Legislation: Fair Trading Act Amendment Bill 2001

The New Zealand Fair Trading Act 1986 enacted many of the key provisions of Part V of the Australian Trade Practices Act 1974.  It protects consumers and other traders by prohibiting misleading or deceptive conduct and certain unfair trade practices.  In the 15 years since the Act came into force, the criminal provisions have lost some of their sting - particularly as inflation has taken its toll on the current maximum penalties ($30,000 for an individual and $100,000 for a body corporate).  Corrective orders have also been rarely used in practice because these can only be granted by the High Court on application for Commerce Commission, whereas in New Zealand criminal prosecutions under the Fair Trading Act are taken in the District Court.

The new Bill aims to strengthen the effectiveness of the Act in a number of ways.  Some of the more significant changes are:

1. The maximum penalties are doubled to $60,000 for an individual and $200,000 for a body corporate.  In respect of pyramid selling schemes, the maximum penalty is $200,000 for an individual or body corporate.  In addition, a new section 40A will allow the Court to order that a person convicted in respect of a pyramid selling scheme pay an amount not exceeding the value of any commercial gain resulting from the scheme.
   
2. Corrective orders can now be granted by the District Court.
   
3. A vexed problem under the Act has been the three year time limit on criminal prosecutions.  Currently if the breach is discovered more than three years after it occurred, action is time barred.  Under the Bill the criminal limitation period will now run for three years from the date of discovery of the breach or the date the breach ought reasonably to have been discovered.  
   
4. The Commerce Commission is now to be exempted from the requirement to give undertakings as to damages when seeking interim injunctions.  This will make it easier for the Commerce Commission to bring such proceedings.
   
5. The Commerce Commission presently has a rather heavy handed search warrant procedure which is often inappropriate where information is required from unrelated third parties.  The search warrant procedure is to be augmented by a specific statutory power enabling the Commission to require persons to supply information or documents.