I. INSTITUTIONAL DEVELOPMENTS

The Ministry of Consumer Affairs was established on 1 July 1986. It is an operating branch of the Ministry of Economic Development (MED), but on matters of policy reports direct to the Minister of Consumer Affairs. The MED was formerly the Ministry of Commerce, and its new role requires it to be more actively involved in the economic development of New Zealand. This will require greater levels of consultation and partnership with the private sector, Maori, local government and other agencies.

The vision of the Ministry of Consumer Affairs is: Well-informed consumers, fair trading practices, safe products used safely.

The Ministry works with consumers and business to:

• Provide high quality advice to the Government on laws, practices and policies affecting consumers.
• Promote consumer and public rights to safe products and services, and their responsibility for using products safely.
• Provide information, education and advice to consumers and business.
• Ensure that transactions based on weight and measure are accurate, fair and consistent with international standards.
• Promote improved consumer practices and encourage compliance with codes, standards and laws.

The Ministry operates in the areas of policy, information and education, and trading standards (trade measurement and consumer safety). In addition, the Ministry of Economic Development’s Energy Safety Service, which was aligned to the Ministry of Consumer Affairs in 1999 under the management of the General Manager Consumer Affairs, is responsible for electricity and gas safety, supply quality and measurement, and petroleum fuel quality monitoring.

There are 66 staff in the Ministry of Consumer Affairs, including the Energy Safety Service, and the annual budget Consumer Affairs budget is approximately NZD 4.4 million (mainly Crown funded). The Energy Safety Service has a budget of NZD 3.7 million, funded mainly by industry levies.

The Ministry administers and enforces the Weights and Measures Act 1987 as well as regulations made under that legislation. It also administers:

• The Door to Door Sales Act 1967.
• The Hire Purchase Act 1971.
• The Layby Sales Act 1971.
• The Unsolicited Goods and Services Act 1975.
• The Fair Trading Act 1986 and regulations.
• The Consumer Guarantees Act 1993.
• The Credit (Repossession) Act 1997.

The Energy Safety Service administers and enforces:

• The Electricity Act 1992 and associated regulations covering safety, supply quality and measurement requirements.
• The Gas Act 1992 and associated regulations covering safety, supply quality and measurement requirements.
• Petroleum Products Specifications Regulations 1998 covering supply quality requirements.
• The Ministry of Energy Abolition Act 1989 and associated regulations, covering electricity and gas levy requirements.

The Ministry of Consumer Affairs works with a number of other agencies in the consumer safety spectrum responsible for product safety in specialist areas:

• Commerce Commission – see below under Fair Trading Act
• Accident Rehabilitation and Compensation Insurance Corporation – safety promotion and research
• Environmental Risk Management Authority – hazardous and noxious substances
• Land Transport Safety Authority – road vehicles and accessories
• Ministry of Agriculture and Forestry – pesticides
• Ministry of Health – foods, medicines and toxic substances
• Ministry of Labour – workplace related safety, dangerous goods
• NZ Customs – import bans of unsafe goods
• Standards New Zealand – voluntary national standards.

Because of this, some consumer safety reports and complaints the Ministry receives are referred to other agencies for action.

Fair Trading Act

Under the Fair Trading Act 1986 the Minister of Consumer Affairs may recommend the making of product safety standards. The Minister may also declare goods to be unsafe (i.e. ban them) or require a supplier to recall goods which do not comply with product safety standards, or which otherwise may put the public at risk of injury. All goods which contravene product safety standards, or which have been declared unsafe goods, or which are subject to compulsory recalls may not be supplied in New Zealand and are deemed to be prohibited imports under section 54 of the Customs and Excise Act 1996.

The Commerce Commission enforces product safety standards, unsafe goods declarations and compulsory recalls of goods in New Zealand.

The Ministry received 133 reports about allegedly unsafe goods in 1999/2000. A risk assessment procedure is applied to all product safety reports received in order to assist the Ministry in prioritising its work. The procedure involves combining ratings for four factors (maximum potential injury, probability of hazard occurrence, probability of the hazard being recognised, and product availability) on a nomograph to give a numerical risk assessment.

Of the reports received during 1999/2000, 23 resulted in recalls, modifications or safety publicity, 29 were referred to other agencies for investigation, 45 were recorded for ongoing monitoring, and 36 reports were deemed low risk, unsubstantiated or requiring no action. The largest category of reports was received for nursery equipment and supplies (37), followed by toys (20) and personal use items (18).

A product safety standard that requires cigarette lighters to be child-resistant and to meet specified safe performance requirements took full effect in May 1999. To check compliance levels the Commerce Commission ran a cigarette lighter "day" where lighter sellers were visited in Auckland, Wellington and Christchurch; 149 warnings resulted. Follow-up checks showed only one trader with compliance issues and a Commission settlement was reached with this trader.

The Commerce Commission carries out inspections to check for compliance with the product safety standards that are mandated under section 30 of the Fair Trading Act. Four hundred and forty nine inspections were carried out during the year, with the introduction of the new product safety standard for cigarette lighters accounting for 399 of these. The 449 inspections resulted in 151 warnings being issued and two settlements being signed. One warning concerned the bicycle standard, another the nightclothes standard, and the rest of the actions related to cigarette lighters.

In June 2000, candles containing lead in their wicks and candlewicks containing lead were banned. A product safety standard for household cots was approved in September 1999 and took effect in October 2000. Regulatory action is also being considered with regard to baby walkers. Products recalled voluntarily by suppliers in 1999 included toy intercom-telephones, a puller for lifting car motor engines, projectile toy guns, candles, a child’s bed guard, a child’s car seat, and an action toy.

New Zealand and Australia have co-operated to produce new joint standards and harmonised regulations for the safety of children’s nightclothes. Previously each country maintained its own standards and regulations. These regulations have been approved and are now in force in both countries.

Energy Safety

In 1999, the Ministry of Economic Development and the Occupational Safety and Health Service of the Department of Labour commenced a review ("EnergySafe") of the electrical and gas safety regimes. The aim of EnergySafe is to introduce changes that will reinforce:

• All electrical and gas work being carried out in a safe manner and resulting in a safe completed product.
• A specified range of work only being carried out by a competent person.
• A subset of that specified work only being carried out by a licensed person.
• Consistent certification processes for energy safety work.
• The results of complaints against energy workers matching the offence, being timely and resting on natural justice and fair standards of proof.

A public consultation document on EnergySafe was prepared and distributed widely, and publicity given to the changes proposed in the document. Responses were received from almost 500 organisations and individuals.

During the year, industry-wide consultation occurred on the declaration processes to be used in the supply of electrical and gas appliances. This consultation resulted in broad agreement. The necessary regulation changes are to be prepared and, in the case of gas appliances, mutual recognition discussions with our Australian counterparts to be resolved.

As a result of industry representations, the amounts of the levies payable under the Ministry of Energy (Abolition) Act were reviewed. These levies are collected to provide resourcing for the Energy Safety Service to monitor safety and undertake associated activities. The Ministry proposed a reduction in the electricity levy (to correct an underspending situation) and an increase in the gas levy (to provide funding for standards development, communications and other safety initiatives). Responses from industry consultation showed broad support for the proposal. Further consideration of the scope and range of the levies will be necessary.

During the year, the Electricity Regulations were amended to recognise the provisions of NZ Standard 3000 as a deemed method of safe working practice. As a result, the Ministry co-operated with Standards New Zealand and representatives of the electrical industry in conducting a number of nationwide seminars explaining the Standard’s provisions. This activity is a precursor to the forthcoming introduction of a joint Australia and New Zealand Standard.

As a result of a Coroner’s recommendation, the Ministry investigated the safety of certain liquid petroleum gas camping stoves. Laboratory test showed high levels of carbon monoxide released from two models, under certain conditions. One model has been recalled, and discussions are continuing with the supplier of the second model. The Ministry has made its safety pamphlet Let it Breathe widely available.

Prodsafe

The Ministry of Consumer Affairs continues to administer on behalf of the OECD the Internet mailing list for notifications and information exchange on product safety. The mailing list, known as PRODSAFE, is available to product safety officials throughout the OECD. Membership is restricted to OECD national contact points and other people in government agencies working in product safety.

The Ministry continued to distribute information to product safety network members and the public through its newsletter and news releases.

III. PROTECTION OF CONSUMERS’ ECONOMIC INTERESTS

New Zealand has developed a model code for consumer protection in electronic commerce. This was based on the Australian Best Practice Model for Electronic Commerce and drew on the OECD Guidelines on Consumer Protection in the Context of Electronic Commerce.

A voluntary code of practice is being developed by the New Zealand Chambers of Commerce and the Advertising Standards Authority (ASA) in consultation with the Ministry of Consumer Affairs. The self-regulatory regime for Internet marketing will adopt the International Chamber of Commerce Code on Advertising and Marketing on the Internet as its key code with reference to the OECD Guidelines on Consumer Protection in the Context of Electronic Commerce. Electronic certificates will be issued to website marketers who agree to abide by the code and an industry funded ASA disputes mechanism. The code will cover information disclosure, privacy mechanisms and consumer complaint handling.

The Government has conducted an inquiry into the electricity industry after a succession of reforms, the latest of which split lines and networks services from retail power companies. The Ministry of Consumer Affairs made a submission to the Inquiry which included information on consumer concerns received on an 0800 toll free hotline ("Powerline") set up especially to allow consumers to have their input into the Inquiry. The Inquiry team reported back to the Government in June 2000.

The Government is conducting a Ministerial Inquiry into Telecommunications. The inquiry panel made an interim report in June 2000, submissions are now being heard and further announcements are expected later in the year.

In 1999 the Minister of Consumer Affairs approved a review of consumer credit policy and legislation. Key issues are impediments to efficiency, quality of regulation and consumer detriment. A two-year work programme is underway and five discussion documents are being released as part of an extensive public consultation process. International developments in consumer credit are being examined as part of the review.

The Consumer Guarantees Act (consumer post-sale legislation covering goods and services) is being amended to cover utilities and computer software, after a court decision that line and network services were neither a good nor a service.

The Fair Trading Act prohibits misleading and deceptive conduct and false representations in relation to the supply of goods and services in trade. It also provides for the development of product safety and consumer information standards. Some areas for improving the enforcement of the Act have been identified. These include the civil and criminal limitation periods and corrective advertising orders. Other provisions that may be reviewed include the prohibition on third party trading stamps schemes, the definition of a pyramid selling scheme, and fines.

The Commerce Commission is responsible for enforcing the Fair Trading Act. The Commission takes action where issues meet certain criteria such a widespread consumer detriment, repeated breaches by a trader, an industry practice, or a matter where a precedent is necessary. In the year ended June 2000, the Commission received 10 484 enquiries and a total of 466 matters were selected for investigation. The Commission resolved 305 of these matters by warning the trader about the practice or entering into a settlement with the trader.

In the year ended June 2000, 26 cases excluding product safety were commenced by the Commission. Included in these were four concerning alleged pyramid selling. All alleged pyramid selling matters filed are still before the court. However, in one case a Mareva injunction has been granted freezing the assets, and in another the promoters must keep aside 26% of all new membership fees pending a full hearing of the matter. One case has set important precedents for all partnerships – a partner can be criminally liable under the Fair Trading Act for the actions of other partners.

The Commission promoted education backed up by enforcement action in both the motor vehicle and furniture industry. However, in both cases significant educational work appeared to have a minimal effect and a number of court actions have either been taken or are under way in both industries.

Two significant settlements were reached with health insurance providers, Aetna and Southern Cross, concerning misrepresentation over the payout amount of policies. The companies agreed to pay reimbursements of over NZD 100 000.

The Ministry has participated in each IMSN, ACCC co-ordinated, sweep day in 1997, 1998, and 1999.

In 1998, 33 sites were visited regarding claims for arthritis and cancer "cures" or medical "miracles". One month later, three sites had been removed and six had amended their text.

In 1999, 56 sites were visited to check the quality of on-line information for prospective buyers. Unlike previous sweeps, only New Zealand on-line retail sites were targeted. The sweep results received wide media coverage. Participants in this sweep day found it easier to look for answers to questions posed about information contained on the site than to ascertain the legitimacy of health or get-rich-quick investment schemes.

In September 1999, in response to complaints being received from the public about prize and lottery promotions from overseas, mainly Canada, the Ministry introduced a Scam Watch service on its website. The site has grown to list over 100 named scams as well as providing information on types of scams being promoted in New Zealand.

The site lists pyramid selling schemes (both prosecuted or warned by the Commerce Commission), pro forma invoicing schemes (false billing), "Nigerian letter" 419 frauds, unregulated investment schemes, work from home schemes, and frauds promoted on the Internet. It encourages people to provide information on scams they have received.

The Ministry works with the Commerce Commission, Securities Commission, and Serious Fraud Office to share information. It has also liaised with Canadian authorities regarding investigations of prize and lottery schemes operating with Canadian addresses. Information on current scams is also provided to Australian consumer protection agencies monthly, as often the same schemes are promoted in Australia.

The Ministry has received wide publicity from the media about scams. It has specifically targeted retired persons (as they seem to be targeted in bulk mailing prize and lottery schemes) and publications providing information to that community. The Ministry has issued a scams factsheet for those without Internet access and a list of current scams is provided with this factsheet.

The Ministry is exploring the possibility of using postal policy/regulations to address scams entering New Zealand through the mail system. However this is very early thinking at this stage.

The Weights and Measures Act 1987 requires that the system of weights and measures for use in trade in New Zealand be metric, and it specifies the procedures for compliance with internationally accepted requirements for legal metrology. The Ministry’s Trading Standards Service administers the Act and its regulations.

The Ministry operates a trade measurement accreditation scheme whereby private sector organisations are accredited to test and verify measuring instruments used for trade. Applicants are required to operate a quality management system and demonstrate competence in the testing procedure. A review in 1998/99 refined the scheme to ensure that the integrity of the scheme was maintained while compliance costs were reduced. Metering of hydrocarbons from high flow measuring instruments is now included in the scheme.

The three Trading Standards Service laboratories and their staff are accredited to ISO Guide 25 for their work in calibration and verification of standard measures of mass, volume and length. During 1999 the accreditation to ISO Guide 25 was extended to cover the type approval of non-automatic weighing instruments used for trade.

Legislation providing for the introduction of the Average Quantity System (AQS) was introduced in the Parliament. AQS is an international framework of measurement for pre-packaged goods.

A strategic inspection programme was maintained to sample randomly for weights and measures compliance on measuring instruments and on food and non-food products. Twenty-one infringement offence notices were issued and 85 warnings issued. The infringement offence scheme was extended to include further ranges of offences under the Weights and Measures Act 1987.

The Minister of Consumer Affairs is placing new emphasis on the importance of consumer representation as a means for consumers to participate in decision making and wishes to improve the level and quality of consumer representation that is occurring in New Zealand. A new position has been created in the Ministry that will aim to sharpen support for consumer representation, result in the development of a greater understanding of how good consumer representation occurs and help to ensure that it does occur.

Ministry of Consumer Affairs Programmes and Resources

The Ministry of Consumer Affairs targets its information, education and compliance programmes towards consumers who are most disadvantaged in the marketplace in terms of education and income and towards the traders who deal with those consumers, and focuses on issues of most consumer detriment. These issues frequently involve credit and/or motor vehicles.

The 90 Citizens’ Advice Bureaux throughout New Zealand are a key source of consumer information through their toll free services. The Ministry provides a user-friendly consumer law manual for bureaux workers and a hotline on which they may call the Ministry’s legal advisors for extra consumer help for their clients. Bureaux along with Family Budgeting Services and Community Law Centres also receive quarterly packs of up-to-date information and resources. The Ministry also provides a comprehensive annual training programme in consumer law for Citizens’ Advice Bureaux and Family Budgeting Services.

The Ministry uses radio and community newspapers to reach Maori and Pacific Island consumers, and undertakes regular community activities to promote consumer rights.

The Ministry produces on average one media release per week. Topics range from product safety warnings, to education on current issues (e.g. scams), to policy statements (e.g. regarding electricity contracts).

The Ministry also produces A Word of Advice every fortnight. This is a column designed specifically for community newspapers, which are delivered free to letterboxes. The column focuses on consumer rights and current consumer issues. We have an active list of 60 community newspapers receiving the column.

A new part of the Ministry of Consumer Affairs Web site is under construction. "Kidsite" will provide students aged from 8 to 18 and their teachers with an electronic resource that is closely aligned with relevant parts of the school curriculum. Visitors to the site will have a choice of either English or Maori language and a choice of navigation paths depending on the level of the student. There will be a home page, links to the main Ministry site, staffroom, parents’ lounge and a library for teachers, students and parents. Kidsite is expected to go live on 30 October 2000 in time for National Consumers’ Day.

The Ministry produces a newsletter, Consumer Affairs, three times a year, which is sent to approximately 1 500 groups and individuals.

The Ministry undertook a number of energy safety publicity and information activities during the year, including:

• Developing focused electrical safety messages for the farming community as a part of a rural video magazine.
• Convening a meeting of interested organisations to focus attention on the causes of clothes dryer fires, with accompanying media publicity and the publication of an advisory leaflet.
• Highlighting and publicising the dangers of multi-box socket outlets by the publication of an advisory leaflet.
• Expressing concern about unsafe features of Christmas lights being sold as a charity fundraising project, with a consequent recall of the lights, following publicity.
• Publicising the dangers associated with the use of free-standing liquid petroleum gas cabinet heaters.
• Producing a public brochure outlining measures taken to ensure the quality of petroleum products, and publishing a report on New Zealand’s fuel quality (1992-99).
• Participating in public information presentations at events such as the Aotearoa Performing Arts Festival, Pasifika 2000 and rural field days.

Commerce Commission Programmes and Resources

The Commerce Commission undertakes to visit places where it does not have an office, jointly with the Ministry of Consumer Affairs, with the aim of educating traders about consumer protection law. Each of these visits involves speaking with trader and community groups and holding a seminar. Seminars are also held for professional bodies. There were a total of 45 seminars and speeches conducted.

The Commission works closely with companies on its Major Trader Programme to increase their levels of compliance with the Fair Trading Act. There were ten companies on the programme this year. Thirty-four meetings and reviews were carried out as part of this programme this year, and ten reviews were carried out and two meetings held with other traders.

The Trade Association Programme is designed for industries where the Commission has concerns about the compliance of the industry as a whole rather than individual traders and where there is a trade association covering most participants in that industry. Members of the programme are the Motor Vehicle Dealers’ Institute and the Real Estate Institute of New Zealand. Four meetings, four reviews and 21 seminars were carried out this year.

The Commerce Commission publishes two newsletters, Fair’s Fair and Compliance, which deal with its work in enforcing the Fair Trading Act and the Commerce Act. In 1999/2000 it also reviewed and reprinted four brochures providing guidance and information on the Fair Trading Act and issued media releases on Fair Trading Act issues.

Consumers’ Institute

Comparative product testing and brand name surveys of goods and services are undertaken by the Consumers' Institute, a non-governmental consumer organisation. The Consumers' Institute produces two magazines for its subscribing members. The first is a general magazine entitled Consumer, which contains consumer information and advice, comparative testing and other public affairs issues. In 1999, it was circulated to 85 000 individuals and organisations. The second is the Institute's specialist magazine, Consumer Home and Garden, which had 45 800 subscribers in 1999. The Institute has also published a series of guidebooks over the years – from saving for retirement to practical guidelines for coping with stress. The Institute's Web site, www.consumer.org.nz, also provides information and services to consumers.

Fair Go

Television New Zealand continued to run its series of the popular consumer complaints programme, Fair Go. Other television programmes are also dealing with consumer issues.

V. REDRESS AND COMPLAINTS FACILITIES

The Department for Courts administers Disputes Tribunals, which provide inexpensive, informal and fair resolution of minor disputes. The Tribunals can deal with claims of up to NZD 7 500 (or NZD 12 000 if both parties agree). The cost of taking a claim ranges from NZD 30 to NZD 200, depending on the amount claimed. A new position of Principal Dispute Referee was established in 1999 to oversee the consistency and quality of decisions made by Disputes Tribunal referees.

The Office of the Ombudsmen has the jurisdiction to make recommendations on the actions of government departments, state owned enterprises and electricity suppliers. Two private sector industries – banking and insurance – have permission to use the term Ombudsman for their complaints handling resolution schemes.

The Office of the Banking Ombudsman was established in 1992. The Banking Code of Practice requires that all banks have an internal complaints resolution mechanism which a customer must use before complaining to the Banking Ombudsman. In the year ended June 1999, the Office received 1 061 complaints and completed 1 006 (some were carried over from the previous year).

In 1993, the insurance industry set up an Insurance and Savings Ombudsman Scheme on criteria very similar to the banking industry’s scheme. It commenced operations in March 1995. During the 12 month period ended June 1999, the office completed a total of 406 complaints, 324 being received in that year.

VI. RELATIONS BETWEEN CONSUMER POLICY AND OTHER ASPECTS OF GOVERNMENT POLICY

New Zealand’s economy continues to be underpinned by the principle that a competitive economy supports economic growth and prosperity. Recent trends are for the Government to take a more active role in regional and economic development activities and to look closely at the operation of key markets such as electricity and telecommunications, to determine whether the Government’s involvement and regulatory frameworks that apply are effective in supporting the delivery of the best outcomes for consumers.

The Ministry’s work is based on the premise that competitive markets can benefit both consumers and business but that in some cases intervention is necessary to ensure that consumers’ legitimate rights and interests are met. The Consumer Guarantees Act and the Fair Trading Act are two important pieces of legislation that contribute to meeting consumers’ interests. New emphasis is being put on credit law, motor vehicle sales law, electronic commerce, and broader issues such as consumer representation in policy development to enhance the position of consumers.