Are you one of the many New Zealand businesses that sell
its goods through online auction sites like Trademe?
If you are, take note, because amendments are coming in the
middle of this year to our consumer laws – including the
Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986
(FTA) – which may affect your business...BIG time.
The amendments are the most significant set of changes to our
consumer-related legislation in nearly 20 years. For this article I
have chosen to focus on an aspect of the changes which to some
businesses may be insignificant, but which to an ever-increasing
number of small-medium size businesses is highly significant: the
granting of rights to consumers who buy goods through online
Why is this change significant?
The easiest way to explain is by reference to the current
Most if not all readers will be familiar to some degree with the
protections afforded to consumers in respect of goods and services
under the CGA. What readers may not be aware of is that the
CGA's protections do not currently apply to goods which are
supplied by auction or competitive tender. In tandem with this is
that the FTA does not currently require a person selling goods
online to disclose if they are a trader (versus a private
individual selling an item on a one-off basis).
Consider the following fact situation. I visit TradeMe and see a
pair of shoes I like being offered for sale. The only detail I am
given about the seller is the account name, 'derek123'. I
have no idea if 'derek123' is an importer or private
individual. If I successfully bid for those shoes my purchase is
not currently protected by the Act, regardless of whether
'derek123' is a trader or individual. Further, if my shoes
fall apart within a week through no fault of my own I have no
recourse to 'derek123'.
If however, I bought the same shoes using the 'Buy Now'
button my purchase is protected by the Act – provided
'derek123' is a trader – because a 'Buy Now'
transaction is deemed to be the same as physically visiting a
retailer and buying goods in-store. But herein lays another
problem: I don't know if 'derek123' is a trader or
private individual, so how do I know if I can enforce my rights if
I need to?
Amendments to the CGA and the FTA fix these problems. The
relevant section of the CGA (s41(3)) is being repealed as of 17
June 2014, meaning the protections afforded by the CGA will apply
to goods bought by auction and competitive tender on TradeMe as
well as by 'Buy Now'.
In addition, online traders will no longer be able to trade
under the radar: a new section in the FTA (s28B)(2)), which comes
into force on 18 June 2014, will require online vendors to make it
clear to potential purchasers that they are operating in trade.
Consumers will thus be provided with surety their purchases will be
protected by the provisions of the CGA (and the FTA).
Fifteen years after TradeMe was established, then, consumers
will finally have rights against traders in respect of goods bought
In closing, I offer a word of advice to any business which sells
its goods through online auction sites and which has managed to
avoid (rather than evade) the nets of the CGA and FTA to date: if
you don't have sufficient or the right liability insurance in
place, you would be wise to contact your broker.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
James & Wells Intellectual Property, three time winner
of the New Zealand Intellectual Property Laws Award and first IP
firm in the world to achieve CEMARS® certification.
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