New Zealand: Facebook Marketplace launches in New Zealand – consumer rights at law or a virtual handshake?

Last Updated: 23 October 2016
Article by Katrina Hammon

Most Read Contributor in New Zealand, November 2016

The addition of Facebook Marketplace into the online auction space in New Zealand provides a useful point at which to remind ourselves of the law that applies in this area, and to think about what practical things can be done to protect ourselves when transacting through these sites.

Online marketplaces or auction sites, such as Ebay and Trade Me, see millions of transactions every year and most of us make use of them at one time or another to get a deal. For the most part these trades, whether between a private individual and a business or between two private individuals, are straight forward and leave both seller and buyer satisfied with the result. However, sometimes things go wrong. For example, goods might not show up following payment or are delivered but don't match the description. It's the internet, so there are no shortages of scams out there and consumers need to remain vigilant.

The law

Sales between two private individuals cause the most uncertainty under the law as, to an extent, these transactions are based on trust - a "virtual handshake". If you purchase products or services from a business, you have the protection of consumer rights provided in the Consumer Guarantees Act (CGA) and Fair Trading Act (FTA). Trades between private individuals are not contemplated or covered by these Acts. As consumers we are left to rely on general contract law, where the general principal of "caveat emptor" (let the buyer beware) applies.

The Contractual Remedies Act (CRA), may provide recourse to damages where a seller makes a misrepresentation and the consumer actually relies on that in their decision to purchase. However, to run a successful claim under the CRA you must prove that the misrepresentation was a significant and influencing factor in your decision to purchase (although it does not have to be the only factor). In most cases it will be too late to "cancel the contract", but it is worth noting that the CRA provides a right of cancellation where there is serious loss or damage suffered.

The Disputes Tribunal is the best avenue for a consumer to bring a claim or resolve a dispute resulting from an online trade. There are typically two types of claim that might arise in this context:

  • The most common basis for a claim is misrepresentation of the goods or services, for example the condition or state of repair of a lawn mower. A successful claim can result in an award of damages, which might be calculated based on the difference between the amount paid and the Tribunal's best estimate of the market value of the lawn mower.
  • Another option is to make a claim for the costs to fix or repair the goods purchased. However in this case you have the obligation to mitigate your loss. A good example where mitigation of loss might be a hurdle to a successful claim for costs of repair would be if you replaced the motor on the lawn mower, knowing that was a major and expensive repair and it would have been more cost effective to purchase a new second-hand mower.

The only other legislation that may apply to private transactions through auction sites is the Sale of Goods Act 1908, which may be relied on where the description of the goods is inaccurate entitling a consumer to compensation. Where goods are "sold by description" the actual goods must match that description. This sort of claim would not normally cover the state of repair or condition of the goods (that would be a misrepresentation), it would however cover the kind, brand, authenticity stamping/mark, make, model or class of goods. It is important to note that a sophisticated seller can contract out of this Act (although unlikely that the average private seller would do so).

If the online seller is a professional trader then the protection is greater under the law. The FTA requires that a professional online trader clearly states on the listing that they are in trade. Purchases from a professional trader will be covered by the CGA and the FTA, giving protections for (among other things) misrepresentations, misleading statements and goods not being fit for purpose.

Practical tips for consumers

  • Carefully read the policies of the online auction site.
  • Search online to check if there are any reviews or warnings about the seller.
  • Do your research and compare product pricing against retail and other second hand retail avenues.
  • Ask questions and request additional photos of any damage/ wear and tear disclosed.
  • Before the item is removed take a screen shot and save it. You can then double check that the item received is the item pictured. Any emails, texts or instant messages should also be saved. This could end up being evidence at a Disputes Tribunal hearing.
  • Consider using an escrow service. This is important when the product is of significant value. Escrow service involves an independent person holding the purchase price paid on behalf of the consumer and it is not released to the seller until the seller has completed the sale transaction (a fee will be charged by an escrow service provider). In New Zealand, for example, Trade Me offers an escrow service, called SafeTrader.
  • Be aware of potential scams and never deposit cash into an offshore bank account.
  • If the value of the item warrants it, consider arranging insurance for the item if it is being posted or shipped.
  • If the product is a mechanical item or of high value, consider having it inspected by an expert, such as an automotive inspection for a car.
  • In the event of a dispute:
    • First try and resolve the issues with the seller.
    • If this does not work consider using the Disputes Tribunal (unless it relates to the purchase of a car purchased from a dealer, then the Motor Vehicle Disputes Tribunal would be the best option). However, note it can sometimes be difficult to enforce a Disputes Tribunal decision.
    • Let the site know about the issues and provide full details of the seller and other evidence.

Summary

Buying goods through online auction sites can allow you to make some significant savings. Unfortunately such trades come with some risks, depending on where and from whom you are purchasing. Knowing your rights and being smart in how you make use of online auction sites, particularly when buying high-value items, can save a lot of stress in the long run.

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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