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Submission on Consumer Protection (Definitions of GS) Bill

InternetNZ Submission on the Consumer Protection (Definitions of Goods and Services) Bill.



The Internet Society of New Zealand Inc (InternetNZ) approaches its consideration of the bill with its constitutionally mandated desire to promote the growth and understanding of the Internet in New Zealand for the good of all stakeholders whether they be consumers, business users or internet industry participants.


To do so, in InternetNZ's view, consumers must be provided with adequate protection against substandard service. InternetNZ therefore supports the aim of addressing the problems created primarily by the decision in The Commerce Commission v The Consumers Institute (alt cit Electricity Supply Association of New Zealand Incorporated v Commerce Commission (1998) 6 NZBLC 102,555. However, it is critical that in addressing those problems, providers of both internet content (eg information on the web) and connectivity in the widest sense (eg telecommunication providers, internet service providers (ISPs) etc) are not exposed to undue risk since, without their crucial services, the Internet will not function.


InternetNZ's submissions are primarily focussed on the proposal to include telecommunications signals (ie electronic information) within the definition of goods in the Consumer Guarantees Act ( CGA ).

To the extent that the definition is to be introduced into the Commerce Act, Fair Trading Act and Sale of Goods Act, similar comments apply. We also give brief attention to the proposal to specifically characterise computer software as a good, particularly in the context of supply of software applications online (ie application service provision).

General Overview of InternetNZ Submission


It is InternetNZ's general view that by characterising telecommunications signals as goods, the balance will swing too far against ISPs in particular, who, in the face of this and other legislative and quasi legislative (1) moves are becoming increasingly exposed to unacceptable levels of risk. There is a danger that this will result in, among other things:

  • ISPs limiting the nature of their services to business only users so as to avoid the guarantees in the Consumer Guarantees Act; and/or
  • ISPs, particularly smaller ISPs, leaving the market altogether resulting in accelerated aggregation of substantial market power in the hands of fewer large participants and therefore a lessening of competition; and
  • As a result of either or both of the above, increases in internet access prices for consumers when such prices are already suggested to be on the increase (2) ; and
  • Resulting damage to New Zealand's knowledge economy drive.

Specific Submissions


Telecommunications signals should not be goods because:

5.1 In a technical sense when talking about the web generally, the supply is not of a thing which is for the use of any particular recipient ? there is no one to one transaction as would normally be the case in the supply of a good. At best there is an implied licence to the world to view/download. Web browsing is therefore analogous to watching TV, listening to the radio or even reading a book. The medium of delivery may be a good (eg the TV, the radio, the book itself or nowadays a CD ROM) but the information delivered is not. There is a fundamental difference therefore to utility type network suppliers of water and electricity (for whom the bill was intended). Those providers have direct one to one relationships with each consumer (either contractually or physically) and therefore have control over that supply relationship and the ability to remedy any defect.

5.2 It will often be difficult to decide who a supplier of the information is and this will lead to confusion for consumers. Since there can only be one supplier, this may result in invalid claims being made against other parties in the chain of connectivity, which would lead to increase costs for those involved and for the consumer.

Example: Information presented on a website hosted by a New Zealand ISP could, under the definition of supply, be argued to be supplied by the website owner, the ISP, and any intermediate conveyer of that information to the consumer (eg a telecommunications network provider or the consumer's own ISP through who it obtains internet connectivity).

5.3 One only has to look at the goods guarantees to see that information delivered electronically does not have the appropriate characteristics of a good : the CGA guarantees of title, availability of repairs and spare parts, correspondence with sample, and fitness for purpose have little or no application to information delivered in digital form. The acceptable quality guarantee may do but this protection is adequately given by providing that the supply of the information is a service, which is therefore subject to the reasonable care and skill guarantee. In other words characterising the supply as a service adequately protects consumers and there is no need to provide separately that the information itself is a good.

5.4 Another example of this inappropriateness appears when one considers the rights which consumers have to reject goods (ie return them to the supplier) for failure to comply with the CGA guarantees. It is difficult to see how this will apply to electronically supplied information.

Example: A New Zealand based ISP hosts a website for an overseas based vendor of travel packages. A consumer books and pays for a travel package based on that information. Unbeknown to the ISP, the overseas vendor has become insolvent and is no longer in existence. Since the New Zealand ISP can be argued to have supplied that information and the information is clearly not of acceptable quality (since it is out of date/defective), the New Zealand ISP could be liable for refund of the payment and any consequential losses (eg the consumer's non-recoverable hotel booking fees etc).

5.5 Further, by allowing the possibility of claims re lack of title to information, there is every possibility of overlap and confusion with the Copyright Act 1994. For example, if a consumer obtains information from a website, which is later found to be an infringing copy, that consumer may have rights both under the Copyright Act and the CGA. It is inappropriate to allow the potential for copyright matters to be dealt with here particularly where the ability to claim consequential losses may encourage what are more properly copyright actions to be mutated into CGA claims. More generally, it is difficult to imagine how a claim to "title" in information provided over the internet is to be dealt with since there will often be various people who have rights in website information and, in any case, the recipient is not receiving the original but a copy whenever he or she downloads that information.

5.6 An ISP will be a manufacturer as defined in para (c) of the definition of manufacturer in section 2(1) of the CGA in may cases where it hosts a website for an overseas person since it can easily be argued that the ISP is the first importer of that information. Since it is also common for ISPs to attach their brands to websites that they host, they will also be caught under paragraph (b) of the definition. The suggestion that New Zealand ISPs should bear liability (including consequential loss liability) when overseas providers of information may well be inaccessible is unwarranted. In the examples above, the ISP could equally be characterised as a manufacturer of the information and therefore consumers and those claimed against will be confused as to whether the guarantees given by suppliers or only those given by manufacturers apply.

5.7 ISPs have no relationship with and therefore no control over many content and network providers. It is therefore inappropriate for them to be responsible for their performance. Again, this is entirely different from the utility network suppliers' position.

Example: A New Zealand consumer offers for sale a New Zealand painting. An overseas buyer sends in a bid by email which, when delivered by the consumer's ISP is found to be unintelligible because of a fault in an overseas telecommunications network over which the message has traveled. The consumer then receives another bid which is substantially less and accepts that. Since it is the consumer's ISP that has supplied the defective information to the consumer in the form of the unintelligible message, the consumer may well be able to claim the difference in the two prices from the ISP. It is unlikely that the ISP would be able to obtain any recovery from the overseas network provider with whom it will have no contractual or other relationship.

5.8 InternetNZ notes in relation to the example in paragraph 5.8 above that postal operators such as New Zealand Post have a complete exclusion of all liability for delay in delivery of letters in section 45 of the Postal Services Act 1987 (3) . If that exclusion is to remain for delivery of information by physical means (a letter) then it should be extended to delivery of electronic information by all suppliers in the chain of supply, from the poster of the email or website information, to the recipient.

5.9 Characterising supply of information as a service is sufficient to protect consumers. In fact, it is likely that such supplies are already covered as services. The guarantees as to reasonable care and skill, fitness for purpose, timely supply and reasonable price, are appropriate and fit well with the provision of information over the internet. It is InternetNZ's view that the reasonableness requirement in particular will mean that ISPs will be unlikely to be held responsible for overseas providers over whom they have no control. However in order to make this clearer, section 33 of the CGA should be clarified to make it certain that ISPs are not suppliers where they have no such control


Where software functionality is made available over the web but no product is actually transferred to the user, it is InternetNZ's view that this should not be characterised as the supply of a good but of a service. Indeed the very name of some activities falling within this sphere - application service provision - suggests this. If computer software is specified as a good then there is a risk that this type of activity will be subject to nonsensical goods guarantees when services guarantees would be sufficient and more appropriate. InternetNZ's view is therefore that computer software should not be specified as a good exclusively. It should be left to the Courts to determine in particular circumstances whether a computer program is best characterised as a good, or its delivery as a service. In some cases (eg "sale " of shrink-wrap software), it might well be argued that the software is more akin to a good and that here are little if any service components. In any case, the problem raised in the Electricity Supply Association decision does not apply to software.



InternetNZ considers that providing that the provision of telecommunications signals is a service covered by the CGA will adequately protect consumers. To also characterise the information or signal supplied as a good in the context of the internet is inappropriate and exposes ISPs to unwarranted levels of risk.


ISPs will very often have no control over the quality of the information or signal that is delivered or made available over their systems and should not therefore be held liable under the goods guarantees in the CGA and for potential consequential losses which can be claimed.


The provision of software online will not always be in the nature of the transfer of a good. In some cases, the provision will be entirely that of a service. Therefore InternetNZ considers that computer software should not be explicitly defined as a good therefore leaving for the Courts the determination of whether goods or services provisions in the Act should apply in each factual scenario.


InternetNZ respectfully requests the opportunity to make oral submissions to the Select Committee in support of this written submission.


  1. e.g. The Crimes Amendment (No 6) Bill, the ISP-focussed suggestions in the Ministry of Economic Development's Discussion Paper Digital Technology & the Copyright Act 1994 and the Draft Telecommunications Information Privacy Code 2002 issued by the Office of the Privacy Commissioner.
  2. See Shakedown means higher dial-up costs, Peter Griffin, NZ Herald, 15 January 2001, pC8
  3. 45. Loss or delay of letters--- No person is entitled to compensation, and no liability is imposed on the Crown or any postal operator, for any loss or damage suffered by any person because of any loss, default, delay, or omission in the receipt, transmission, or delivery of any letter.

For further information please contact Rick Shera, Vice-President, InternetNZ at ; 021 612 713

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