Opinion & Analysis
OPINION: About nine years ago I had a cup of coffee with a cardigan-wearing Ministry of Consumers Affairs official.
He was still unsure if this online auctions caper was really going to last, but he surprised me with his observation that buyers probably weren't covered by consumer law.
Fortunately, he turned out to be wrong about the first thing, but he was bang on about the second. Because of an auction loophole in the Consumer Guarantees Act (CGA), buyers weren't covered if they bought an item from a professional trader by winning a Trade Me auction. Confusingly they were covered if they bought it on Trade Me via a fixed price offer, a "buy now" or as a classified.
This concerned me. Our whole business was founded on consumer empowerment, and providing a transparent and effective market. Yet this loophole meant that our members didn't have the same protection they had from buying from a high street retailer. We introduced a code of conduct which requested sellers do the right thing, but we had no means of forcing it. For that the law needed to be updated, so I set up a meeting with then Consumer Affairs Minister Judith Tizard, who agreed to get her officials to take a look.
A year later, in May 2006, a discussion paper was released. Things got more serious with ACT's Heather Roy coming in as minister in 2008, and the focus broadened to all seven consumer laws, from the Fair Trading Act (FTA) through to the likes of the Carriage of Goods Act and Door to Door Sales Act.
Roy aggravated the light-footed Rodney Hide in a leadership bid - and got stepped on. She was replaced by the earnest but brief John Boscawen who fell on his sword to take up the ACT leadership, perhaps not his best call. The portfolio moved to the omnipotent Simon Power. Power passed the consumer affairs baton on to the very brief Chris Tremain who barely had time to change his letterhead before it passed to the ambitious Simon Bridges, before the portfolio moved again, this time to Craig Foss in early 2013.
It was Foss who finally tabled the supplementary order paper in the House and got it across the line with its third and final reading last December.
The changes go live this Tuesday and should ensure consumers are better protected, no matter where and how they buy from professional traders.
The FTA has been upgraded to prevent traders making unsubstantiated claims, and they must ensure all claims are valid. Auctions will be given an up-to-date definition and auctioneers will need to meet minimum standards - something long overdue.
The land's most reachable court, the Disputes Tribunal, has its mandate extended to consider a broader range of consumer complaints. The rules around layby sales have been given a shakeup, pulling them under the FTA and requiring written disclosure from sellers. The Carriage of Goods Act is amended so carriers and senders cannot contract out of the CGA. Anyone who has ever unsuccessfully tried to recover costs of damaged goods will know how welcome this will be.
From a self-interested point of view, it's great that consumers buying items from professional traders via online auctions will finally be protected.
The CGA will apply to all auctions for goods being offered by professional traders, both traditional and online, including the specific guarantees within the Act such as acceptable quality and fit for purpose.
Shill bidding becomes a specific offence under the FTA - making this sort of nefarious activity illegal and sending a strong message to any lowlifes contemplating it.
Overall, it's an impressive set of changes that should buoy the current economic recovery by reassuring consumers.
There's just a couple of pieces missing.
The first is meaningful guidance for the poor old car dealers who get stuck with the job of disposing with older, high mileage cars. Auctions - both online and offline - used to provide this avenue because the dealer didn't have to honour the specific CGA guarantee of acceptable quality.
Parliament's commerce select committee recommended meaningful guidance on this matter because acceptable quality for an old bomb is very different to acceptable quality for a new Toyota.
I understand that MBIE will publish this guidance in September. Until then, car dealers would be well advised to highlight the risks of older cars and hope they don't get smacked in the interim. The sooner MBIE gets its guidance out, the better.
The second and final missing piece is that while online sellers will be required to declare if they are professional sellers, offline traders don't have the same requirement. In other words, if you are off the grid you can simply not declare your trader status if you want to try to evade the law. In this situation, a consumer is protected only if they ask sellers their status before they buy.
This leaves the onus on the buyer. Not a sustainable situation, in my opinion, where ironically the digital world has become safer than the real one. Hopefully this final tweak will be forthcoming.
As the last of seven accountable ministers, Foss should be congratulated on getting the reform across the line.
But I reckon it's a handful of public servants we should thank for guiding our new consumer laws through a nine-year gestation and delivering genuine public good. Good things can come in cardies.
Mike ‘MOD' O'Donnell is chief operating officer for Trade Me and participated in the Consumer Law Reform process. His Twitter handle is @modsta. His wife has thrown out all his cardigans.