Consumer Law Reform Bill may reduce consumer protection

23 April 2012

Consumer Law Reform Bill may actually reduce consumer protection

The Motor Trade Association (MTA) is concerned that the Consumer Law Reform Bill may in some instances be adding to the complexity of consumer protection laws without in fact providing benefits of substance for consumers.

The Bill passed its first reading on 9 February 2012, with Parliament's Commerce Committee calling for submissions, which closed on 29 March 2012.

MTA spokesperson Ian Stronach says “Government is to be applauded for trying to tidy up this whole area and provide a better framework for consumer rights. We are concerned though that government’s desire to provide added protection for those buying through online auctions may result in a significant unintended consequence. Registered vehicle traders will withdraw from the lower end of the market meaning more people buying and selling privately, without the very protections government is seeking to provide.”

At the lower end of the vehicle market, where margins are typically thin, the cost of meeting the obligations of the Consumer Guarantees Act will mean vehicle traders will not be able to on-sell older low value trade-ins at reasonable prices. Traders will simply deal in even less lower priced cars than they do now. Owners of older vehicles will more likely have to sell them privately, and in that situation the buyers of those vehicles end up with no protection whatsoever.

Stronach also says “Consumers typically use auctions in the hope of securing a bargain. It has long been accepted that there are additional risks with auctions, and people are prepared to trade off that risk for the chance to buy at a cheaper price; that is part and parcel of buying at auction.”

If the proposed changes come into effect vehicle traders will no longer be able to sell via on-line auction, and consumers will therefore be denied the opportunity and convenience of buying vehicles from traders through such forums. Bargain hunters will still be able to take part in traditional auctions, but those forums are not so convenient or accessible to the vast majority of people. In that sense, government is seeking to protect consumers from themselves.”

Internet based sales sites have been a positive development. They have turned the whole country into one large marketplace, benefitting both consumers and traders, with internet auctions just one of several ways of buying in that new marketplace.

The rapidly changing nature of e-commerce though means that being able to protect consumers at every turn is simply not achievable. Instead of trying to provide this level of protection, government could more usefully put in place mechanisms to ensure consumers are appropriately informed of the risks and allow them to make their own decisions.

If the desired effect of this part of the legislation is to ensure more consumers are buying with added protection, then it seems unlikely to succeed. It adds additional complexity in terms of who is covered for what and under which circumstances, and will drive more buyers into the private market where they have no comeback whatsoever. MTA will be urging government to reconsider this part of the Bill.

ENDS

© Scoop Media