Simpson Grierson - Fair Trading Act update - Black Friday obligations, and higher penalties on the horizon

Fair Trading Act update - Black Friday obligations, and higher penalties on the horizon

The holiday season marks the busiest period of the year for consumer retail spending. With the growing popularity of Black Friday sales, it is timely for retailers and consumers to reflect on the Fair Trading Act’s application to promotions. The Government has also announced its intention to significantly increase fines for breaches of the Fair Trading Act.

Black Friday - your obligations as a business

The American tradition of Black Friday sales has overtaken Boxing Day in terms of retail spending in New Zealand in recent years, with most major retailers now running extended sales throughout November.

While many of these sales bring true value to New Zealand customers in the form of better prices, it is essential that retailers are mindful of their obligations under the Fair Trading Act, which prohibits a range of conduct by people engaged “in trade” - most commonly understood to be the buying and selling of goods or services.

There are two key prohibitions in the Fair Trading Act that are relevant to promotional pricing conduct. These are:

A prohibition of false or misleading representations, such as advertising and statements made by sales representatives; and
A prohibition of misleading or deceptive conduct, which extends beyond representations to all conduct in trade, such as omitting important information and other sales behaviour that may fall short of being a “representation”.

Some examples of promotional pricing conduct that may raise Fair Trading Act issues include:

Advertising a store wide sale where a number of products are excluded from the promotion, particularly if those products are more likely to be the focus of consumer spending;
Advertising an “up to X% off storewide” sale where there are only a limited number of products on sale at the X% discount (with most available at a lower or no discount);
Advertising products with “was/now” pricing where the products have only been sold at the “was” price for a limited time, meaning the discount appears more significant than it actually is;
Advertising a clearance sale where the product is not sold out, and returns to full price after a period of time; or
Advertising a sale on products which are only available in very limited quantities and/or only at certain stores, without clarifying their limited availability.

The New Zealand Commerce Commission (the NZCC) enforces the Fair Trading Act in New Zealand, and keeps a close eye on retailers’ pricing behaviour. The Australian equivalent to the Commission (the Australian Competition & Consumer Commission, or ACCC) has announced that it will be conducting a sweep of retailers’ promotional behaviour to identify any conduct which falls foul of Australia’s consumer laws, with a focus on retailers which have been identified as raising issues in previous sweeps of Black Friday and Boxing Day promotions by the ACCC.

Although the NZCC has not announced a similar sweep of its own to date, misleading sales conduct is clearly on the NZCC’s radar, and we expect it will be paying close attention to retailer behaviour over the next few weeks, with protection of vulnerable consumers one of its stated enforcement priorities for 2025/26.

The NZCC has taken action against a number of retailers for breaches of the Fair Trading Act in recent years, obtaining significant penalties against retailers including One NZ, 1 Day, and Strandbags. It is also currently engaged in proceedings against some of the major grocery retailers for similar conduct - with two PAK’nSAVE stores awaiting sentencing in December following guilty pleas, along with ongoing proceedings against Woolworths New Zealand.

With these penalties in mind, retailers should:

Accurately reflect the scope of the sale in all promotional material - including availability of products, extent of discounts, and excluded products;
Before using was/now pricing, consider how long the product has been available at various prices to ensure you are accurately representing the “was” price;
If advertising a clearance sale, ensure the clearance price remains in place until the product is sold out; and
Exceptions and caveats to promotions should not be hidden in fine print.

Increased penalties on the way

In related news, the Government has announced its intention to significantly increase the penalties for breaches of the Fair Trading Act. Currently, businesses can be fined up to $600,000 per contravention, and individuals up to $200,000. The proposed amendments would see penalties for companies increase to the greater of:

$5 million;
Three times the commercial gain or loss avoided; or
The value of the relevant transaction.

The same structure for penalties applies to individuals, except with a $1 million cap (increased from $200,000). This structure is similar to the equivalent laws in Australia (noting the maximum penalties are much higher there). Fines for other misconduct in breach of the Fair Trading Act will also increase, including:

For breaching management bans, an increase from $60,000 to $200,000; and
For impeding enforcement or breaching consumer information requirements/consumer transaction rules, an increase from $10,000 to $60,000 for individuals, and an increase from $30,000 to $200,000 for companies.

In terms of the reasons for these large increases in penalties, the Government cited circumstances where gains from breaching the Act outweigh the maximum penalty, the 23% rise in Fair Trading Act complaints being made to the NZCC in the last five years, and the continued drive for consistency with Australia, as the driving forces for the proposed amendments. While you can be found liable for breaching the Act multiple times through a single piece of conduct, the Government’s view appears to be that this is not sufficient to deter underhand business practices - and this ability will continue with the new penalty regime.

The Government has said that these reforms will be reflected in a Bill that will be introduced to Parliament in early-2026 and passed later in the year. We will provide a further update once we have seen the Bill, and will let you know the deadline for any submissions on it.