Overview
Background
The Ministry of Consumer Affairs is part of the Ministry of Economic Development. The General Manager of the Ministry of Consumer Affairs is also a Deputy Secretary of the Ministry of Economic Development, and the Consumer Affairs Branch includes functions that fall within other Votes.
The Ministry of Consumer Affairs was established in 1986 as a semi-autonomous Ministry within the Department of Trade and Industry to provide independent policy advice and with the Cabinet mandate to "be directly responsible to the Minister of Consumer Affairs". The original rationale for the Ministry's establishment was a concern that without an entity with an explicit mandate, consumer issues would not be taken account of in government policies, particularly business-related policies, leading to potentially negative impacts for consumers and poorer policy overall.
As the Ministry of Consumer Affairs is a branch of the Ministry of Economic Development, under the Public Finance Act and State Sector Act, the Chief Executive of the Ministry of Economic Development is accountable for all aspects of its performance. The authority to give effect to this Ministry's mandate therefore sits with the Chief Executive. The Chief Executive currently gives effect to the Ministry's mandate by delegating the ability to provide policy advice and other contracted services direct to the Minister of Consumer Affairs, including developing and signing purchase agreements.
The practical implications of this structure is that Consumer Affairs has a special identity as the Ministry with a focus on creating an environment in which consumers can transact with confidence, and also works within a broader sustainable economic development framework.
Vote: Consumer Affairs comprises the following areas:
- Policy responsibility for the three overarching pieces of consumer legislation that form part of the basic framework for effective markets and govern all consumer transactions. These are the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and the Weights and Measures Act 1987.
- Policy responsibility for a number of transaction-specific laws that also cover certain purchases or selling methods that present special risks to consumers, including the Credit Contracts and Consumer Finance Act 2003, the Motor Vehicle Sales Act 2003 and the Door to Door Sales Act 1967.
- Enforcement of the Weights and Measures Act.
- Product safety banning and recall provisions of the Fair Trading Act.
- Information provision, either directly or through partnering with other organisations, to consumers on consumer and business rights, obligations and avenues for remedy and redress; and specific information on current scams and how to avoid them. In some cases, information delivery strategies are tailored so as to penetrate to groups of consumers disproportionately affected by bad deals. In addition, funding is provided for Powerswitch, a service that allows domestic consumers to compare the deals offered by electricity and gas retailers.
- Promoting consumer representation in decision-making processes where these processes are likely to impact on consumers.
The annual appropriation of Vote: Consumer Affairs is in the order of $6.8 million. This introduction highlights the key features of the portfolio and the challenges ahead.
Consumer Policy Framework
Consumer Affair's policy focus was reviewed some three years ago. One outcome was that the focus of consumer policy should be on creating the conditions in which consumers can "transact with confidence". In practice this means that consumers should get what they reasonably expect from a purchase and, if not, have access to redress.
Transacting with confidence is not just important for the individual, it is also essential to a thriving, innovative and sustainable economy. When consumers demand higher quality products and services, make effective choices among the offerings of competing suppliers and seek satisfaction when their purchasing expectations are not met, they can stimulate greater economic efficiency and innovation. Effective markets need demanding consumers who take action if business does not meet their needs and demand better service, new products and better value for money.
The key challenge for consumer policy generally is improving our understanding of how consumers make decisions and hence what refinements to policy could be considered to ensure consumers can transact with confidence. Among the initiatives being taken:
- Assessing the relevance of the relatively new field of behavioural economics to current approaches to regulation. For example, information barriers are a significant reason why consumers do not get what they expect when making a purchase and this has led to an emphasis on information disclosure as a principal regulatory tool. However, consumers do not always respond as expected when better information is available to them. Behavioural economics may offer new insights into consumer behaviour.
- Improving our understanding of the linkages between consumers, competition and innovation and drawing out implications for policy. As economies seek to become more innovative, there is an increasing focus on what drives innovation. One assumption is that sophisticated, confident consumers can encourage firms to be more innovative, and firms will compete to attract the business of these consumers.
- Looking at what overseas jurisdictions are doing to encourage consumers to purchase and use products in a sustainable way. This is to assess what role, if any, a Consumer Affairs Ministry might play in this area.
A further key challenge is ensuring that the consumer policy framework is fair to both consumers and business and has the minimum regulation necessary to achieve its goals. Striking the right balance between consumer rights and responsibilities and those of business requires both good evidence and considerable judgement.
Monitoring and Enforcing Consumer Policy and Law
To create effective consumer law, the government provides information and establishes market rules and mechanisms for their enforcement (including access to redress mechanisms). The incentives on businesses to behave in accordance with market rules depend on how effective information programmes and rule enforcement are, and also industry self-regulation and voluntary compliance.
The key challenges in this area:
- Better understand the effectiveness of consumer programmes and laws, both in general and in terms of their impact on particular groups. To this end, we are undertaking baseline surveys of both consumers and traders, and using our networks to develop a comprehensive database on issues of concern to consumers.
- Better understand how specific consumer programmes and laws are working in practice, and determine whether any weaknesses reflect the rules and/or the enforcement strategy. To this end, we are reviewing the redress and enforcement provisions in the Fair Trading Act 1986 and Consumer Guarantees Act 1993, reviewing the operation of the Motor Vehicles Sales Act 2003, reviewing the initial implementation of the Credit Contracts and Consumer Finance Act 2003, and assessing how effective our information strategies are in reaching vulnerable groups.
- Differentiate our measurement and product safety compliance approaches depending on the characteristics of the business concerned, for example, by putting more time into rogue traders and less time into minor (and often unintentional) breaches by businesses with a responsible track record.
- Better understand the contribution that industry self-regulation is making, or can make, to effective consumer law. To this end, we are assessing the effectiveness of current practices in industry self-regulation, as well as its role in the broader mix of regulatory approaches to consumer protection, redress and enforcement.
- Contribute our knowledge to emerging areas of consumer concern. For example, we will be taking a leading role in the review of financial products and providers, which includes the regulation of financial intermediaries.
Consumer Representation
Involving consumers in decision-making processes, where the outcomes are likely to impact on them, helps to ensure policies are developed that reflect a consumer perspective and are likely to be effectively implemented and successful. We promote consumer representation through providing guidelines on how to select and use consumer representatives effectively. We also provide a free nomination service.
The key challenges in this area:
- Increase our pool of nominees. We have recently undertaken recruitment and training, attempting particularly to locate good potential consumer representatives outside of the main centres.
- Ensure that consumer representatives on decision-making bodies are used effectively and are appropriately compensated for their contributions. Unlike many industry representatives, consumer representatives do not get paid to attend bodies such as Standards Committees. This can result in a reluctance, over time, to engage.
- Make more use of the consumer representation network as an input into consumer and consumer-related government policy more generally.
International Dimensions of Consumer Policy and Law
There are two main international dimensions of consumer policy. The first is the opportunity to reduce technical barriers to trade that arise out of different consumer laws in different countries. The second is to manage the risk of goods or services originating in another country escaping the reach of domestic consumer law. Goods sold over the internet are an example of this.
The key challenges in this area:
- Coordinate our laws with other countries (and in particular Australia in the context of the single economic market goal) in such a way that technical barriers to trade are minimised but allows us to retain our ability to regulate in ways that reflect unique New Zealand conditions or preferences.
- Design effective cross-border information sharing and enforcement cooperation programmes with other countries.
Strategic Priorities
The broader Ministry of Economic Development's strategic priorities focus our expertise and resources on activities that have the most impact for sustainable economic development. In summary, these are:
- leadership: leading a whole-of-government approach to economic development
- international linkages: improving international linkages that allow firms to benefit from trade, knowledge transfer and investment
- innovation: fostering entrepreneurship and innovation in New Zealand firms
- regulatory environment: strengthening the growth focus in the regulatory environment for business
- infrastructure: strengthening the quality and reliability of key infrastructure services
In keeping with the Ministry's five strategic priorities, the work programme under Vote: Consumer Affairs over the next three years will include:
- examining whether there are opportunities to further improve growth prospects in New Zealand, using a combination of competition and consumer policies
- working with Australian counterparts to examine the potential for greater harmonisation of consumer law where this is in New Zealand's best interest
- undertaking a review of industry-led regulation focusing on when it works, when it doesn't and how it could be enhanced as a tool for achieving policy goals
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