Government outlines plans to crack down on businesses taking consumers for a ride

The Government is putting companies which lock businesses and customers into unfair, long-term contracts on notice with new rules designed to protect against unfair business practices.

Businesses which aren't complying with the terms of existing contracts, making excessive demands, and blacklisting and bullying their suppliers are also in the Government's crosshairs.

Commerce and Consumer Affairs Minister Kris Faafoi and Minister for Small Business Stuart Nash have outlined new measures they say would better protect both businesses and consumers from unfair commercial practices.

"We're taking action to prohibit the most serious types of commercial misconduct, and to ensure there are better protections against unfair contract terms," Faafoi said this morning.

The Government is proposing two key changes: The first is to prohibit conduct which is unconscionable – serious misconduct that goes far beyond being commercially necessary or appropriate.

The second is to extend current protections against unfair contract terms in standard form consumer contracts to apply to business contracts with a value below $250,000 as well.

Nash said there were already laws which prohibit unfair commercial practices, but the changes the Government plans go further.

"We heard about a range of potentially unfair contract terms, including extended payment terms, one-sided contract terms, and businesses being locked-in to contracts for long periods of time.

"We also heard that some businesses aren't complying with the terms of existing contracts, making excessive demands, and blacklisting and bullying their suppliers."

The changes the Government expects to limit this type of behaviour will be introduced through the Fair Trading Amendment Bill by early next year.

"The new market study powers which the Commerce Commission is using to review the retail fuel sector is an example of the sort of work the Government's doing in this space," Faafoi said.

The announced changes come after the Government surveyed a range of businesses, and found that around half of them had experienced what they considered to be unfair conduct or contract terms.

Many of them reported being negatively affected by unfair practices, and experienced problems including cash flow issues, increased costs, reduced sales, wasted time and stress.