Consumer law reform may lose momentum

BY MIKE O'DONNELL

OPINION: In his seminal work Leviathan Thomas Hobbes noted that life for many in the 18th century was nasty, brutish and short. If you've been watching the shenanigans within the ACT party of late, you might have thought that he was talking about being second-in-command at ACT.

While I have no knowledge of what Heather Roy was like as a deputy leader of the ACT party, I saw her deliver a momentum and urgency to consumer law reform that was a marked contrast to the glacial progress of previous ministers.

Earlier this year Ms Roy parcelled up the seven core pieces of consumer legislation and oversaw a pretty decent review of them, together with good work from the Consumer Affairs Ministry.

This resulted in the publication of the Consumer Law Reform discussion paper in June with the aim of bringing antediluvian pieces of legislation like the Auctioneers Act up to date with the 21st century.

Importantly, it also sought to ensure the two rock stars of consumer law - the Fair Trading Act and the Consumer Guarantees Act - were relevant to an ecommerce world where consumers bought products they have never seen off people they had never met.

At the time the discussion paper was published, the minister gave an indicative timetable that would see the tweaked laws entering the House around November this year.

This would have allowed for implementation in the first or second quarter of 2011.

However, the events of recent weeks have thrown that timetable into question.

John Boscawen comes to Cabinet with a reputation for sensible advocacy after his work on failed finance companies and the Electoral Finance Act.

But consumer law will be all new for him and may well have to take a back seat to his commerce portfolio. There is now a real risk that the revised bills will not enter the House until next year and not be implemented until 2012.

So for working mums and dads, the updated protection they so badly need may well be over a year away. Two of the areas that are particularly pertinent are extended warranties and online auctions.

For the most part extended warranties are simply a tool for a salesperson to squeeze extra commission from gullible punters who are unaware of the free protection they have under the Consumer Guarantees Act, or indeed the paid protection they have under their home insurance.

A Consumer NZ mystery trial of three chain stores found that staff rarely informed customers of their rights, and applied deceptive and pressuring techniques to sell extended warranties. This is almost as bad as selling KiwiSaver to the hospitalised.

I found exactly the same thing when I went to buy a big screen TV last week, with a thin-lipped salesman effectively suggesting I was a mug not to buy an extended warranty. Such devious behaviours are predatory, relying on ignorance.

Salespeople should be required to give full disclosure around warranties, and consumers deserve the benefits of a cooling-off period to give them time to reconsider.

Equally important is the need to ensure a level playing field between offline and online purchases.

A current loophole in the Consumer Guarantees Act means consumers buying from professional traders through an online auction are not covered if they win by placing the highest bid.

Bizarrely, they are covered if they win via fixed price offer or buy now. And, of course, they are covered if they buy face to face.

Such an inconsistent and arbitrary distinction is contrary to the principle-based approach of the Act and provides a loophole for dodgy traders to dispose of shoddy goods without having to worry about repercussions.

Given over half of the 60 million online auctions a year that New Zealanders participate in are conducted by professional sellers, the potential for exploitation is huge.

As the loophole around online auctions is closed, the Government needs to go one further and deliver Consumer Guarantees Act protection to all auctions, whether they be online, hybrid or offline.

The good news is that there exists a good opportunity for pulling these two components - extended warranties and online auctions - out of the consumer law review and fast-tracking them through Parliament so they could become law this year.

Earlier this year National MP Jackie Blue had her private member's bill on the Consumer Guarantees Act pulled out of the ballot process. Six weeks ago that Bill had its first reading and was referred to select committee.

At the time she generously agreed to the Bill being bundled up with the rest of the consumer law review. But the good news is she can choose to disengage from this process, which would hugely reduce the timeline to deliver real consumer protection.

By detaching Dr Blue's bill from the rest of the package, the Government has the ability to deliver real benefits to consumers in 2010, while at the same time giving a new Minister useful breathing space, and a Prime Minister a genuine public-good win to take to next year's elections.

Hobbes' original Leviathan was a reference to the gatekeeper of hell, and he used it as a metaphor for the need for a strong central authority to avoid the evils of discord and civil war.

New Zealand needs consumer law that similarly is strong enough to avoid the evils of shysters and dodgy dealers eager to exploit loopholes or foist the unnecessary on the unsuspecting.

And with a bit of luck we might see the first part of that live before Christmas.

Mike O'Donnell is an online exponent and director. Disclosure of interest: Mr O'Donnell works for Trade Me.