Online Shopping: Pearls and Pitfalls for New Zealand Consumers – How to Increase Consumer Protection and Build Consumer Confidence

Abstract

Increased consumer confidence is expected to lead to increased levels of retail online shopping which will have flow-on economic benefits. Current online shopping trends demonstrate the importance of the online retail sector to New Zealand’s economy. This thesis analyses the effectiveness of current consumer protection law for online consumers and recommends changes to better protect the interests of consumers who shop online. Increased consumer protection will improve consumer confidence in online shopping. The issues dealt with examine: contract formation; the use of “contract on dispatch” terms; the incorporation of terms and conditions; unfair terms regulation; and the enforcement of consumer rights in online shopping transactions. These issues relate to creating and defining the legal relationship between the online consumer and the trader and the mechanisms for obtaining consumer redress. The thesis focuses on online shopping transactions relating to the purchase of goods, rather than services. The thesis has been completed by publication. The text of the five published articles is included as chapters 3 – 7. The thesis begins with an outline of the policy behind consumer law and an analysis of the current inconsistencies and complexities in the definition of the term “consumer”. Chapter 3 includes a recommendation for a simplified definition of “consumer” which takes account of consumer policy and covers all who need consumer protection including online shoppers, whether individuals or small businesses. In terms of contract formation, the thesis recommends an interpretation which enables the online consumer to accept the offer to sell goods, made by the trader who operates an interactive website. This analysis gives the consumer the power to accept and create contractual rights at an earlier point in the transaction than the alternate analysis which would give the trader the power to accept or reject the consumer’s offer to buy. Related to this recommendation is an analysis of “contract on dispatch” terms. These terms state that the contract with the online consumer is not made until the goods are dispatched by the trader. A website review shows that these terms are commonly used by online traders in the United Kingdom. The thesis argues that “contract on dispatch” terms are contrary to the purpose of consumer protection and that New Zealand and Australia should not require online traders to include terms which specify when the contract is made. Arguments against the validity of “contract on dispatch” terms are advanced and legislative reform, to reduce the impact of these terms on the online consumer’s contractual rights, is recommended. An analysis of the methods used to incorporate terms and conditions includes a review of 25 New Zealand and 25 Australian retail websites. The review shows that 60% of these websites used the browse wrap method to purport to incorporate terms and conditions. The thesis argues that the browse wrap method generally does not result in valid incorporation. It is suggested that online traders are engaging in misleading and deceptive conduct by leading consumers to believe that their terms and conditions form part of the purchase contract when in fact they have not been validly incorporated. The importance of unfair terms regulation for consumers who are bound by disadvantageous terms is highlighted and it is recommended that the recent New Zealand reform in this area be amended to allow consumers to challenge unfair terms. The current regulation only allows the Commerce Commission to challenge unfair terms. Consumers who shop online need access to justice which is cost effective and efficient. The existing methods for resolving consumer disputes in New Zealand are outlined and the effectiveness of these methods for online consumers is assessed. The thesis promotes the development of an Online Dispute Resolution (“ODR”) scheme for online consumers in New Zealand to encourage early and inexpensive settlement. It is suggested that New Zealand should model an ODR scheme on international proposals but must include access to automated negotiation tools in the ODR process and should make participation in the ODR scheme by online traders mandatory. The thesis makes recommendations which are consistent with current consumer law policy and promotes interpretations and new regulation which advance the interests of consumers who shop online.