New Zealand: E-Commerce And The Code For Consumer Protection

Are you aware of your rights when buying or selling on the internet? Annabel Sheppard, an associate with the Christchurch Lawlink firm of Wynn Williams & Co, outlines some concerns and how the proposed Code for consumer protection will work.

What Is E-Commerce?

Any sort of commercial transaction conducted electronically is e-commerce. Put simply, it is doing business on-line. The most obvious example is selling products on-line to consumers.

E-commerce is changing the way businesses are conducted. Businesses and consumers can be in contact without the need for any face-to-face meeting and transactions can take place almost instantaneously. It has the potential to benefit both business and consumers substantially. However, in order to be successful in an e-commerce environment, businesses need to adapt their practices to take into account the different dimensions involved.

Problems

Your business might not be international, but e-commerce is. Your potential market has expanded. New Zealand laws will apply to e-commerce transactions which occur within New Zealand and involving New Zealand entities. There is, however, uncertainty if the consumer or business is located outside New Zealand. Which country’s legislation is applicable? What procedure should be applied if there is a dispute? Which country’s courts have jurisdiction? It can be difficult to determine where the business is actually located. How can legal documents be served on the business? How can judgments be enforced?

Often the business entity is not clearly identified. It therefore may be unclear who exactly the consumer is dealing with.

Another issue is how consumer privacy is protected. This is especially important in respect of payment mechanisms. Consumers need to have confidence that the information they release is secure, especially credit card details given when paying for goods.

What are the terms of contract between the consumer and the business? Often these are not clearly defined and in some cases there are no provisions at all. For example, what is to happen if the consumer is unhappy with the goods? Is there any right to return them? Will a full refund be available? What warranties are there?

These problems have not been addressed consistently by businesses involved in e-commerce. As a result there is a lot of uncertainty, which can lower customer and business confidence in on-line transactions.

The Code

The Ministry of Consumer Affairs has proposed a New Zealand Model Code for Consumer Protection in Electronic Commerce.

The objective of the Code is to provide guidance on fair business practices and to encourage businesses and industry associations to adopt the guidelines. It is hoped that it will help ensure that consumers are protected adequately, so that both businesses and consumers can have confidence in on-line transactions.

The Code is designed to apply to e-commerce between business and consumers (and not business to business transactions). However businesses are encouraged to adopt relevant provisions when dealing with other businesses.

The Code is not mandatory, but is meant as a guide to assist businesses and help develop confidence in e-commerce. It is in addition to and not a substitute for other obligations (for example, obligations under the Fair Trading Act 1986 and Privacy Act 1993).

The Code relates to electronic commerce which is defined as meaning: "commercial activities that are carried out through electronic networks including the promotion, marketing, supply, order or delivery of goods or services."

It recommends that businesses provide consumers with accurate, clear and easily accessible information. Businesses should provide all information on-line which they are required to provide off-line.

Information on the terms and conditions of a transaction should be identified clearly and distinguished from advertising and marketing material. In particular, there should be adequate information on the following matters:

  1. The costs of a transaction (including the applicable currency, postage, insurance and taxes and duties).
  2. Any restrictions or conditions of purchase (eg if it is intended that delivery will only be within New Zealand, this should be stated clearly. Just because the internet is international, businesses do not have to be, as long as they make it clear if they are not).
  3. If limited, the period for which the offer is valid.
  4. Payment options.
  5. Terms of delivery.
  6. Mandatory safety and health care warnings that a consumer would get at the off-line point of sale.
  7. Conditions for termination, return, exchange, cancellation and refunds.
  8. Details of any cooling-off period or right of withdrawal.
  9. Details of any explicit warranty provisions.
  10. Details of any after-sales service.

Businesses should also provide appropriate security for protecting consumers’ personal and payment information (as a minimum, New Zealand businesses must comply with the Privacy Act 1993 and its principles).

There should also be clear and easily accessible information to consumers on complaint procedures. If it is intended that New Zealand laws should be the governing law, then this should be stated clearly.

Summary

If your business is involved or thinking of becoming involved in e-commerce, then it is important you have clear practices in place to deal with the dynamics of the electronic environment.

The proposed New Zealand Model Code for Consumer Protection in Electronic Commerce provides guidance to businesses. If you provide clear and easily accessible information about contracts, this will assist consumers in having confidence to deal with on-line transactions.

Your Lawlink lawyer can advise you on the Code and how to adapt your business practices to deal with e-commerce. Your lawyer can assist with drafting terms and conditions to deal with on-line transactions.

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.

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