The Government is ratcheting up penalties for misleading advertising and other breaches of fair trading law to deter underhand business practice.
"Once the changes take effect, serious offenders will be liable for fines of up to tens of millions of dollars if they have gained significant amounts from breaching the law," Economic Growth Minister Nicola Willis says.
"Legislation to be introduced to Parliament early next year will increase the maximum penalty for breaches of the Fair Trading Act from $600,000 to the highest of three times the value of the commercial gain, the value of the transactions, or $5 million.
"Presently, there are circumstances in which the gains to be made from breaching the Act can outweigh the penalties for breaching it. The new regime will eliminate the financial incentives for breaching the Act.
"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.
"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."
Nicola Willis says the increased penalties will bring New Zealand more into line with comparable jurisdictions overseas.
"In Australia, the maximum financial penalty for breaches of fair trading laws is $A50 million, three times the benefit obtained or 30 per cent of turnover.
"The changes will mean New Zealand consumers can have more confidence that they are being treated fairly by the businesses they buy from.
"They will also help to ensure businesses who play by the rules are not disadvantaged by competitors using unfair means to woo their customers away from them. The existing rules do little to prevent large retailers from further entrenching their market dominance.
"The changes do not mean all breaches of the Act will incur higher penalties. The courts will continue to have discretion to consider a range of factors. These include the nature of the conduct, whether the party has breached the Act before, the size and scale of the party and the breach it made."
Nicola Willis says that, following consultation with business and other groups, the Government has decided not to proceed, at this time, with proposals to stop directors taking out insurance or indemnifying themselves from penalties under the Act.
"We have also opted not to progress proposals to expand infringement fees and unfair contract terms provisions."
Commerce and Consumer Affairs Minister Scott Simpson says the changes to the Act will ensure greater protection for consumers.
"While the vast majority of businesses are law abiding, the current penalties and legal thresholds make it too difficult to hold repeat offenders to account.
"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," Scott Simpson says.
"In some cases, the same businesses have breached the law more than once. These changes will ensure the law provides stronger incentives to comply and stronger consequences for those who don't."
The reforms will introduce a new civil penalties regime for most breaches of the Act, allowing the Commerce Commission to take action on the balance of probabilities, rather than meeting the higher criminal standard of proof. Serious or deliberate offences will remain criminal.
"These reforms will build a fairer and more confident marketplace for both consumers and responsible businesses."
The changes are expected to become law later next year following public consultation through the select committee process.
