Ia Ara Aotearoa Transporting New Zealand

 
Government backs RTF  on deferred payments

Government backs RTF on deferred payments

Ia Ara Aotearoa Transporting New Zealand

 December 2019    RTF News

The Road Transport Forum has praised the Government for announcing a commitment to introduce legislative measures to protect small businesses from unfair commercial practices.

"Smaller transport operators and service providers, particularly in provincial areas, have for years suffered from bullying at the hands of some of the corporate big boys," says RTF CEO Nick Leggett.

"For a rural transport operator, in many cases their whole business relies on servicing one dominant client – and there is little choice but to accept the contract terms they're presented with….lest they should lose that contract and go out of business."

When it comes to unfair commercial practices, one of the most insidious is the imposition of unfair contract terms through deferred payment terms, sometimes as long as 90 days after invoicing.

"Large corporates cynically do this to exploit their suppliers as a cheap source of finance," says Leggett.

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The Road Transport Forum has praised the Government for announcing a commitment to introduce legislative measures to protect small businesses from unfair commercial practices.
"Smaller transport operators and service providers, particularly in provincial areas, have for years suffered from bullying at the hands of some of the corporate big boys," says RTF CEO Nick Leggett.
"For a rural transport operator, in many cases their whole business relies on servicing one dominant client – and there is little choice but to accept the contract terms they're presented with….lest they should lose that contract and go out of business."
When it comes to unfair commercial practices, one of the most insidious is the imposition of unfair contract terms through deferred payment terms, sometimes as long as 90 days after invoicing.
"Large corporates cynically do this to exploit their suppliers as a cheap source of finance," says Leggett.
"It's an accountancy trick that is available to those businesses that exist in an environment that contains very little competition.
"Unfortunately, New Zealand has a few sectors of our economy where competition is scarce and corporates can get away with such practices. This places small transport operators under significant stress.
"As every small business owner knows, cash is king. The timely payment of invoices allows small businesses to pay staff, invest in maintenance and upgrade their machinery when required."
RTF began lobbying the previous National Government prior to the 2017 election and was one of the first organisations in the door to see new Cabinet ministers Kris Faafoi and Stuart Nash on the issue early in Labour's time in office.
"We were given a very positive indication by ministers Nash and Faafoi that the Government was keen on doing something and we helped facilitate that further by providing them with a legal opinion that set out the legislative amendments required," says Leggett.
"Earlier this year the Government subsequently ran a public consultation process to further ascertain the scope of the problem across the economy."
Commerce and Consumer Affairs Minister Faafoi said, in announcing the measures: "We know that unfair commercial practices are harming NZ businesses and consumers.
"We're taking action to prohibit the most serious types of commercial misconduct, and to ensure there are better protections against unfair contract terms."
During the consultation process, says Minister for Small Business Nash, "we heard about a range of potentially unfair contract terms, including extended payment terms, one-sided contract terms, and businesses being locked-in to contracts for long periods of time.
"We also heard that some businesses aren't complying with the terms of existing contracts, making excessive demands, and blacklisting and bullying their suppliers."
The Government's measures include a specific commitment to extend the provisions of the Fair Trading Act to business to business contracts with a value below $250,000.
Unfortunately, as part of the same process the Government is also determined to try to legislate to prohibit "unconscionable conduct."
Unconscionable conduct applies where courts consider it unfair or "against good conscience" to allow a party to enforce its contractual rights against another party which is deemed to be in a weaker position and is forced to accept what's on offer. Contracts would therefore not be enforceable if a court decides they are "unconscionable."
Says Leggett: "RTF opposes this measure as we believe it will inadvertently put into law provisions that are so vague and ambiguous that all they will do is unnecessarily add to corporate litigiousness and be unusable for small to medium businesses that do not have the significant legal resources required to pursue it.
"Nevertheless, we are pleased that ministers Nash and Faafoi have acted on our concerns and are making a proper attempt at levelling the playing field for small NZ businesses. RTF awaits the details of the Government's plans with interest and will continue to engage in the process on behalf of our members."
The Government's intention is to introduce these measures through a Fair Trading Amendment Bill early in 2020.


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