Recent news from across the Tasman provides a timely reminder to New Zealand businesses that engaging in unconscionable conduct will not be tolerated by regulators. The Australian Competition and Consumer Commission (ACCC) has commenced proceedings against Australia’s second largest telco provider, Optus Mobile Pty Ltd (Optus), for allegedly engaging in unconscionable conduct by selling telecommunications goods to vulnerable consumers who did not want or need them.

What is unconscionable conduct?

The concept of unconscionable conduct in Australian and New Zealand consumer law is potentially very broad. The relevant statutory provisions are widely framed, and Australian case law suggests the courts are willing to take an expansive view when assessing whether conduct meets the unconscionability threshold. In ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90, the Federal Court of Australia found that conduct will be considered to be unconscionable if it is “against conscience by reference to the norms of society”. The courts will consider societal norms and questions of fairness and honesty when determining whether there has been a breach of the law.

The case against Optus

The ACCC alleges that Optus made inappropriate sales to a significant number of particularly vulnerable customers, including by:

• subjecting them to undue pressure or influence that induced those customers to purchase a large number of goods and services that they did not want, did not need and/or could not afford;
• failing to explain the terms and conditions of sale in a manner that they could understand;
• selling products that they would not be able to use (for example, by selling Optus products to customers that lived outside of Optus’ coverage area);
• manipulating the credit checks it ran on its customers to bypass credit controls and sell them products that it ought reasonably to have been aware they could not afford and would otherwise not have been eligible for; and
• misleading them to erroneously believe that particular goods were “free” or included in a bundle, when that was not the case.

The ACCC further alleges that Optus sales staff were trained to engage in these types of inappropriate sales conduct by managers.

The ACCC alleges that this behaviour, especially when directed towards vulnerable consumers, was a pattern of behaviour that was, in all the circumstances, unconscionable and unlawful.

Unconscionable conduct in New Zealand

New Zealand’s unconscionable conduct provisions, which came into force in 2022, were designed to replicate the breadth of the Australian unconscionability regime. 

Section 7 of the Fair Trading Act (Act) states that a person must not, in trade, engage in conduct that is unconscionable. No system or pattern of behaviour is required, no contract need have been entered, and no person must be (or be likely to be) disadvantaged by the conduct. Section 8 of the Act provides a non-exhaustive list of factors a court may have regard to when assessing unconscionability including the bargaining power of the parties involved in the conduct, the extent to which parties acted in good faith, and whether there was any use of unfair pressure or tactics.

Ultimately, what is unconscionable is highly fact specific and difficult to define exhaustively, but New Zealand businesses should regularly reflect on their practices and interactions with consumers to ensure that they are always acting fairly and responsibly. Any failure to do so could give rise to liability under the unconscionable conduct regime or other provisions of the Act.

If you have any questions about New Zealand’s new unconscionable conduct regime, please contact the Consumer Markets Team at Wynn Williams.