Fair holiday trading – what you need to know

If you’re a retailer or service business gearing up for a busy Christmas season, now’s a good time to make sure you’re up to speed with your responsibilities under the Fair Trading and Consumer Guarantees Acts.

Both Acts affect the way you can legally advertise and sell your products – from running Christmas sales and promotions to resolving customer returns and disputes.

The Fair Trading Act

The Fair Trading Act (FTA) covers all aspects of the promotion and sale of goods and services, including pricing. And from June of this year of it also contains special rules covering layby, door to door, telemarketing and online sales. Key things to remember are that all claims your business makes about price or about the goods or services you sell must be clear, accurate and substantiated.

Sales and promotions

To your customers, the word ‘sale’ means an opportunity to buy goods at reduced prices for a limited time. There are many different types of sales, but all generally imply that a lower price than usual is being charged. Any goods or services a business promotes as part of a sale must be priced below normal levels to avoid misleading customers. You must be able to substantiate any sale claim with evidence that those goods were sold at a higher price for a reasonable length of time before the “sale”.

This is a new provision in the Fair Trading Act and it gives the Commerce Commission the power to come and ask you to substantiate any claim or representation you make about the goods or services you sell. If a sale doesn’t include stock already on sale or discounted, this must be clearly stated. Read more on the Commerce Commission website (external link) .

Consumer Guarantees Act

The Consumer Guarantees Act (CGA) protects customers from poor quality services and goods that don’t meet reasonable customer expectations. The CGA applies to all goods bought for personal or household use – like clothes, food, appliances and furniture. Vehicles, pets, plants and trees, and second-hand goods are covered as well as goods sold by hire purchase or hired out for use.

The Act also applies when you buy these types of household goods to use in your business – such as a toaster for the staff cafeteria – unless the seller’s contract, or its terms and conditions, specifically exclude goods bought for business purposes.

If you sell or buy goods that aren’t usually bought for household use these aren’t covered by the CGA – like a hardware store selling tools to professional tradespeople. These goods aren’t covered even if they are purchased by a consumer for household use.

The new delivery Guarantee

In June this year some changes were made to the CGA. One change that you might want to remember as Christmas approaches is the new delivery guarantee. The effect of this new guarantee is that if you agree with your customer to arrange for goods to be delivered to them, you will be responsible for the goods arriving on time and undamaged.

“On time” means either the date agreed on, or if there was no date agreed, within a reasonable time. So only agree to deliver goods before Christmas if you are sure they will get there on time. Otherwise you may find yourself having to refund money for late deliveries in the New Year.

Resolving customer issues with goods

If a problem with goods isn’t serious, your customer can ask you to put it right. You must provide a remedy but you have the choice of whether you repair the goods, replace them or give a refund. You also need to act within a reasonable time and provide the repair or replacement free of charge.

If a problem is serious the customer chooses the remedy and they can choose either a replacement or a refund of the purchase price. In both cases the customer shouldn’t be out of pocket, so if the fault has caused them extra costs you’ll need to cover those too.

You are not allowed to make a customer accept a credit note as a remedy for faulty goods. So what is a serious problem? And what are extra costs? Find out on Consumer Protection's Refund, replacement, repair page (external link) .

If a customer changes their mind

You don’t have to give a refund or a replacement if the customer has decided they no longer want the goods or if their circumstances have changed. It’s your choice whether you offer a refund or any other remedy if a customer has changed their mind or decided they can't afford the goods.

However, if you told the consumer that they could get a refund or a credit note if they change their mind, then that is part of your contract with them. When a customer changes their mind about goods they are paying off on layby they have the right to a refund under the Fair Trading Act.

More about Layby Sales (external link)

Dealing with defects

You won’t be liable for a fault if you display a sign or tag with the goods that specifically states what the fault is – for example, "This appliance has a scratch on the left side".

You can only exclude liability for specific faults that you know exist. You can’t use a sign to avoid responsibility for unknown faults that may occur.

CGA for service businesses

The CGA says that any consumer service you provide must ensure:

  • The work will be carried out with reasonable care and skill
  • The work will be fit for any particular purpose that the customer has told you about
  • If the time for completing the work has not been agreed, the work will be carried out within a reasonable time
  • If the price for the work has not been agreed, the price charged will be a reasonable price for the work done.

Guarantee of reasonable skill and care

Reasonable care and skill will be judged by looking at the care and skill used by other competent people doing the same work. Your skills should be such that you can do the job and achieve the purpose the customer wanted. You should take the same care that other competent people take to do the job well and avoid causing any damage.

To find out about remedies for service businesses see the Consumer Protection website. (external link)

Find out more about The Consumer Guarantees Act and Fair Trading Act at Business.govt.nz’s Consumer laws section.

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