Major Overhaul of the Fair Trading Act: What the New Penalties Mean for Retailers


The Government has announced substantial reforms to the Fair Trading Act (“FTA”), with a bill expected to be introduced to Parliament next year. While supermarkets have been specifically referenced as a focus point of the amendments, following multiple supermarkets pleading guilty to FTA offences earlier this year, these changes will apply to all businesses.

Major Increases to Maximum Penalties

The central feature of the amendments is a significant increase in financial penalties. The current maximum penalties are $600,000 for bodies corporate (e.g. companies) and $200,000 for individuals. The proposed amendments will increase the maximum penalty to the greater of:

• $1 million for individuals or $5 million for bodies corporate; or
• Three times the value of the commercial gain made or loss avoided; or
• The value of the consideration for the transaction(s) that constituted the contravention.

Nicola Willis, the Minister of Finance, has cited the fact that under the current regime, there are situations where the commercial benefits of breaching the FTA outweigh any potential penalty that would be imposed. The proposed changes aim to remove any economic incentive to breach consumer protection laws. This comes at a time when there are increasing FTA complaints to the Commerce Commission.

Civil Regime rather than a Criminal Regime

Currently, the FTA’s penalties regime operates to the criminal standard, which means that breaches need to be proven beyond a reasonable doubt. The proposed reforms would make the FTA Act a civil regime. This means breaches will instead need to be proven only on the balance of probabilities. This will likely result in the Commerce Commission taking more enforcement action because of the lower burden of proof.

For retailers, this represents a material increase in the risk of a breach, as the threshold for establishing a breach is lower.

This proposed amendment will apply to most breaches. However, serious or deliberate conduct will remain criminal. This includes, but is not limited to:

• Demanding payment without intending to supply goods or services;
• Serious product safety breaches; and
• Obstructing or impeding the Commerce Commission in its enforcement role.

Increases to Other Penalties

The proposed amendments also include increasing the maximum penalty for several other categories including:

• Breaching consumer information requirements, consumer transaction rules and impeding enforcement:
  • Increase from $10,000 to $60,000 for individuals; and
  • Increase from $30,000 to $200,000 for bodies corporate;
• Breaching management bans increase from $60,000 to $200,000.

What does this mean for retailers?

Although the government has had the supermarket sector in mind for these reforms, the changes will apply across the board. Retailers should expect:

• Greater scrutiny of pricing practices, promotional claims and product labelling;
• Higher enforcement risk due to the shift in civil liability and the lower burden of proof; and
• A need to review compliance programmes, internal controls and staff training to ensure that updated FTA obligations are understood and consistently applied.

If you would like assistance or advice on understanding how the proposed amendments may affect your business, please contact one of our commercial experts, Sarah Churstain or Jordan Todd.

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