New Zealand has two key laws which deal with product safety, the Consumer Guarantees Act and the Fair Trading Act. In 2007 the Government issued a government product safety policy statement to complement the Consumer Guarantees Act. The Consumer Guarantees Act is a general consumer protection law which gives minimum standards of quality for goods and services. The Fair Trading Act is designed (among other things) to promote product safety and to prevent injuries. In relation to product safety, the Fair Trading Act allows the government to: recommend the introduction of product safety standards; declare goods to be unsafe (a product ban); and order a compulsory recall. Customs Service can also enforce safety provisions, under the Customs Act. There are many ministries and government agencies involved in safety of all the four phases of products (production, distribution, usage and disposal). Service component is also included. Government action will generally be taken by the agency that has the lead interest in the class of product, supported by other relevant agencies. Industry sector associations and the NZ Retailers Association play an active role in promoting self-regulation. Maintaining food safety standards and managing recall risk are two increasingly pressing issues for New Zealand companies.
Product safety laws
New Zealand has two key laws which deal with product safety, the Consumer Guarantees Act and the Fair Trading Act.[1,2] Consumer Guarantees Act (CGA) gives consumers certain guarantees when they purchase goods and services. The Act puts responsibilities on retailers and manufacturers/importers and sets out rights and remedies consumers can claim if these guarantees are not met. The guarantees apply to goods (new and second-hand) and services which are purchased for household use. Excluded from the Act are goods and services that are supplied for business use and goods supplied by auction. Relevant to product safety are the guarantees contained within the Act that goods sold are of ‘acceptable quality’. Goods that are unsafe are said to be of ‘substantial failure’ and the consumer has the right to reject the goods.
A government product safety policy statement is designed to complement the Consumer Guarantees Act by making it clear to manufacturers and importers what is considered ‘acceptable quality’ and ‘fit for purpose’ under the Act. In 2007 the Government issued a government product safety policy statement that clarified acceptable levels of formaldehyde in clothing.
The Government has revised consumer laws to help consumers transact with confidence and to support honest business practices. The law changes were included in the Consumer Law Reform Bill.[3] In December 2013 the Consumer Law Reform Bill went through the final legislative processes and received Royal Assent.
Avoiding product liability is a stronger incentive in jurisdictions where suppliers and manufacturers are liable for personal injury or liability for other damages. Reputational damage in the market place from high profile cases where goods are found to be unsafe probably has a higher commercial impact than an award of damages by a Disputes Tribunal or other court.
Unlike the statutory guarantee that goods of an acceptable quality should be safe, the statutory guarantees in relation to services do not expressly refer to services being safe. The safety requirement is probably implicit in the guarantees that services are carried out with reasonable care and skill and that the services are fit for particular purpose. If consumers suffer physical damage or loss as a result of services being provided which are not safe, then the services are unlikely to have been provided with reasonable care and skill, or to have been fit for purpose.
Breaches of the Consumer Guarantees Act are only actionable at the suit of consumers in the civil courts. Consumers are unlikely to be motivated to take on cases in relation to the lower-priced goods which are frequently the subject of product safety concerns. Breaches of the Consumer Guarantees Act are not offences enforceable by the Commerce Commission (or any other public agency).
Fair Trading Act 1986 includes provisions dealing with product safety (Part III) and the safety of services (Part IV). The features of these provisions of the Fair Trading Act include: Regulations may be made establishing product or service safety standards for the purpose of preventing or reducing the risk of injury to any person (sections 29 and 35).
In relation to product safety, Part 3 of the Fair Trading Act 1986 provides the Minister of Consumer Affairs with the power to ban products, set standards through regulation and order compulsory recalls. The Consumer Guarantees Act 1993 also provides a guarantee that consumer goods are safe. The FTA is administered by the Ministry of Business Innovation and Employment (MBIE) and enforced by New Zealand Customs Services and by the Commerce Commission post importation. These provisions cover all consumer products with the exception of food, gas and electrical products, motor vehicles and cosmetics that are regulated by other agencies under product specific legislation.[4]
Anyone buying goods or services in New Zealand is protected by consumer laws. Fair Trading Act makes it illegal for businesses to mislead consumers, give false information, or use unfair trading practices. It applies to anyone in trade - from big players like hotel chains, airlines and department stores, to small or temporary businesses like a souvenir stall or ice cream stand. Under this Act, goods must be fit for their normal purpose, safe, durable, have no minor defects and be acceptable for safe use.
Product safety standards
The Product safety standards may relate to: the performance, composition, contents, manufacture, processing, design, construction, finish or packaging of goods; the testing of the goods during or after manufacture or processing; and the form and content of markings, warnings, or instructions to accompany the goods.[5]
Service safety standards may relate to: the maintenance, repair, treatment, processing, installation, assembly, cleaning or alteration of goods; the construction, maintenance, repair, cleaning or alteration of any building or other fixture on land; and the development of land.
There are six current regulated product safety standards in New Zealand. There are no regulations for service safety standards. The product safety system in New Zealand is generally consistent with the Australian system under their Trade Practices Act.
Trading Standards investigates complaints about consumer products that are not subject to mandatory product safety standards (this is done by the Commerce Commission), or otherwise covered by other regulations (e.g. food, medicines). Trading Standards also monitors voluntary compliance with national standards where there’s information that there may be the potential for injury but the need for formal government intervention has not yet been established. When an investigation concludes that critical safety requirements are not being met, the Ministry assesses whether the powers of the Fair Trading Act are required, depending on the potential injury risk involved, and the ability and or willingness of the suppliers to voluntarily self-regulate.
Ministry of Business Innovation and Employment, draws on consumer complaints, market place sampling/testing and data and intelligence sourced from other organizations within New Zealand and overseas. The Minister is able to take action that ranges from interim bans of a product through to permanent regulations. The basis for the majority of these provisions are published standards. The preference is for New Zealand or joint Australia/New Zealand standards, the majority of which directly relate to the equivalent ISO standards.
Unsafe goods notice and product bans
The Minister of Consumer Affairs has the power to stop the sale of goods by declaring them to be ‘unsafe goods’. A ban stays in force for 18 months, unless withdrawn earlier. At this point it can be imposed indefinitely or for a further specified time. There are unsafe goods notices for: lead in children's toys; hot water bottles; candles with lead in the wicks and candlewicks containing lead; and pistol crossbows. The Commerce Commission investigates complaints about products that have a product safety standard or have an unsafe goods notice attached to them.
The Minister of Consumer Affairs can order a compulsory product recall where goods being sold do not comply with a product safety standard; or are of a kind which will or may cause injury and the supplier has not recalled the goods or taken good enough action to recall the goods. New Zealand does not require notification of voluntary recalls, but Trading Standards does offer assistance to companies undertaking a recall.
Food safety - Food Act 2014
Food safety has many ingredients. Robust biological science has been developed on food hazards. Supply chain integrity is another. Companies must have supply chain traceability that is real, comprehensive and action-able. If food or food ingredients are contaminated, it is just as important to know the source and current location of the items and substances in question as it is to know the biological facts of the contamination.
The news in August 2013 of potential Clostridium botulinum contamination was bad for New Zealand, which prided itself on exporting food of the highest quality. The 38 tonnes of the Whey Protein Concentrate (WPC) in dairy export supply chain fell under suspicion of contamination. The inquiry concluded that the regulatory framework was fundamentally sound, but recommended improvements. Underlying many of these was the idea that the dairy industry must anticipate future risks as well as counter existing known threats. The Inquiry also observed that, if Fonterra had possessed a strong food safety culture, this incident would probably not have happened.[6]
Scores of consumers were made sick during October 2014 after eating supermarket-bought fresh vegetables contaminated with the bacteria, Yersinia.[7] The Ministry for Primary Industries is refusing to confirm carrots and lettuces as the source of a stomach bug that's hit more than 100 people and put 38 in hospital. But in both above cases, existing traceability systems were found wanting.
Demand for product recall has increased significantly over recent years as consumer awareness increases, legislative requirements become more stringent, supply chains more complex and contractual conditions more onerous. The impact of a product recall event has the potential to cause severe damage to a company's brand reputation and survival. Maintaining food safety standards and managing recall risk are two increasingly pressing issues for New Zealand companies. But while product recalls are becoming larger and more frequent, most food and beverage companies are unaware of the magnitude of their recall risk.
Food Standards Australia New Zealand (FSANZ) has established a rigorous and transparent process for assessing the safety of GM foods. The responsibility for demonstrating the safety of any new food product on the market lies with the developer of that product. This is also the case for new chemicals and drugs.
Regulatory authorities
Consumer NZ moves from testing products to testing businesses with new accreditation scheme. Consumer NZ, the non-profit organization started in 1959, delve into the quality of products and services and investigate consumer issues, and has launched a scheme called Consumer Trusted to enhance that. Consumer Trusted is based on a Code of Conduct for the accredited business, which includes the right to exchange or return for a full refund a non-perishable product within 30 days of purchase; no bond charge for returning faulty goods; refunds for products worth over $100 that go on sale within a week of purchase; and advisers to help customers of the accredited business. [8]
Medsafe is the New Zealand Medicines and Medical Devices Safety Authority. WorkSafe NZ is New Zealand’s workplace health and safety regulator. Biosecurity New Zealand is a division of Ministry of Agriculture and Forestry charged with leadership of the New Zealand biosecurity system. It encompasses facilitating international trade, protecting the health of New Zealanders and ensuring the welfare of environment, flora and fauna and marine life.
Environmental Risk Management Authority (ERMA) is to safeguard people and the environment by regulating the introduction and use of hazardous substances and new organisms under the Hazardous Substances and New Organisms (HSNO) Act. ERMA regulates the importation, development and use of plants, animals and other new organisms including genetically modified organisms.
New Zealand Transport Agency (NZTA) contributes to an integrated, safe, responsive and sustainable land transport system, in support of the updated New Zealand Transport Strategy.
Many industry sector associations and the NZ Retailers Association play an active role in promoting self-regulation. They are involved in the development of industry codes of practice, provision to business of advice on suppliers’ responsibilities under the Consumer Guarantees Act, and the development of national standards through participation on standards technical committees.
Insurance Schemes [9]
The Accident Compensation Corporation (ACC) is responsible for administering the country's universal no-fault accidental injury scheme. The scheme provides financial compensation and support to citizens, residents, and temporary visitors who have suffered personal injuries. ACC was based on an insurance model that provided cover for all, regardless of fault or cause of injury.
All New Zealanders and visitors to New Zealand who get injured can apply for help from ACC. It does not discriminate what caused the accident and where the injury happened at work, during sport or recreation, at home or on the road. ACC can also help a New Zealander returning from overseas with an injury, as long as the victim is a permanent resident, and have not been away for more than six months. Because of the wide range of help available from ACC after an injury, victims cannot sue for personal injury in New Zealand, except for exemplary damages.
This scheme will also cover accidents due to use of unsafe products and services. In a way it helps manufacturers and suppliers of unsafe products and services from heavy legal and insurance liabilities. Suppliers and manufacturers are for practical purposes exempt from liability for physical injury to consumers and any third parties under the Accident Compensation scheme. Unsafe products and services, in addition to causing harm and distress to individuals, it can have an impact on costs to the government health budget and to the Accident Compensation Corporation.
ACC manages about 1.6 million injury claims each year and collect as much information about those injuries as possible. These data are used to measure the safety issues with product and services.
Whilst ACC provides cover for most accidents at work, employees can still sue for work-related illnesses that the ACC does not cover, including:Mental injury or stress not accompanied by any physical injury; Nervous shock or fright not accompanied by any physical injury (this may result in serious illness, such as heart attack or stroke); and Disease brought on over time (eg exposure to the elements or extremes of temperature).
So, insurance firms such as Zurich NZ is trying to sell Employers Liability Insurance. Zurich's policy covers damages and legal costs for employees who have suffered injury or disease arising from, and in the course of, their employment.
Zurich's product safety and recall insurance provides a combination of recall planning and preparation advice, broad coverage plus post-loss consultancy to help minimize damage to the brand and the balance sheet. In response to this problem, AIG created NOVI, a free and confidential service that enables businesses to better understand their product recall risk exposure by estimating the probable maximum loss from a recall event.
Conclusion
The most fundamental issue which faces any product safety system is that regulations can only have a reactive role because the range of goods and services available to consumers is too great for a regulator to sensibly monitor or test for safety compliance. It can only react to particular problems which arise. New and emerging product safety risks and concerns challenge the reactive model. Increasingly risks and issues are being raised around chemicals and new technologies where risks are virtually impossible to determine. Many small businesses lack the capacity to test products, and/or do not consider testing for product safety before they supply goods, which means potentially unsafe goods get on to the market un-checked.
References and Further Reading
[1] Consumer Guarantees Act 1993
[2] Fair Trading Act 1986 & Fair Trading Amendment Act 2013 [www.legislation.govt.nz]
[3] Consumer Law Reform Bill
[4] Consumer Affairs' (including Trading Standards') under Ministry of Business, Innovation and Employment [www.mbie.govt.nz]
[5] Standards websites: www.standards.co.nz; www.foodstandards.govt.nz; and www.foodsafety.govt.nz
[6] The WPC80 incident: causes and responses, Government Inquiry into the Whey Protein Concentrate Contamination Incident November 2014
[7] “Carrots and lettuce cause outbreak in Bay”, www.nzherald.co.nz dated 7th October 2014
[8] The Consumer Advisory Service [www.consumer.org.nz]
[9] Websites of Insurance companies such as ACC, Zurich NZ and AIG
Administrator:NARA is a Consultant by profession and an Engineer by qualification. Nara holds an Engineering Masters degree and have worked 25 years for leading organizations.
Now working part time on country/technology research projects and Maintaining community Web sites.
Spending more time to pursue his interests on studying: ancient scriptures; maths & astronomy; physics; philosophy; history & culture and so on.
