Consumers better off in shake-up

Experts predict that more shoppers will save themselves money and ditch extended product warranties.

New Zealand's biggest overhaul to consumer law in 20 years came into force this week bringing major changes for buyers and sellers of goods and services.

Legal and consumer experts predict that more shoppers will save themselves money and ditch extended product warranties, while the need to substantiate claims could see many industries becoming effectively self-policing.

In addition, traders on online auction sites will also now be brought under the new Fair Trading Act and the Consumer Guarantee Act.

"The changes are long overdue and will provide greater protection against unfair practices and dodgy dealers," said Consumer NZ chief executive Sue Chetwin.

One key change is the right to cancel extended warranties within five working days. Mark O'Donnell, an associate commercial lawyer at Sharpe Tudhope, said the new laws meant retailers would also have to explain before consumers purchase a warranty, what extra protections it provided over and above existing consumer rights under the Consumer Guarantees Act.

"Up until now, I think consumers generally took extended warranties up out of fear rather than getting value for what they were," said Mr O'Donnell.

"It's been a nice money-earner for businesses. If you buy a high spec item from a reputable manufacturer that's a known brand, well-built and has all the bells and whistles, then you'd expect it to last a decent period of time.

"So if it's faulty or it breaks down you can probably seek redress under the CGA anyway."

Paying for an additional warranty may often be a waste of money, and the new law would now allow consumers to make an informed decision, he said.

Another major change is that businesses can no longer make unsubstantiated claims to market their product or services if they don't have evidence or reasonable grounds to back it up.

Robert Bycroft, a special counsel with Tompkins Wake lawyers, said the change was significant.

"Businesses will need to have substantiation for the claims that they make, which seems such a simple thing because before, you couldn't be misleading or deceptive," he said.

"But it causes a mind-set change to actually have to have the evidence to support a claim."

Mr Bycroft believed the change was likely to have an impact on companies in the real estate sector, as well as those selling nutraceuticals and making health claims generally about products, including businesses selling "magnet" bracelets and TV-marketed exercise machines.

"I would expect that this aspect of the law is going to be enforced by better-resourced companies that have invested in substantiating their health claims already, against competitors who have not."