Fair Trade Amendment Act changes selling online

Date: 10th July 2014

E-commerce concept

With so many businesses selling online now, including many of our local bricks and mortar stores with online stores, The Fair Trading Act has been modernised to reflect the digital age we live in.  If you’re an online seller, it’s important to know what your responsibilities are. Here’s some information from the Commerce Commission to get you up to speed.

Selling online is not a “free for all” where anything goes. The Fair Trading Act applies to all traders who advertise or sell to New Zealand consumers online, even if the trader is based outside of New Zealand.

Traders who sell online must also make it clear that they are in trade, so that consumers know they are protected under the Fair Trading Act and the Consumer Guarantees Act.

When does the Fair Trading Act apply?

The Fair Trading Act applies to online selling when a seller is in trade – as opposed to a person selling a second hand pair of skis they have in their garage.

Who is in trade?

Many factors can be relevant to whether a person is in trade, including whether they:
• regularly or habitually offer to sell goods or services online
• make, buy or obtain goods with the intention of selling them
• are GST registered
• have staff or assistants to help manage their sales
• have incorporated a company or set up another type of trading vehicle.
Anyone selling goods initially bought or acquired for their own personal use is not in trade.

Disclosure of trader status

The Fair Trading Act requires anyone who is in trade to make this clear to consumers when offering goods or services for sale online. This informs consumers that they are covered by the Fair Trading Act and the Consumer Guarantees Act.
The online auction site Trademe has recently made changes to their trading rules to incorporate this requirement into their site.


Ben travels overseas on holiday. While away he buys a pair of shoes for himself and nine other pairs to sell online when he gets home. Ben is in trade when he sells the nine extra pairs, because he bought the shoes with the intention of selling them. Ben’s online listing for the extra shoes must clearly state that he is selling them in trade. Ben must comply with the Fair Trading Act and Consumer Guarantees Act.

Kate has a young son. She sells online the clothes he has outgrown. Despite selling a lot of her son’s clothes online, Kate is not in trade because the clothes she is selling were initially purchased for personal use.

What obligations do those selling online have?

Traders selling online need to make sure they comply with both the Fair Trading Act and the Consumer Guarantees Act.

Fair Trading Act

Under the Fair Trading Act traders selling goods online must:
• make it clear to potential buyers that they are in trade (see above)
• ensure any representations they make about the goods or service are accurate and do not mislead or deceive consumers
• not mislead consumers about their rights and obligations
• avoid engaging in unfair sales practices, such as bait advertising or pyramid selling
• have a reasonable basis for any claims they make about their products or services,
• comply with the product safety and consumer information standards where relevant, and not sell any goods prohibited by an unsafe goods notice.

Consumer Guarantees Act

The Consumer Guarantees Act applies to goods and services that are ordinarily purchased from a trader for personal, domestic and household use.  Under the Consumer Guarantees Act, goods must match their description, have no undisclosed defects, and be fit for their normal purpose, safe, durable, of reasonable quality, and acceptable in look and finish.

Common Fair Trading Act problems online

The Commission sees a number of commonly-recurring problems with online sales.

Terms and conditions

Traders need to make sure the terms and conditions of any online sale are clear and easy to find. This includes terms relating to price, quality and condition, delivery, returns and warranties.

Traders also need to ensure that the messages conveyed in any offer are accurate.

Traders must not bury qualifications, limitations and other important terms in the fine print or on a link-through page.

Availability of goods and services

Traders must not offer to sell goods or services that they do not reasonably believe they will be able to supply on the terms offered.

Traders must provide clear and accurate information to consumers about the availability of goods and services and when the consumer can expect to receive them.

Traders who do not hold stock

Some traders only source stock to supply once they have taken an order or sold the item online. Traders who do this need to make sure that any representations they make about availability and delivery times are accurate.

Daily deals and voucher sales

Traders offering goods or services through daily deal or group buying websites must have the capacity to fulfil every deal that they sell.

Where a voucher is sold, the trader must make clear before customers accept the offer the timeframe within which the voucher must be redeemed.

If the trader is only able to satisfy a certain number of sales, it should limit the offer to a manageable number, specify in the offer any dates when the voucher cannot be redeemed, or ensure a refund is available if the customer has trouble redeeming it.

Buyers should not be left with a voucher that they are unable to redeem because the seller is “booked-up” or otherwise unable to deliver on the voucher within a reasonable timeframe.

Delivery of goods

An online trader must ensure that delivery terms are clear and can be met. These include shipping costs, taxes, fees and the estimated delivery times.

Shill Bidding

Under the Fair Trading Act a vendor or seller is only allowed to bid on their own online auction or get someone to bid for them where:
• the online auction has a reserve price
• the vendor bid is below the reserve price
• the bid is clearly identified at the time it is made as a vendor bid.

Price comparisons

Traders often compare the price of a good or service with a usual price or recommended retail price (RRP) to show consumers that they can get a bargain by buying now, through them. This is common practice on daily deal and group buying websites.
Any trader selling goods or services online must not exaggerate price discounts. A usual price must be the price at which a good or service is commonly sold.


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