Planned legislation will move from criminal to civil regime
Nicola Willis, economic growth minister, has announced the government’s intention to introduce legislation to Parliament early next year to combat underhanded business practices by increasing maximum penalties for misleading advertising and other breaches of the Fair Trading Act 1986.
In a news release, the government explained that it will raise maximum penalties for contravening most provisions, including misleading and deceptive conduct, from $200,000 for individuals and $600,000 for body corporates to the highest among:
The government added that it will also increase maximum penalties for the following:
According to Willis, after the changes take effect, serious offenders may face fines of up to tens of millions of dollars if their legal breaches led to significant gains.
Scott Simpson, commerce and consumer affairs minister, said the changes seek to protect consumers better, ensure a fair and confident marketplace for consumers and responsible businesses alike, hold repeat offenders accountable, strengthen incentives to comply, and increase the impacts for those who do not.
Willis added that the changes aim to remove any financial incentives for breaching the law, eliminate any unfair advantage that businesses flouting the rules have over those that comply, and align New Zealand with comparable jurisdictions.
Willis noted that Australia’s maximum financial penalty for fair trading breaches is $A50m, three times the benefit obtained, or 30 percent of the turnover.
In a news release, the Commerce Commission described the decision to increase penalties under the Fair Trading Act as a step to promote competition and attain fair outcomes.
“This sends a clear signal that misleading and deceptive behaviour won’t be tolerated,” the Commerce Commission said. “This is something the Courts have already recognised, noting large corporates often require large penalties to change behaviour. The recent case we took against Jetstar is one recent example.”
In the government’s news release, Willis clarified that courts will retain their discretion to consider factors such as the conduct’s nature, whether a repeat offender is involved, the party’s size, and the contravention’s scale.
The government’s news release noted that most Fair Trading Act breaches will shift from a criminal liability regime to a civil liability regime to enable the Commerce Commission to act upon the balance of probabilities, rather than the stricter criminal standard of proof.
“The civil enforcement regime is better set up for us to deliver much higher financial penalties, which we know from experience is often a stronger deterrent than criminal convictions for big corporations, and removes any financial incentive for breaching the Act,” the Commerce Commission said.
The Commerce Commission added that this shift will align the Fair Trading Act with the Commerce Act 1986, fair dealing under the Financial Markets Conduct Act 2013, and the Australian Competition and Consumer Commission’s approach.
“Many of the cases we deal with under the Fair Trading Act include corporate conduct that is not ‘truly criminal’,” the Commerce Commission said in its news release.
In its news release, the government clarified that serious or deliberate offences – such as demanding payment without intent to supply, serious product safety breaches, or obstruction of the Commerce Commission – will remain criminal.
“Between July 2020 and July 2025, the Commerce Commission received more than 48,000 complaints about fair trading issues such as misleading advertising, inaccurate pricing, refund refusals, and subscription traps,” Simpson said in the government’s news release. “In some cases, the same businesses have breached the law more than once.”
“The increase follows an almost 23 per cent rise in the number of fair trading complaints made to the Commerce Commission over the past five years,” Willis added. “It also comes after a Consumer NZ campaign led to two Pak’nSave supermarkets pleading guilty this year to 18 charges of misleading pricing and Woolworths being charged with 14 breaches of the Act.”
The government said it expects the changes to take effect next year after public consultation via the select committee process.
According to Willis, the current regime enables situations in which the gains from breaching the law can outweigh the penalties and fails to deter large retailers from fortifying their market dominance.
