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Commerce Commission

Business briefs

Commercial, News, Uncategorized
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Five companies sentenced over Whakaari/White Island eruption

In our Summer 2024 edition published in early February, we wrote on the Whakaari/White Island prosecutions brought by WorkSafe; in this Winter issue we report on the court’s late February sentencing.

Almost five years after the Whakaari/White Island eruption that left 22 people dead and 25 others severely injured, the District Court delivered its sentence for safety failings under the Health and Safety at Work Act 2015.[1]

Five companies were collectively fined $2 million for failing to assess and mitigate risk, and three of the five have been ordered to pay a collective total of $10.21 million in reparations to victims and their families. GNS Science was also fined $54,000 for failing to adequately communicate risk to contractors.[2]

Whakaari Management Limited (WML), one of the five companies sentenced and responsible for managing access to the land, was held liable for a significant portion of the penalties. WML has claimed it is unable to pay the penalties as it has no assets or bank account, even though evidence at trial indicated WML received about $1 million annually from island tours. The judge acknowledged he cannot make orders against WML’s shareholders, but appealed to their ‘inescapable’ moral duty to advance the necessary funds – even if this means reaching into their own pockets.

These penalties are a strong reminder for businesses to take seriously their health and safety obligations or risk hefty penalties.

 

Navigating financial distress

What should you do if your business is in rough financial waters? If you feel financial strain creeping into your business, it is important to take action early to address the situation rather than hoping it improves on its own. Below we suggest some options to help you navigate financial distress.

  • Engage with lenders: Communicate transparently with your lenders early on. This will maximise available options and strengthen your relationship. Most lenders are willing to agree to an approach where borrowers are transparent and can demonstrate a plan

 

  • Reach out to suppliers and customers: Have open conversations, where appropriate. Clarity around payment timeframes, late payment fees and other expectations will provide certainty for all parties involved

 

  • Review business contracts: Understand the terms of your business contracts, what obligations are owed and the implications if you default

 

  • Keep directors’ duties in mind: Ensure you are complying with your director duties, including avoiding trading recklessly or incurring obligations the company is not able to perform. You can be found personally liable if you breach your director duties. Maybe you have to make the difficult decision of winding up your business to avoid breaching your duties, and

 

  • Seek professional advice: Speak to your accountant or financial advisor to assess the financial position and solvency of your business. We can also advise on your options at any stage.

 

Commerce Commission win over Viagogo

In a recent judgment, the High Court provided useful guidance on misleading and deceptive conduct, and unfair contract terms under the Fair Trading Act 1986 (FTA). The decision followed a six-year legal battle between Viagogo and the Commerce Commission.[3]

The Commission commenced proceedings against Viagogo in 2018 after receiving thousands of complaints by consumers who had purchased event tickets from Viagogo, only to be refused entry at the events because their tickets were not authentic.

The High Court found that Viagogo had misled consumers in breach of the FTA by:

  • Failing to adequately disclose its status as a resale platform
  • Guaranteeing customers’ tickets to events, when in practice it often refunded invalid tickets after a customer had already missed the event
  • Creating a false sense of urgency for prospective purchasers seeking tickets
  • Disclosing additional ticket fees at a late stage of the purchase process, and
  • Stating it was an official or authorised source of tickets when it was not.

A clause in Viagogo’s terms and conditions requiring customer disputes to be resolved in Switzerland was also found to be unfair and unenforceable.

Viagogo was ordered to correct the misleading information on its website and update its terms and conditions.

This judgment emphasises the importance of using honest and fair trading practices, and ensuring your terms and conditions comply with the FTA.

Viagogo has appealed the judgment.

 

CCCFA update

The government recently announced changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) as part of a larger, two-phase financial reforms package to address concerns about the accessibility of credit and burdensome obligations on lenders.

Phase 1: Already underway, this phase includes the removal of overly prescriptive requirements around loan affordability assessments, and exemptions for local authorities and providers of non-financial goods and services (such as certain car dealers).

Phase 2: As this phase is rolled out, it is expected the CCCFA will be updated to further streamline the lending process and continue to support more accessible lending practices.

The Ministry of Business, Innovation and Employment will publicly consult on revisions to the Responsible Lending Code and possible amendments to the CCCFA as they become available.

[1] WorkSafe New Zealand v Whakaari Management Limited, White Island Tours Limited,
Volcanic Air Safaris Limited, Aerius Limited, Kahu (NZ) Limited [2024] NZDC 4119.

[2] WorkSafe New Zealand v Institution of Geological Nuclear Sciences Limited [2024] NZDC 4149.

[3] Commerce Commission v Viagogo AG [2024] NZHC 713.

 

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Business briefs

Commercial, Your Own Business
0

Cartel conduct: New Zealand’s first ever criminal cartel prosecution

The Commerce Commission recently filed criminal charges against two construction companies and their directors for alleged bid-rigging of publicly funded construction contracts. This is New Zealand’s first ever criminal prosecution for alleged cartel conduct under the Commerce Act 1986.

 

Bid-rigging, or collusive tendering, occurs where some or all the bidders collude to pre-determine who will win the bid or tender. This is a form of cartel conduct that is prohibited by the Act.

 

The case is currently before the court so information is limited but, if found guilty, the companies and their directors could face serious penalties. Each company could be fined up to $10 million, three times their commercial gain from the cartel conduct or 10% of their turnover per year per breach. Each director could be imprisoned for up to seven years and/or fined up to $500,000.

 

The Commission’s willingness to bring criminal proceedings for cartel conduct is a warning for all businesses to understand their obligations under the Act and have adequate processes to avoid engaging in cartel conduct.

 

New privacy rules for biometrics

The Office of the Privacy Commissioner (OPC) has announced it will release a draft policy code early this year regulating the collection and use of biometric information. The code will have direct implications for any businesses dealing with biometric information.

 

Biometric information is any information about a person’s biological or behavioural characteristics, such as fingerprints, face, voice or eyes. It is increasingly common for businesses to collect and use biometric information to verify people’s identities online, enhance retail security, control access to devices or physical spaces, or to monitor attendance at a site or a work place.

 

While the use of biometrics has significant benefits for businesses, it also increases the risks of profiling, discrimination, bias, and lack of transparency and control to individuals.

 

The OPC has proposed three categories of rules that businesses must comply with when collecting and using biometric information. These are:

  1. Proportionality assessment: Businesses must undertake a proportionality assessment to ensure that the reasons for collecting biometric information outweigh the risk of privacy intrusion
  2. Transparency and notification: Businesses must be open and transparent with individuals and the public about the collection and use of their biometric information, and
  3. Purpose limitations: The collection and use of biometric information will be restricted for certain purposes.

 

The public will have an opportunity to provide feedback on the code before it is implemented.

 

New reporting obligations for large businesses

The Business Payment Practices Act 2023 will come into effect on 25 May 2024. It will require large businesses to publicly report information on their payment practices to the Business Payment Practices Register.

 

The legislation applies to businesses with more than $33 million in annual revenue and $10 million in third party expenditure. The information that must be reported on includes:

 

  • The average time to pay supplier invoices
  • The percentage of invoices paid in full within the required timeframe, and
  • A description of the business’s standard payment terms (if any).

 

If a business fails to comply with its reporting obligations, it could be fined up to $9,000. If a business intentionally provides false or misleading information, it could be fined up to $500,000.  The Act is designed to address payment delays that can have significant impacts on the cash flow for New Zealand’s small and medium-sized businesses.

 

If you would like more information or advice on any of the above topics, please feel free to contact us.

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Business briefs

Commercial, Property, Your Own Business
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Update on construction contracts retention regime

In our Spring 2021 edition, we discussed the proposed changes to the retention money regime for construction contracts in light of the introduction of the Construction Contracts (Retention Money) Amendment Bill.  The legislation was passed on 5 April 2023 and it comes into force on 5 October 2023. In brief, the Act will require contractors to place retentions in a trust account with a registered bank in New Zealand (or other accepted form) and keep it separate from other money or assets.

All construction contracts entered into or renewed from that date onwards will be subject to the new requirements.

For more information about how the new legislation will work, please be in touch.

 

New obligations for businesses offering Buy Now Pay Later

The government recently announced it will introduce new regulations to extend the consumer protections in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) to apply to Buy Now Pay Later (BNPL) schemes.  BNPL provides consumers with interest-free credit to buy goods and services and pay for them later. Consumer advocates have raised concerns that BNPL is ‘easy money’, which leads to vulnerable consumers taking on more debt than they can afford to pay back.

The CCCFA imposes certain obligations on lenders to protect borrowers. It does not, however, currently apply to BNPL.  While the new regulations are not yet finalised, it is expected that obligations for businesses offering BNPL will include:

  • Only charging reasonable default fees
  • Varying repayments on request when a consumer suffers unforeseen hardship
  • Offering financial mentoring services to consumers who miss payments, and
  • Being a member of an external dispute resolution scheme.

The new regulations are expected to be introduced to Parliament later this year.

 

Large businesses may need to disclose payment practices

The Business Payment Practices Bill is currently being considered by Parliament and, if passed, will require large businesses to publicly report on their payment practices.  As currently drafted, the proposed legislation will require businesses with more than $33 million (including GST) in revenue for two or more consecutive accounting periods to report six-monthly on their payment practices on both a public register and on their own websites.  Information required to be disclosed will include time taken to pay invoices and the proportion of invoices paid in full. If businesses do not comply with the reporting requirements, they could face fines of up to $500,000.

The purpose of the Bill is to improve transparency for business-to-business payment practices and provide small businesses with information to help with making decisions when engaging with large businesses. The Bill also encourages large businesses to improve their payment practices given its transparent nature.

The Bill is currently awaiting its second reading so there may be some changes before being passed into law. We will keep you up to date with its progress.

 

Are your T&Cs unfair?

The Commerce Commission has filed proceedings in the High Court against holiday home company Bachcare Limited. It alleges that some of Bachcare’s contract terms with consumers are unfair under the Fair Trading Act 1986 (FTA).

The Bachcare contract terms in question are:

  • Regardless of how far in advance a guest cancels their booking the guest may lose up to 100% of the amount paid
  • Service fees are deducted regardless of whether the booking is cancelled by Bachcare or the guest, and
  • Where a booking is cancelled due to an uncontrollable event, such as an extreme weather event, and is unable to be re-scheduled, a guest could lose 100% of the amount paid.

Since 2022, the unfair contract terms regime has applied to contracts between businesses that have a trading relationship with an annual value of $250,000 or less (known as ‘small trade contracts’). The Commerce Commission appears to be increasing enforcement efforts now the regime has been in force for some time.

If you have not already done so, now is a good time to review your consumer terms and conditions, and small trade contracts to ensure they comply with the FTA.

Please contact us if you need help with unfair contract terms.

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Business briefs

Commercial
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Employment Court rules four Uber drivers are employees

In October last year, the Employment Court ruled that four Uber drivers are employees rather than independent contractors[1], challenging the traditional gig economy model.

You can read the full Uber decision here.

The court’s ruling means that Uber drivers could now be entitled to receive the minimum wage, holiday pay and other benefits that are typically provided to employees.

Two major factors that led to the court’s decision were that:

  1. Uber drivers are dependent on the Uber platform for the opportunity to earn income, and
  2. Uber exerts a significant degree of control over the way in which the work is performed.

This decision is a landmark ruling that potentially has far-reaching implications for the gig economy as a whole, where companies such as Uber typically classify their workers as independent contractors.

If you engage workers as independent contractors, we recommend you carefully consider whether the nature of the work gives rise to an employment relationship. Please contact us if you need specific advice.

[1] E Tū & Anor v Rasier Operations BV & Ors [2022] NZEmpC 192

 

Facial recognition and the Privacy Act: balancing security and individual rights

The Office of the Privacy Commissioner has urged businesses to proceed with caution when using facial recognition technology (FRT).

The Commissioner’s warning comes as Foodstuffs, that owns Pak’n Save, New World and Four Square, trials the use of FRT in 29 North Island stores. Foodstuffs says its use of FRT is aimed at preventing crime, and keeping its staff and customers safe.

The Commissioner is doubtful whether the benefits of FRT outweigh its privacy-intrusive nature in the retail setting. The Commissioner is monitoring Foodstuffs’ controlled trial and will release a report outlining a proposed regulatory approach to FRT at the end of this year.

If you are thinking about using FRT for your business, you should conduct a privacy impact assessment. If you need more help, please be in touch.

 

Cartel conduct: Commerce Commission warns eight freight forwarding companies

In October 2022, the Commerce Commission warned eight freight forwarding companies for likely engaging in cartel conduct. This highlights the need for businesses to take care when entering into a supplier/customer relationship with competitors.

The warnings related to conduct that occurred between 2014 and 2018. At that time, the eight companies engaged Mondiale Freight Services Limited and Oceanbridge Shipping Limited to provide wholesale freight forwarding services. These services included, for example, a company combining its customers’ freight with that of Mondiale or Oceanbridge, for the sake of efficiency, if the company did not have a full container of freight.

Given the eight companies were also in competition with Mondiale and Oceanbridge, they were concerned Mondiale and Oceanbridge would learn confidential and commercially sensitive information regarding the companies’ customers. To protect against this, the companies entered into arrangements with Mondiale and Oceanbridge not to compete for each other’s customers. This included:

  • Refusing to quote for the other party’s customers
  • Apologising to the other party when the other party’s customers were approached, and
  • Discussing the amount a party should quote the other party’s customers to ensure the price would not be competitive.

The commission considered these arrangements likely amounted to cartel conduct and went further than necessary to protect the companies’ confidential and commercially sensitive information.

In June 2022, Mondiale and Oceanbridge were fined almost $10 million combined for their involvement. The commission decided on a warning for the eight companies given they had significantly less market and negotiating power.

All businesses entering into a supplier/customer relationship with a competitor should ensure the arrangement does not breach their obligations under the Commerce Act 1986.

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Greenwashing

Commercial, News, Your Own Business
0

‘Green’ credentials are good but take care

The Sustainable Business Council ‘Better Futures 2022’ report[1] surveyed New Zealanders and identified that more than 43% of Kiwis are committed to living a sustainable lifestyle; this is a continuation of an upward trend over the last three years. Given the public’s motivation to be more sustainable than ever, businesses are honing their marketing strategies towards environmental sustainability.

 

Making any form of environmental claim in marketing is known as ‘green marketing.’ Making an environmental claim that is misleading, false or unsubstantiated is usually referred to as ‘greenwashing.’ It is not a new concept but, given the increasing number of Kiwis wanting to make environmentally sustainable decisions, the desire to market products and services in a green way continues to increase. However, if any such claims are not substantiated, an advertiser may inadvertently cross the line between green marketing and greenwashing.

 

Responsibility for preventing greenwashing falls to a number of different regulatory bodies in New Zealand. These include:

  • Commerce Commission that, amongst its many roles, takes action to enforce the Fair Trading Act 1986 by taking breaches of the legislation to court
  • Advertising Standards Authority for breaches of the Advertising Standards Code, and
  • Financial Markets Authority through its enforcement of the fair dealing provisions of the Financial Markets Conduct Act 2013 and its support of New Zealand’s transition to an ‘integrated financial system.’ This not only takes into account financial returns but also non-financial factors such natural, social and human capital impacts.

 

Greenwashing with words

Expressly making environmental claims, or using words to imply a certain environmental attribute, that do not exist is a mistake a business could easily make. Regardless of whether this is unintentional, using words such as ‘eco’, ‘organic’, ‘natural’, ‘green’, ‘plant powered’, ‘non-toxic’, ‘plant based’, ‘zero waste’, ‘recycled content’, ‘compostable’ and many more can all be examples of greenwashing unless the words are completely truthful, substantiated and not misleading in any way.

 

For example, if packaging says a product is ‘recyclable’, but can only be recycled at recycling centres in a limited area, or by returning the packaging to the manufacturer, this may be considered greenwashing. Similarly, if packaging says ‘compostable’ and does not specify under what kind of composting environment it will break down; it may amount to greenwashing and a misleading environmental claim.

 

Greenwashing imagery

Even if a business avoids using any ‘green’ terms but uses imagery that implies some environmentally friendly attributes, that could be considered greenwashing. The most common examples of using images for greenwashing are the use of the three green arrow recycling logo, an image of the earth or a green tick. These may be easy enough to justify, but a business could still be found to be greenwashing for using images of flowers and trees if those images lead a consumer to believe the product has environmentally friendly qualities that it does not have.

 

Deliberately misleading statements

Any false environmental related statements are obvious greenwashing, for example, if a product is labelled ‘organic’ or ‘plant based’ if it is not made with organic material or plants. What is trickier though, is making statements that aren’t technically false, but the unique combination of marketing features could lead a consumer to an incorrect conclusion about a product.

 

A recent example is a case[2] of a smallgoods producer that used the phrase ‘100% NZ owned’, along with imagery of farms and a rural address for the business. This company was found liable for greenwashing because its pork products comprised 87% imported meat, but the marketing led consumers to reasonably believe the pork was New Zealand-reared. The company was fined $180,000 for this breach despite each marketing element being truthful; the company was 100% New Zealand owned and the rural farm address was a genuine address for the business. Businesses, however, cannot ‘hide’ behind each statement being truthful if the combined elements together lead a consumer to a misleading conclusion.

 

Tips to avoid greenwashing

Avoiding greenwashing is a case of stepping into the shoes of a consumer to assess whether any of the marketing elements could potentially be interpreted to give the product more environmentally friendly attributes than it truly has. Before finalising packaging or marketing, business owners should ask themselves if the marketing is:

  • Honest
  • Specific
  • Substantiated
  • In plain English
  • Not exaggerated, and
  • Not misleading in its overall impression.

 

It is also important there are frequent branding and marketing checks, particularly if there is a comparative claim. A good example is making a claim that a product is ‘recyclable’; that may be considered greenwashing if the ability to recycle that product is not commonly available through local council recycling services.

 

Keeping business honest

Anyone who identifies greenwashing, or wants a greenwashing claim investigated, can report suspected cases to the Commerce Commission, Advertising Standards Authority, Financial Markets Authority or another relevant regulator or industry body.

 

In the case of a complaint made to the Commerce Commission, depending on the severity of the alleged greenwashing, the Commission can either choose to disregard the report, investigate further, or issue a warning or a ‘compliance advice’ letter. In significant cases it can take the company or individual responsible for the alleged greenwashing to court for a breach of the Fair Trading Act 1986. The penalty for failing to ensure environmental claims are truthful and substantiated can be up to $600,000 for a company and $200,000 for an individual.

 

Sue me!

Even if the Commerce Commission or other regulatory body decides not to pursue a company for greenwashing, a competitor may choose to sue privately for misleading statements that may amount to greenwashing.

 

A private claim has been filed by United States-based carpet making giant Godfrey Hirst against New Zealand-owned carpet company Bremworth. In 2020, Bremworth announced that it was moving to 100% wool fibre production. In its marketing campaign, Bremworth made a number of claims about the benefits of wool over synthetic carpets. One such claim was that the weight of a nylon carpet in an average size home was similar to 20,000 plastic bags. Godfrey Hirst, that manufactures nylon carpets (amongst other types of carpet), claims this is misleading as the consumer is led to believe its nylon carpet has the same environmental impact as 20,000 plastic bags. Bremworth stands behind its statements as being factually correct; the two companies remain in costly ongoing litigation.

 

Care is needed

We can reasonably expect that, given the focus on environmentally conscious decision-making by the New Zealand public, green marketing will continue to rise and, along with it, instances of greenwashing. Business owners keeping a careful and critical eye on marketing will help both the consumer make a considered and informed choice, and ensure the business does not succumb to greenwashing.

 

The Commerce Commission has guidelines on greenwashing: go to www.comcom.govt.nz and search for ‘greenwashing.’

 

If you would like help with reviewing marketing claims for your business or would like more information on greenwashing, please contact us.

[1] https://sbc.org.nz/resources/better-futures-2022-report/

[2] Commerce Commission v Farmland Foods Ltd [2019] NZDC 14839

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650