The Commerce Commission has recently released a new video, ‘If you can't back it up, don't say it’, giving guidance to traders on false, misleading, or unsubstantiated claims.
The video provides a good overview of what is prohibited under the Fair Trading Act 1986 and shows how strange sheared alpacas look. It is a useful reminder to all traders to make sure labels and advertising can be substantiated and are not misleading, to ensure compliance with the Fair Trading Act.
When making any claim on a label or in advertising, make sure you consider:
Below is a brief summary of the law and two recent cases.
A trader must have reasonable grounds for making a claim (at the time the claim is made), irrespective of whether the claim is false or misleading. Therefore even if a claim is later proved to have been true, a trader can still be held liable.
In determining whether a trader has reasonable grounds for a representation, the Court will have regard to the:
Case Example - Fujitsu General New Zealand Limited
Misleading or deceptive conduct
The Fair Trading Act prohibits traders engaging in conduct that is misleading or deceptive, or is likely to mislead or deceive. The Act also prohibits false representations concerning the nature, manufacturing process, characteristics, suitability for a purpose, quantity, or price of goods, etc.
The terms ‘misleading’ and ‘deceptive’ are not defined, but include conduct that causes someone to believe facts that are false, lead someone astray, or lead someone to error.
In determining whether claims made are misleading or deceptive, the Court’s focus is on the consumer—what the consumer understood the claim to be, and whether they were in fact misled. It is not necessary to prove that a trader intended to mislead, or even that loss was suffered.
Case Example - Reckitt Benckiser (New Zealand) Limited
If you can’t back it up, don’t say it
The video and recent cases are a useful reminder to ensure all product labelling and advertising can be substantiated and is not misleading or false. The Commerce Commission has demonstrated its commitment to pursuing companies that breach the Fair Trading Act and traders should ensure their claims do not run the risk of facing prosecution.
If you would like more information about unsubstantiated claims or misleading conduct, or a review of your business’s marketing and advertising strategy, please contact Reece Leggett or David Campbell.