Fair Trading Act changes will increase governance risk for business

Parliament has been busy introducing legislation to target misleading and other harmful conduct, and strengthen protections for consumers and individuals, both online and offline.

This Insight is the first of three on the proposed reforms to the Fair Trading Act 1986 (FTA) and related regulations, focusing on the proposed civil penalty regime. Parts 2 and 3 will address other reform, including the proposed “safe harbour” for online service providers who act to disrupt suspected scams, and the streamlining of product safety settings.

Beefed up civil penalties

Our November 2025 Insight covered the Government’s proposed reform to the FTA by introducing a new civil penalty regime, which has now been introduced to Parliament as the Fair Trading Amendment Bill (Fair Trading Bill).

Consistent with the cost-of-living crisis and high cost of fuel, the Commerce Commission’s focus appears to be on targeting misleading pricing in the retail and fast-moving consumer goods and energy sectors. This includes where consumers are charged more than the advertised price or sold a “special” that doesn’t save them money. This conduct has been an ongoing priority since the Commission’s prosecution of Strandbags, fined in 2022 for misleading consumers about pricing and discounts, and the recent announcement the Commission will file charges against BP for failing to apply discounts. Similarly in Australia the ACCC prosecuted Woolworths and Coles in 2024 for what it says were illusory “discounts”. Earlier this month, an Australian Court found Coles had made false or misleading representations about its discounts.

While this conduct will fall within the new civil penalty regime, its scope is much broader, applying to all businesses trading in New Zealand.

Penalties (in the form of fines) are already available under the FTA where businesses contravene the Act. However, only the Commission (the New Zealand regulator responsible for prosecutions under the FTA) can bring criminal proceedings against a business and ask the Court to impose a fine.

Fines are designed to punish businesses and discourage them from repeating the offending conduct.

They are separate from other remedies that individuals (or competitors) can seek under the FTA, such as orders that a business compensate them for any loss suffered. Compensatory orders (as well as other relief, such as injunctions) will continue to be available under the new regime.

The existing criminal regime’s fines are low by international standards. Currently the maximum fine for a single offence is:

• $200,000 for an individual; and

• $600,000 for a body corporate:

These fines have been criticised by the Commerce Commission and consumer advocacy groups for some time as being too low and not delivering the “sting” required to effectively deter businesses from repeated breaches of the FTA.

The Fair Trading Bill proposes to materially increase this “sting” by:

• largely transforming the existing criminal regime by creating a new civil one, which lowers the standard of proof required – balance of probabilities vs beyond reasonable doubt, and introduces a new pecuniary penalty regime; and

• substantially increasing the maximum fines and penalties available.

What are the changes?

The Fair Trading Bill replaces the current framework with two tiers of civil liability:

Tier 1 civil liability

Tier 1 covers what is likely to be the most serious conduct, including:

• unconscionable conduct;

• misleading conduct in relation to goods and services;

• unsubstantiated representations; and

• false or misleading representations.

The maximum penalty for Tier 1 breaches is proposed to be the greater of:

• the consideration for the transaction that constituted the contravention (if any);

• three times the gain made, or loss avoided, by the person who contravened the provision (if that amount can be readily ascertained); or

• $1 million for an individual, or $5 million for a body corporate.

In practice, this could mean penalties for businesses will significantly exceed $5 million. For example, if a business wrongly charged $159.99 for a product that it advertised at $149.99, and it sold 100,000 units, the maximum penalty would be $15.9 million (as the “consideration for the transaction” would be $159.99 x 100,000 transactions), despite the commercial gain being $1 million ($10 difference x 100,000 transactions).

Tier 2 civil liability

Tier 2 provisions will attract lower penalties:

• $60,000 for an individual; and

• $200,000 in any other case.

Despite the introduction of the new civil penalty regime, contraventions of certain provisions of the FTA are set to remain criminal offences (including those relating to product safety and compulsory recalls).

What this means for businesses

Together, the increased penalties and the lower burden of proof mean materially greater governance risks for business, which will require boards to focus more closely on these issues, for example, ensuring there are good and comprehensive compliance systems in place. Pervasive but otherwise relatively innocuous and innocent behaviour, such as pricing errors, could have a significant impact on the business and profitability.

The proposed changes will also have a material impact on the amount of disclosure required in proceedings under the new regime. As penalties will become part of a civil regime, civil procedure (as opposed to criminal procedure) and rules of evidence will apply. This means fulsome disclosure, including of all adverse documents, will be required as part of any proceedings, significantly increasing the amount of disclosure required. While legal privilege will apply, businesses should be mindful that privilege may not cover all internal communications or documents – including employee conversations with AI tools.

The Fair Trading Bill includes a time limit on bringing proceedings, including penalty proceedings, where:

• any proceeding must be commenced within 3 years after the relevant conduct was discovered, or ought to have been discovered; and

• in any case, proceedings cannot be brought 10 years or more after the relevant conduct occurred.

While legislation does not typically apply retrospectively, conduct occurring prior to the reforms coming into force could be the subject of a civil penalty proceeding once the Fair Trading Bill becomes law. Businesses therefore ought to start preparing now for any future changes to the law.

Businesses may want to keep in mind the other defences that apply when proceedings are brought under the FTA, and it is worth noting that the same standard of proof (balance of probabilities) ought to apply to any defences. The Fair Trading Bill also introduces new defences, which would supplement the existing defences under the FTA.

We can provide further information to businesses who are concerned about the potential impacts.

What this means for consumers and competitors

While penalties will not result in consumers (including consumers who may have suffered loss) directly receiving financial compensation, if the increased penalties have the intended impact they will encourage more consistent compliance with the FTA. Consumers could expect to see businesses exercising greater care when it comes to the goods and services they offer, including how these are marketed and priced.

Consumers and competitors will also continue to have the option to seek relief or compensation under the FTA where they consider a business has breached the FTA, even if the Commerce Commission does not decide to seek a penalty.

Look out for Parts 2 and 3 of our updates on the proposed FTA reforms.