The Road Transport Forum is calling on the Government to provide more legal protection for truckies against unfair contract terms.
The Fair-Trading Act Amendment Bill was introduced to Parliament last year and aims to prohibit “unconscionable conduct” carried out by big business on small firms.
The bill is still in the select committee process and has been receiving public submissions before it goes to its second reading.
It’s of particular interest to the transport industry with many companies subject to unfair contract terms in the form of late payments or unilateral deferred payments (UDP).
The RTF has lobbied hard for the past few years against the practice with a number of transport companies working in the primary sector forced to accept 60 to 90-day payment terms.
RTF chief executive Nick Leggett says he supports the bill, however he would like to see it include a contract threshold of $500,000.
So far, the proposed legislation only applies to business-to-business trading relationships with a value below $250,000 per year.
Leggett spoke to the Economic Development, Science and Innovation Select Committee at Parliament on May 21, asking for the changes to be made.
“A significant chunk of the road freight transport industry is small and medium sized business operators. However, despite being small businesses themselves, they take on large contracts. This is why we are submitting that the definition of small trade contracts in the bill should be increased to a threshold of $500,000,” he says.
“Too many contracts whose parties deserve protection from unfair contract terms will be worth more than $250,000. Many transport operators will have contracts with an annual threshold value well in excess of that amount.
“Unless the threshold is increased, a significant number of small businesses that deserve protection under the Act will not get it.”
The RTF has also submitted that the Commerce Commission’s monopoly on enforcement of unfair contract terms (UCT) should be removed.
It says the amendment should apply to all existing standard form small trade contracts and extending the UCT provisions to small businesses is more important than the prohibition on unconscionable conduct.
“Prohibiting unconscionable conduct is unlikely to be effective. We prefer the focus on protections against unfair contract terms to small trade contracts,” Leggett says.
“This will have a profound impact on small transport companies that in some parts of the country are subject to unfair contract terms in the form of unilateral deferred payments. This is an insidious practice used by some large corporates seeking to extend payment times to their suppliers beyond what is normally considered acceptable.
“Road freight is critical to New Zealand’s economy and will have a substantial role to play in COVID-19 recovery to ensure that supply chains remain connected. Support for road freight transport must be prioritised at this critical period,” he says.
Commerce and consumer affairs minister Kris Faafoi says the changes are about protecting businesses and consumers harmed by unfair commercial practices.
“We’re taking action to prohibit the most serious types of commercial misconduct, and to ensure there are better protections against unfair contract terms.
“This is part of other work underway to promote competition and protect people against unfair business practices.
“We’re also strengthening laws to protect vulnerable consumers from loan sharks, looking at other ways to improve business-to-business payment practices, and reviewing the current law around misuse of market power such as predatory pricing,” Faafoi says.
*The RTF submission is available here.
