News & Thinking

Should Fair Trading Act penalties be increased?

Contributed by:

Mark Allen
Senior Assc

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Mark Allen


Robin Kim
Solicitor

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Robin Kim


Last week, the chair of the Commerce Commission (Commission), Dr John Small, told a select committee during its annual review process that the potential penalties enforceable under the Fair Trading Act 1986 (FTA) are weak and a frustration for Commission.

This is not the first time the Commission has expressed its position on the FTA penalties. The Commission had two successful appeals in 2023 where it challenged the initial fines awarded under the FTA to One NZ and NZME as being “manifestly inadequate”. The issue was also expressly raised in the Commission’s 2023 ‘Briefing to the Incoming Minister‘, where the Commission noted that penalties provided under the FTA do not act as a meaningful deterrent but may be considered by some larger traders as a “cost of doing business”.

The Commission’s continued echoing of these concerns are worth keeping an eye on – especially as organisations look to operate under increasingly tightening economic conditions. It will be interesting to see what impact (if any) the tightening economic conditions will have on organisations’ FTA compliance, and how the Commission may respond.

The maximum fines under the FTA are substantially different with Australia’s maximum under its comparative legislation. Currently, the maximum fine for a company’s breach of the FTA is $600,000 per breach. In Australia, the maximum fines are the higher of $50 million or 30% of the breaching companies’ turnover.

In terms of the current Coalition Government, we are awaiting policy indications signalling how it will respond to the Commission’s concerns. A previous review of this issue by MBIE (in 2019), recorded “it would be worth testing whether or not the maximum penalties should be increased further…”, however no formal next steps were taken at the time. Previous news reports have suggested that Andrew Bayly (in his then capacity as opposition spokesman before he became Minister of Commerce and Consumers Affairs), was open to taking advice from the Commerce Commission on whether penalties for FTA breaches should be raised. However, the same reports noted his preference that any increase in penalties should not be directed at one-off breaches by small traders, but rather directed at larger firms who are breaching the act in a calculated manner.

We will continue to track this issue and provide updates on any developments in this area.