Too often managers are hiding behind lawyers and not accepting responsibility when their companies have breached the Fair Trading Act Commerce Commission Chairman Dr Alan Bollard said today.
Dr Bollard was speaking to the Institute of Directors in Wellington this morning.
He said that some firms act responsibly and admirably by facing up to the issues raised by the Commission, fixing the problems that have been caused by their breaching the Act and putting in place procedures to prevent further breaches.
"But I am also surprised when I see cases where a company simply throws the situation to their lawyers rather than control the resolution process themselves. Lawyers can fight requests for information, deny that actions took place or had any effect, and argue in settlement negotiations. I have even seen them try to run the company's public relations.
"It is the responsibility of management and ultimately of the board to ensure that actions taken are in the shareholders' interests rather than just being legal point-scoring," Dr Bollard said.
Dr Bollard stressed that many mainstream companies, and not just "cowboys" breach the Fair Trading Act. Even accepted business practices have been found by courts to have been illegal: "An example of this would be the use of interest free promotions that, in fact, were not free to the consumer," he said.
"Because the Act does not require intention to be present for a breach to have occurred, mainstream industry often gets caught up in a breach of the Fair Trading Act without actually realising that it has happened, although at times it is hard to imagine how so many millions of dollars could be spent on a promotional campaign that breaches the Fair Trading Act without anyone actually having seriously considered the question."
Dr Bollard said the Fair Trading Act is part of New Zealand's competition law. It works together with the Commerce Act to promote healthy competition. The Fair Trading Act exists because accurate information is vital for competition. If information is false or misleading, then consumers lose out, competitors are disadvantaged and competition is distorted.
After 10 years of the Fair Trading Act, companies are increasing becoming aware of their responsibilities and rights, including, very importantly, the right to take their own action against competitors.
However, many consumers still need to become more aware of their responsibilities and rights.
Copies of Dr Bollard's speech are available from the Commission.
Media contact: Communications Officer Vincent Cholewa
