Fair Trading Act reform – More agile product safety standards

This is the final article in our series on the current proposed reforms to the Fair Trading Act (FTA). Part 1 considered the proposed new civil penalty regime, while Part 2 looked at the proposed safe harbour for online service providers who disrupt suspected scam activity.

The final aspect of the proposed FTA reforms is streamlining the process for the update of product safety standards.

The Government says the changes are intended to fix long-standing product safety issues and help New Zealand keep pace with international standards.

Product safety regulation has been in the spotlight in recent years for several reasons:

• Low-cost goods from offshore online retailers are increasingly available to New Zealand consumers, including via drop shipping. This creates enforcement challenges, as existing product safety laws were largely designed with domestic retailers in mind.

• Children’s products can present acute safety risks, including choking hazards from small parts or exposure to harmful substances. Recent concerns include coloured play sand products and children’s toys found to contain asbestos, and squishy toys with excess benzene in their outer layers.

• Corded window coverings are another well-known risk for young children. The Government has separately announced that it will introduce new product safety standards for corded window coverings, with a 1-year transition period to ensure businesses have time to prepare.

What are the proposed changes and how will they work?

The key proposal is to allow the Chief Executive of MBIE to issue product safety notices. As with the current regime, the Governor-General (on recommendation of the Minister of Consumer Affairs) will make product safety regulations, which determine which products are subject to regulation, and specify the product safety standards that apply. The current regulatory response can be slow, and so the proposed product safety notices are a new addition intended to provide a faster, more flexible regime - one that can stop harmful products reaching New Zealand consumers and keep New Zealand aligned with evolving international standards.

Product safety notices will allow MBIE to respond quickly to emerging risks, including risks identified overseas with goods sold online and available to New Zealand consumers.

Product safety notices will sit alongside the current "unsafe goods" regime in the FTA, which allows the Minister to issue a notice declaring any particular goods to be unsafe (regardless of whether those goods are otherwise subject to product safety regulation).

What does this mean for businesses?

Some New Zealand product safety standards are now outdated, with certain standards dating back to the early 2000s. This can leave businesses complying with requirements that are out of step with modern international practice.

If the reforms bring New Zealand’s standards closer to international counterparts, this may ease the compliance burden on businesses, particularly overseas businesses wanting to supply products in New Zealand where those products have already been tested and approved in comparable markets.

For example, the Government has recently announced, following a recommendation from the Ministry for Regulation, that New Zealand will recognise toy standards of the United States and European Union. Toys that meet those standards will be considered compliant in New Zealand without needing to be retested against New Zealand’s product safety standard.

The Government estimates this will remove unnecessary compliance costs of up to $5,000 per product, and deliver a net benefit of $6.8 million over 10 years.

We can provide further information about the proposed changes and potential transition to the new regime to businesses who require it.