Playing Fair Down Under
In New Zealand, a ban on unfair terms in consumer contracts has taken effect and will, according to the Commerce Commission, will be enforced starting immediately. The regulation forms part of the 2013 Fair Trading Act. Australia introduced a similar ban in 2010.
The Consumer Organization “Consumer NZ” has launched its “Play Fair” campaign to increase awareness of the new law and related consumer issues. According to Consumer NZ, companies had been given plenty of notice of the upcoming ban and thus to review their contracts in order to remove unfair terms, but had to a large extent failed to do so.
The Act will apply to standard-form consumer contracts often used by electricity retailers, gyms, TV service providers and many others.
But what makes a term “unfair”? The Act defines a term as unfair if it would “would cause a significant imbalance between the rights of the company and the consumer, is not reasonably necessary to protect the legitimate interests of the company, [or] would cause detriment, whether financial or otherwise, to the consumer if it were to be applied or relied on.” The Act contains a list of terms that courts are likely to regard as unfair. This covers terms that would allow a company to unilaterally vary the terms of the contract, renew or terminate it, penalize consumers for breaching or terminating the contract, vary the price without giving consumers the right to terminate the contract, or vary the characteristics of the goods or services to be supplied.
After intense lobbying by the insurance industry, that industry was exempted from the ban.
Even though this Act is a consumer protection device, only the New Zealand Commerce Commission can, for now, enforce it. The contemplated fine for violations is $600,000.
In the USA, there are, of course, various statutory and common law protections against unfair terms such as those contained in the UCC as well as fraud protections. However, the deterrence effect of these does not seem effective in relation to at least some industries. Alternatively, perhaps the protections are not broad enough, sufficiently well-known, or sufficiently easy to enforce. Or perhaps people just give up and deal with other companies, or pay what they are asked to do by the companies.
I personally just spent no less than two hours chatting online with a major health care provider over their sudden allegation that a certain doctor I had used was “not in network” (with me thus allegedly owing a few thousand dollars to the insurance company) despite that particular provider being listed on the provider’s own website as “in network” and the doctor having confirmed this. Eventually and after numerous contractual and factual arguments, I was able to persuade provider that I was right. But how many others in my situation would simply give up and cave in to, as was the case, the provider’s repeated bootstrapping arguments that “their ultimate price was fair”?
Only two days later, I heard from a moving company that had agreed to move a car for me for $500 (and confirmed this twice) that the “price is actually $600.” When I told them no, it is not, they repeated their allegation that “we did not have a contract.” After telling them a few things about contract formation and modification principles and after declining listening to their attempted, time-consuming warnings about using other companies that were “scam artists,” I am now looking for a new contract another vendor.
Despite whatever legal protections we may officially have in this country against consumer fraud, it is still rampant. New Zealand’s government enforcement system is interesting, but time will tell if they have more success preventing consumer fraud than we do here.