COMLAW 306 Part 1: The Fair Trading Act 1986

Transcription

1 COMLAW 306 Part 1: The Fair Trading Act 1986 INTERIM REMEDIES mostly for civil actions most marketing actions end here; why? as most businesses cannot afford to stop work for several months to wait for the court why do we need interim injunctions? as marketing matters often need to be settled quickly or else irreversible damage may be caused such as copying another s promotional activities which can lead to confusion in the marketplace - Interim Injunction granted by the court to preserve the status quo, until a court hearing - John Doe Order a form of injunction which is available when there is evidence of likely infringement of copyright and the wrongdoers cannot be identified at the time of the application of the order wrongdoers may only appear on the day of an event (such as a sports game) - Anton Piller Order given in circumstances where it is clear that the defendant may seek to destroy evidence the Pl along with a solicitor is given permission to enter the Df s premises and seize evidence - Mareva Injunction restrains the Df from removing assets from the jurisdiction (i.e. taking them overseas) FINAL REMEDIES Final injunction has no limit of time generally if the Pl can show loss then it will be entitled to damages to recover that loss; alternatively, the Pl may seek an account of profits from the Df. THE FAIR TRADING ACT Section 1A Purpose - (1) The purpose of the act is to contribute to a trading environment (marketplace) in which (a) the interests of consumers are protected; and (b) businesses compete efficiently; and (c) consumers and business participate confidently - (2) To this end, the Act (a) prohibits certain unfair conduct and practices in relation to trade; and (b) promotes fair conduct and practices in relation to trade; and (c) provides for the disclosure of consumer information relating to the supply of g/s; and (d) promotes safety in respect of g/s Section 5C No contracting out: general rule - (1) The provisions of this act have effect despite anything to the contrary in any agreement - (2) a provision of any agreement that has the effect of overriding a provision of this act (whether directly or indirectly) is unenforceable (under section 5D, a contract between 2 businesses may include a clause that excludes the FTA, this is provided that such an agreement is in writing and that both businesses are in trade)

2 THE ROLE OF THE COMMERCE COMMISSION CC set up under the Commerce Act 1986 deals with compliance with the FTA can authorise CC employees to investigate and ensure compliance enforcement of the act contains a range of activities: - education - warnings to traders whose behaviour seems at risk - settlements with traders the CC believes have breached the FTA (not prosecution in court here) - issuance of infringement notices up to $ prosecution through the courts (criminal prosecution) the nature of the action is based upon: - extent of detriment - seriousness of misconduct - the public interest CASE: Commerce Commission v Glaxosmithkline (Ribena Case) in ads, said drinks had a high level of vitamin C school kids test normal Ribena was said to have 7mg of vitamin C per 100ml but there was actually none when tested = misleading information the concentrated Ribena also had misleading information if it was diluted correctly CC took GSK to court, criminally prosecuted them for misleading information and fined $227,000 Also ordered them to perform a corrective order, they had to advertise they were at fault STRUCTURE OF THE FAIR TRADING ACT The FTA basically covers the whole range of marketing activities: - Part 1: Unfair Conduct Misleading and deceptive conduct, unsubstantiated representations, false representations, unfair practices - Part 2: Consumer Information - Part 3: Product Safety - Part 4: Safety of Services - Part 4A: Consumer Transactions and Auctions lay-by sales, uninvited direct sales, extended warranties, auctions - Part 5: Enforcement and remedies - Part 6: Miscellaneous ENFORCEMENT (who can be made liable for breaches of the FTA?) Personal Liability directors, managers, and employees can be held liable for their actions, s40 refers to every person who contravenes any person in a position to make a promotional statement can be held liable for their statements There is criminal prosecution by the CC for breaches under s40 Can also be sued under s9 for civil liability (claim however is not brought by the CC, instead is brought by a Pl who has suffered some form of loss and has a valid cause of action) CASE: Commerce Commission v Callaghan An example of where an employee was prosecuted on his own involved in selling time shares (right to use property for certain amount of time) agent was selling time shares in Queenstown

3 CASE: Smythe v Bayley s Real Estate example where employee and employer were prosecuted SUMMARY OF CASE HERE CIVIL LIABILITY By virtue of s40(1); s9, s14(2), and, s23 give rise to civil liability only In the above, the Pl doesn t need to prove intention; i.e. someone can still be liable for a mistake CRIMINAL LIABILITY Section 40 Contraventions of provisions of Parts 1 to 4A an offence (apart from the above) - individuals can be fined up to $200,000 - body corporates can be fined up to $600,000 - anyone who contravenes s24 is liable for a fine up to $600,000 - breaches of consumer information? individuals $10,000; body corp $30,000 - can also be prosecuted under the Crimes Act 1961 CATEGORIES OF OFFENCES Mens rea - 2 instances in FTA where have to show intent - s19 - s17 cannot offer gifts without the intent of supplying them Strict Liability - where the Df may escape liability by establishing lack of fault - e.g. s10 no person shall in trade; all person has to do is prove the act, no intent required Sue Prosecute established case (where Df has to prove what was done was actually done) Strict Liability (where Df just has to prove actus reus the act itself no intent) Defence? Civil must show that Pl is unable to bring a case (balance of probabilities) Criminal (s10 and s13) where the Df has access to statutory defences PROCEEDINGS SUMMARY DEFENCES TO CIVIL PROVISIONS Pl has been unable to establish case on the balance of probabilities DEFENCES TO OFFENCE PROVISIONS 1) GENERAL DEFENCE TO OFFENCE PROVISIONS there is a general defence under s44(1) Df has to show that the contravention was due to: 1. a reasonable mistake 2. reasonable reliance on information supplied by another person 3. an act/default of another person, or something beyond Df s control where Df had taken reasonable precautions CASE: Foodtown Supermarkets v Barrett (1990) prosecution by CC, just under the name of one of its employees

4 what could the Df (in the previous case, this is the appeal) plead? it pleaded (1) but court said no, as the mistake wasn't reasonable. It then pleaded (3) and court said it is possible that others may have meddled with the signs but without a reasonable compliance program to combat such occurrences, (Foodtown had such programs but they were not effectively implemented) the court refused the defence CASE: Marcol Manufacturers Ltd v Commerce Commission (1991) Marcol sold leather jackets; they were made in Korea but made no mention of such. All they had was a label with the Marcol brand and their NZ address this led to the representation that the jackets were made in NZ s13 prohibits anybody from making misleading statements about the place of origin Marcol pleaded (1) but the judge said no, as they were well aware of the origin of the jackets they were convicted, the prosecution were able to establish actus reus and the Df s defence failed = conviction CASE: Cardin Laurant Ltd v Commerce Commission (1990) were convicted under s30 regarding consumer information relating to the safety of goods director had imported children s pyjamas (which have standards which need to be met and advertised by the tag on the pyjamas) the goods were tested and they failed these standards Cardin pleaded (2) stating that they had contacted the Department of Trade and Industry and asked if it was alright to sell the pyjamas and the official they had spoken to said it was fine court said no not good enough to get oral advice from an unknown source; should've contacted a solicitor with expertise and got a written statement of advice CASE: Commerce Commission v Callaghan (1993) case to do with selling the one off price time shares Df was able to plead (2) as his employer told him that it was OK to advertise as such CASE: Adams v ETA Foods Ltd (1987) ETA made beef pies, and they purchased the meat from Adams The pies were tested and found to contain beef and sheep meat cannot described as a beef pie if it also contains mutton claim (3) that ETA had relied on Adams and the fault was Adams court agreed with this however they denied the defence as ETA had no testing to ensure the meat was 100% beef = conviction note: the s44 defences ONLY apply to criminal actions NOT civil

5 2) DEFENCES AVAILABLE TO PUBLISHERS S44(4) if the Df meets all of the following: - is in the business of publication (advertisements); and - the advertisement in question was received in the ordinary course of business; and - Df had no reason to suspect that the ad would contrive the FTA the Df will have a valid defence applies to both criminal and civil actions CASE: Wilson and Horton Ltd v Commerce Commission (1992) prosecuted for an ad placed in the NZ Herald for a Mazda Bongo; ad stated the vehicle had single rear wheels, however the image showed a vehicle with double rear wheels could the publisher plead S44(4)? yes as they met all the criteria; they wouldn't be expected to know the difference between single and double rear wheels 3) DEFENCES AVAILABLE TO THE MEDIA under s15, newspaper publishers and broadcasters are exempted from the provisions s9 to 14 THIS DEFENCE DOESNT RELATE TO ADVERTISEMENTS OR OTHER PROMOTION MEDIA e.g. if a news reporter interviews someone claiming to have invented water that cures cancer, the news will have a defence AS LONG AS it only reports on the matter; as soon as it goes further so that the piece promotes the g/s, they will NO LONGER have a defence, as the piece has become more of an advertisement they would have to utilise s44(4) above 4) CONSUMER INFORMATION STANDARDS s44(5) & (6) applies to both criminal and civil traders who acquire goods from a supplier in NZ for the purposes of re-supply in contravention of s28 (s28 relates to consumer information on labels) s28 exception person who intends to re-sell can rely on supplier, BUT needs to make a reasonable enquiry 5) BAIT ADVERTISING s19(3) relating to advertisers offering to supply, within a reasonable time if there is a discounted product that runs out, the seller must offer a similar product for the same price else liable under s19(3) PENALTIES IF CONVICTED? up to $200,000 for individuals; up to $600,000 for companies what is likely to increase the fines? - objective of the FTA - importance of any untrue statement - degree of wilfulness or carelessness in making the untrue statement (intent will inc fine) - extent to which statement departs from the truth - degree of dissemination - resulting prejudice to consumers - corrective efforts, if any, will decrease fine - the need to impose deterrent penalties

6 OTHER ORDERS UNSAFE GOODS under s31 - Minister of Consumer Affairs can declare goods to be unsafe e.g. ninja pistol crossbows COMPULSORY PRODUCT RECALL under s32 Minister of Consumer Affairs can order a compulsory product recall and the taking of remedial steps may also require supplier to publicly disclose why the goods are unsafe VOLUNTARY PRODUCT RECALL under s31(a) if a supplier voluntarily recalls goods, it must notify the Ministry of Business within 2 working days IMPORT PROHIBITION under s33 the importation of certain goods is prohibited CORRECTIVE ADVERTISING ORDERS under s42 the CC may apply to the HC for such and order see the Ribena case previous MANAGEMENT BANNING ORDERS under s46c can ban a person from being involved in the management of a company, if - person has committed two separate offences against FTA - has been director of a company that has committed 2 offences - or has been banned overseas COMPLIANCE PROGRAMME s44(1) in order to take advantage of the defences under the Act, the Df may have to show that it took reasonable precautions and exercised due diligence to avoid the contravention comcom.govt.nz/fair-trading/developing-a-fair-trading-compliance-programme/ WHAT IS A CONSUMER? (UNDER FTA AND CGA?) A. person who acquires from a supplier g/s of a kind ordinarily acquired from personal/household use, AND B. doesn t acquire the g/s (or hold themselves out as acquiring the g/s) for the purpose of: i) resupplying them in trade ii) consuming them in the process of manufacture iii) using the goods to repair other goods/fixtures

7 COMLAW 306 Part 2: Protection for Name and Image (1) CHOOSING A BRAND, NAME, LOGO, TM choice of a brand may be dictate by marketing requirements, however legal issues shouldn't be overlooked - it may already be in use - and consider the difficulties in obtaining protection (distinctiveness, offensive names) - you can have a similar name to another company IF you are in a completely different industry, however, some very successful companies are exceptions (using an Apple brand name) CASE: Commerce Commission v Glaxosmithkline (Ribena Case) in ads, said drinks had a high level of vitamin C CHECKLIST WHEN CHOOSING A BRAND search one check government website search the trademarks register search the companies office database search trade directories and trade journals check competitor s products search the telephone books does the company hold a licence from the trademark owner? (2) BACKGROUND (HISTORY OF TRADEMARKS) Trademark Functions: Origin - show where a product comes from Quality/Guarantee - can tell a consumer what to expect in terms of the product s quality (as well as an indication of price) - such statements appeal to different markets Advertising/Merchandise - getting the message out there; creating goodwill and awareness (3) LEGAL PROTECTION (Common Law) Passing Off, Injurious Falsehood (Statute) FTA, Trademarks Act (4) DISTINCTIVE VS DESCRIPTIVE A SUCCESSFUL MARK AND ONE THAT IS PROTECTED (BY LAW) IS ONE THAT IS DISTINCTIVE Inherently Distinctive e.g. Apple, Intel there is NO direct connection to the g/s to which they are applied Acquired Distinctiveness e.g. Tasti (note that a change in spelling doesn't constitute distinctiveness) Descriptive terms tell you something about the product descriptive words are hard to protect as the courts believe everyone should be able to use such words