Commerce Commission releases Consumer Issues report

Today the Commerce Commission has published its Consumer Issues report for 2017/2018.  The Report takes a detailed look at the 7,452 complaints the Commission has received during the financial year and describes trends.

The majority of complaints related to the Fair Trading Act 1989 (6,770 out of 7,452) with other complaints relating to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) and the Commerce Act 1986.

A link to the Report is available here.

Emerging themes – Fair Trading Act

  • Top 5 industries for fair trading complaints: were telecommunications retail providers, motor vehicle retail, domestic appliance retail, online ticket reselling and construction.
  • Online purchases are both beneficial and risky: The Commission notes that online shopping has resulted in increased choice and competitive pricing. However, almost a quarter of complaints in relation to the Fair Trading Act were about purchases considered online or made online.
  • More sophisticated marketing techniques: Some complaints have related to online marketing techniques which cause some consumers to make hurried, spontaneous purchases without having the time to undertake due diligence. For instance, price holds for only a few minutes or statements which customers cannot verify such as “limited stock at this price” or “other customers are viewing this item”.
  • Failure to fulfil guarantee and warranty obligations: In some industries, the consumer’s right to remedy under the Consumer Guarantees Act is not always clearly represented.
  • Misleading representations about price: The Commission continues to receive complaints that prices are being misrepresented. For instance, consumers complained about additional non-disclosed fees; that products are advertised at 70% off when in reality there was only a single product at 70% discount; and issues with misleading or inaccurate “recommended retail price”.

Emerging themes – CCCFA

  • Responsible lending: There are continued failures to comply with the Responsible Lending Principles including the obligation to make reasonable enquiries to be satisfied that lending is affordable and meets borrowers’ needs. The focus of the Commerce Commission appears to be still on high cost short-term loans.  However, there is also an additional concern about the use of text or online forms for top up loans or repeat borrowing and whether this allows lenders to properly reassess borrowers’ circumstances.
  • CCCFA fees: There are continued complaints that fees for consumer loans are not reasonable. The Commission’s review of fees showed that there were 500 names used for fees ranging from $5 to $5,000. Most complaints about fees related to finance companies.
  • Disclosure: Insufficient disclosure is also a key theme in complaints and increased 29% in 2017/2018 when compared to 2016/2017.
  • Ability to compare products: Bundles of products (such as in the telecommunications industry where home phone, mobile, broadband and streaming services can be combined) can be difficult for customers to compare.

Emerging themes – Commerce Act

  • Dynamic technology markets: The Commission has seen an increase in mergers involving digital platforms or markets that are experiencing technological change. The Commission is committed to keeping track of the opportunities and risks these changes present.
  • Anti-competitive conduct: Exclusive supply contracts continue to be seen by the general public as anti-competitive and generate a high number of complaints. However, whether or not these breach the Commerce Act depends on the facts and the impact on the relevant market. The Commission has had a consistent number of leniency applications for potentially anti-competitive conduct such as bid rigging, price fixing and/or market sharing.
  • Mergers: The Commission undertook 6 investigations into non-notified acquisitions.

What’s next

The Commerce Commission is looking to partner with other government agencies, businesses and consumer stakeholders to gain market insight and identify areas which have the biggest impact.  The Commission will be looking for patterns of harm.

Our view

Businesses should be devoting time to ensuring they comply with their Fair Trading Act obligations.  These form the vast majority of complaints.  There should also be a particular focus on how Fair Trading obligations are dealt with online as that is an increasing focus for complaints. Businesses should be keeping an eye on trends in the complaints they receive as systemic complaints will draw the Commerce Commission’s attention.

The Commission is also continuing to focus on responsible lending.  Lenders should also be carefully considering their processes for top up loans and whether they are properly able to assess loan affordability.

If you have any questions in relation to the Report please contact one of our experts.

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