Online services most troublesome trade

24 September 2015

Shopping online, e-commerceAccording to the Commerce Commission’s in-depth annual Consumer Issues report, some interesting trends were highlighted, including the fact that online services and transactions attract the most complaints from consumers and pose regulatory challenges.

Growth in online sales has outpaced growth at traditional bricks-and-mortar outlets, with online transactions now making up at least six per cent of core retail sales, the trade practices regulator said. Of the 4,377 complaints the commission received under the Fair Trading Act in 2014, a third concered online traders, twice the number generated by physical stores.

The majority of complaints related to domestic online traders, with only 13 per cent involving international traders, the regulator said.

“Commission enforcement options apply to both domestic and international traders, but the practicality of applying these offshore is less effective,” the report said. Among those challenges are “when an offshore trader refuses to respond to the commission during an investigation or fails to address compliance issues after receiving advice.”

The basis of the online trading complaints was evenly split, with 26 per cent related to either the quality or advertisement of the goods while 24 per cent of online complaints concerned misleading pricing, including complaints over drip pricing, where a headline price failed to include additional charges. A further 20 per cent of complaints related to the provision of online services while nine per cent related to non-delivery or the delivery timeframe.

Of the remaining complaints the commission received under the Fair Trading Act, 28 per cent concerned contracts and invoices which were specific to individual traders rather than indicative of a wider industry behaviour. It said the most significant contributor to this was the Auckland Academy of Learning, which had featured on TV3’s Campbell Live program selling high priced educational software.

Only 14 per cent of all the fair trading complaints the commission received in 2014 concerned instore trading. Key sources of complaints were Dead Sea Skincare and Progressive Enterprises, the commission said. The competition watchdog’s report for 2013 did not consider Progressive had engaged in deceptive or misleading behaviour, having received almost 90 complaints from suppliers that led to investigations into potential breaches of the Fair Trading and Commerce Acts.

The four most complained about industries were telecommunications at nine per cent, followed by domestic appliances, electronics and phone at seven per cent, car traders and sales at six per cent and trading banks at four per cent, the report said. Within the top 25 most complained about traders, there were five domestic appliance retailers, five telecommunications companies, two group buying sites, two banks and both supermarket chains.

The report identifies 93 current issues and emerging risks to consumers and markets, with the likelihood and detriment of each issue and risk assessed to determine a harm score. Those identified as having a very high harm score and as such having the greatest potential impact to consumers are: lenders charging unreasonable fees; the mobile trader business; disproportionate number of complaints generated by a small number of traders (in particular the telecommunications and domestic appliance retail industries); issues that affect vulnerable consumers; participation in industry associations enabling anticompetitive conduct; misrepresentation of country of origin labelling; and supermarket misrepresentations.

The commission produced the first Consumer Issues report in 2014 solely as an internal document to inform internal planning by identifying issues that may affect markets or consumers or provide opportunities for protecting consumers and promoting competition. After completing the first report, the commission considered the benefit to others if the information was shared publicly and made the commitment to provide a public report in future years. The 2014 report was released under the Official Information Act and is available on the commission’s website.


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