Someone gives you a gift card for a retail purchase, and it expires in 12 months – any problems? It could have no expiry date – what a problem if you’re a retailer. What a problem for you if you go there eight years later and the shop has disappeared! What’s wrong with 12 months?
Moves to regulate the sale of gift cards have been excessive in NSW, with the Government regulating a popular product for retailers which had no serious issues.
In October last year, the NSW Government introduced a three-year minimum expiry limit for gift cards issued in NSW. There has been some suggestion that if an attempt was made to fine an issuing business in another state (particularly one that was not aware of the new legislation), there would be a basis to legally challenge the legislation.
On behalf of our members, we have suggested the obligation be removed for interstate businesses issuing gift cards, as this obligation would be inoperable. If not, this raises the possibility of jurisdictional issues and Constitutional challenges based on restricting trade and commerce between States.
Interestingly, while proposals to regulate gift cards have been around for some time at State and Federal levels, the Government has ultimately decided to regulate this low-cost scheme which will not only provide little benefit to consumers, it will increase non-redemption, breakage rates and the retailer’s financial liability.
Therefore, we are confused as to why the NSW Government has gone down this path.
We clearly have an ambitious Fair Trading Minister who thinks keeping consumer rights advocates happy will win votes for a traditionally conservative, pro-business political party.
The ARA, on behalf of the NSW Business Chamber (NSWBC), Australian Sporting Goods Association (ASGA), Franchise Council of Australia (FCA), Pharmacy Guild of Australia (PGA), and Restaurant and Catering Australia (RCA), all disapproved of the proposed reforms to NSW gift cards, as previous Federal Government inquiries into the operation of gift cards have found no associated consumer benefit to altering the regulations.
Substantial evidence from previous consultations on this issue indicated the breakage rate was a remarkably low 3%. A key driver for gift card redemption is the 12-month expiry period, as shorter redemption periods drive consumers to use their gift cards in the first few months of issue. This evidence suggests longer redemption dates may cause consumers to forget about cards, which increases breakage rates.
We have recently made a submission to NSW Fair Trading’s consultation on amendments to the recently passed legislation for gift cards, suggesting further changes and exemptions.
As our members still hold a significant amount of gift cards in stock, whose terms and conditions will soon be rendered outdated, we are concerned retailers will have very little time to sell these products before 31 March 2018.
This early implementation date means Fair Trading’s changes will need to be rushed through Parliament in February – just three months after the legislation was passed, and weeks before it commences – leaving very little time or detail on how it will work for retailers.
With the implementation date fast approaching, we are concerned the six-month transition period will not allow retailers enough time to offload non-compliant stock, and will be pushing for a more reasonable 12-month transition period.
Fair Trading has proposed this raft of changes so soon after the legislation was initially passed because, as it stands, it clearly would not work. Certain exclusions for specific gift card categories (such as cinema vouchers), a meagre six-month transition period, and forcing retailers to notify consumers of the changes during the short transition period is not only confusing for retailers and consumers but extremely impractical.
Although these regulations are frowned upon across the industry, we are grateful we were able to successfully reject the original proposal – which included no expiry date – which would have seen retailers carrying the financial liability forever.
Best practice for regulating gift card sales in NSW is to abandon this complex and unnecessary legislation and to implement an industry-backed Code of Conduct. Regulation is a serious impediment and additional cost to small and medium retailers issuing gift cards with major retailers, potentially incurring significant red-tape costs and having no choice but to pass these on to the consumer.
There is a worrying trend amongst Governments to increase red tape and regulation to keep every minority stakeholder happy. The Government needs to realise that endless regulations ultimately costs both retailers and consumers, who are both key stakeholders at the fast-approaching State election.
