The Road Transport Forum is pleased that its advocacy in opposition to late payment terms has helped to convince the Government – resulting in the release of a discussion paper on the issue.
"RTF has lobbied Government ministers, ever since they took office in 2017, to find a legislative solution to protect small business against late payment terms," says Forum chief executive Nick Leggett.
Late payment terms, or unilateral deferred payments as they're often called, are typically used by large companies to extend invoice payment times out to two or three months, in order to exploit small suppliers as a cheap source of finance.
This has a major impact on many small New Zealand business including a number of transport operators.
"It first came to our attention a couple of years ago, when a number of transporters dealing with some very large primary sector companies were struggling under the stress of late payments," says Leggett.
"Unfortunately, as is often the case in a small market like NZ, those transporters are not in a position to just walk away from their biggest customers.
"Cashflow is always a challenge for transport businesses and it is therefore critical that they are paid for their services within a reasonable timeframe, which for most is at the end of the month.
"RTF has always considered the imposition of late payments terms as a cynical practice and when we met with ministers Kris Faafoi and Stuart Nash early last year, their attitude towards the practice was equally resolute.
"While the gears of Government tend to grind away very slowly it is pleasing that it managed to release the discussion document for public consultation before Christmas."
Leggett adds: "The simplest solution from our point of view – and what we continue to lobby for – is to simply extend the provisions of the Fair Trading Act that currently protect consumers from unfair contract terms, to also apply to small business contracts as well."
The other options that ministers are considering include seeking to introduce "unconscionable conduct" into law. That would aim to deal with the much broader issue of imbalances of power and the enforcement of contractual rights.
Says Leggett: "RTF does not at this stage support introducing this in NZ as we believe it is a difficult concept for courts to enforce and we do not consider it the role of Government to interfere too deeply in the competitive business environment.
"Nevertheless, we will be carefully studying the various options put forward and will submit on behalf of the industry."
The discussion document is titled Protecting Businesses from Unfair Commercial Practices and is available on the MBIE website.