More outdated laws need modernising
The Financial Markets Authority Te Mana Tā tai Hokohoko (FMA) wants warrantless search powers, a report of the Economic Development, Science and Innovation Committee published on Parliament’s website on Tuesday recorded.
“The FMA told us about two powers used by international financial authorities that it said could be useful in New Zealand,” the report said. “It said it would benefit from an on-site inspection power, which would allow it to search premises without the consent of a person or a search warrant. The FMA told us that such a power would align its supervisory powers with those of its predecessor (the Securities Commission) and international best practice.”
The FMA also wanted to be able to require regulated companies to pay for an “expert report” on aspects of their activities it was worried about. This would match the power the Reserve Bank Te Pūtea Matua has under the Deposit Takers Act.
The FMA is not the only economic regulator tasked with protecting the public which has appealed to Parliament to update long-neglected laws supposed to effectively regulate economic activity. The committee’s report shows MPs have registered the Commerce Commission’s dismay at previous governments having allowed the penalties for companies breaching the Fair Trading Act to remain unchanged for nearly 20 years.
“The maximum penalty per offence for breaches of the Fair Trading Act is $200,000 for individuals and $600,000 for a business.”
The commission referred to a case in which a trader on online marketplace GrabOne sold dangerously small, powerful magnets in 2021, despite the product being covered by an unsafe goods notice from The Ministry of Business, Innovation and Employment (MBIE).
“The company was initially fined only $80,000 after a girl, who swallowed two magnets, needed emergency surgery,” the report said, though the fine imposed by the District Court was in fact $87,750.
The owner of GrabOne at the time was NZME, which has since sold the operation. As soon as it was notified by the commission of the magnets being on sale, NZME immediately took down the listing, and conducted a recall – emailing, phoning and sending pre-paid courier bags to people who had bought them. In some cases, it sent people out to knock on doors when it was unable to contact buyers remotely.
“This fine was later increased to $195,000 following an appeal by the Commerce Commission to the High Court.”
However, the paucity of fines under the Fair Trading Act was lamented as a “long-standing frustration” by commission chair Dr John Small. Speaking to the committee last month, Small said: “As the court put it in one of our appeals; penalties for misleading and deceptive conduct need to sting, not just be an acceptable cost of doing business.”
MPs noted that recent Australian legislation increased the fair-trading penalty for companies to A$50 million (NZ$55m), or 10% of a company’s turnover, whichever is highest. The penalty for individuals increased from A$500,000 to A$2.5 million.
Several other “stewardship” failures by successive governments failing to keep core legislation required for the proper functioning of the economy have have been highlighted in recent weeks, with Commerce and Consumer Affairs Minister Andrew Bayly pledging action.
He has promised to review the outdated Companies Act, and also unfair insurance contract laws, both of which have been left unchanged for several decades.