COVID-19 and consumers

COVID-19 has created unprecedented challenges relating to the supply of products and services in New Zealand, including the ability to supply products and services at all.  Events have been cancelled and/or postponed, households are in lockdown and suppliers of non-essential goods or services are unable to trade.

It is important that, during these unprecedented and uncertain times, suppliers remain aware of their obligations under the Fair Trading Act 1986 (FTA) and Consumer Guarantees Act 1993 (CGA).  We have set out below our top tips for New Zealand businesses to remain compliant.

1. If your prices have increased, do not mislead consumers as to why

With the unprecedented demand over the last few weeks, it is unsurprising that prices for certain products and services may have increased.

There has been a lot of media coverage about increased prices over recent weeks.  It is not technically illegal to price gouge in NZ, however it is illegal under the FTA to mislead consumers as to the reason for a price increase.

The Government is encouraging consumers to report unusually high prices to the Commerce Commission, so any reasons given to consumers for increased prices will likely be scrutinised.

2. Ensure that representations made about logistical matters are not misleading

The effects of COVID-19 have caused operational difficulties for many New Zealand businesses and their supply chains around the world.  Suppliers should consider whether it is necessary to amend representations made in terms and conditions, on their website, in their advertising or any other documentation sent to consumers relating to:

  1. delivery times;
  2. their ability to fulfil orders; and/or
  3. their ability to satisfy maintenance or replacement obligations.

3. Do not demand or accept payment or consideration for goods or services that you cannot supply at all, within a period that you have specified or reasonable time

The uncertainty surrounding COVID-19 and the present government restrictions may make it difficult for suppliers to assess when they may be in a position to supply goods or services in the future.

Suppliers need to take care to ensure that, at the time they accept payment for goods or services, they are able to deliver those goods or services within the period they have represented or agreed with consumers to deliver or, if no period has been specified, a reasonable timeframe.  It is illegal under the FTA to accept payment or other consideration for goods or services if, at the time of acceptance, the supplier:

  1. does not intend to supply the goods or services; or
  2. intends to supply goods or services materially different from the goods or services for which payment was accepted; or
  3. does not have reasonable grounds to believe that they will be able to supply the goods or services within a specified period or, if no period has been specified, within a reasonable time.

4. If you can no longer provide a product or service due to COVID-19, carefully consider whether you need to provide a refund

Whether suppliers need to provide a refund will depend on the reason they are unable to supply the product or service and their terms and conditions.

If suppliers are unable to provide a scheduled service due to the Government’s restrictions (i.e. because the service is not “essential” and therefore cannot be supplied during the level 4 lockdown), consumers are unlikely to be entitled to a refund under the CGA.  Section 33 of the CGA provides that there will be no right of redress against a supplier in respect of a service which fails to comply with the guarantees in section 29 (which provides a guarantee as to fitness for a particular purpose) and section 30 (which provides a guarantee as to time of completion) only because of a “cause independent of human control”.

However, suppliers must still honour their terms and conditions, including any terms governing cancellation and any remedies for force majeure events.  These cannot be changed retrospectively.

If a supplier is unable to supply a scheduled service for any other reason, consumers may be entitled to a refund or other remedy under the CGA.  However, consumers will not be entitled to a remedy under the CGA if it is the consumer that decides they no longer wish to acquire the product or service due to COVID-19.

5. Ensure that any representations made about consumers’ rights to obtain refunds or other remedies are accurate and not misleading

It is illegal under the FTA to make a false or misleading representation about the existence, exclusion or effect of any condition, right or remedy.

It is therefore important that any representations made about consumers’ rights to obtain refunds or credits, or any conditions that apply to access to financial assistance are clear, unambiguous and accurate.

6. When offering free services to consumers, make sure you have the capability to deliver those services for free

When offering a free service to consumers (whether as part of the response to COVID-19 or otherwise) it is important to make sure that there are systems in place to make sure that consumers are not inadvertently charged for those services.  Similarly, if a supplier provides a credit to consumers to compensate them for a service that the supplier is now unable to provide or for service disruptions, the supplier must ensure that the credit is able to be used in the way represented.  This may involve changing back-end systems to apply a credit to the customer’s account or staff training.

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