.