5 Types of Misleading and Deceptive Practices Not Allowed in NZ

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Table of Contents

• 1. Unsubstantiated Claims
• 2. Deceptive Representation of Goods
• 3. Misleading Advertising
• 4. Misleading Pricing
• 5. Misleading Customers About Their Consumer Rights
• Key Takeaways
• Frequently Asked Questions

Misleading or deceptive conduct is a legal phrase that applies to various behaviours in a business context. As a business, you need to ensure that you do not implement any misleading and deceptive practices against customers, partners, or employees when you engage with them. If you do, you run the risk of legal proceedings under the Fair Trading Act, resulting in financial losses. Misleading or deceptive conduct is a broad term that can apply to different situations. It can apply in:

• advertising;
• trade; and
• contractual proceedings.

What qualifies as misleading will depend on the context and what a reasonable person would consider as deceptive. Therefore, you must know what to watch out for. This article will go through five types of misleading or deceptive practices that are illegal in New Zealand.

1. Unsubstantiated Claims

When you advertise your products, you may target your marketing towards a particular niche. For example, you may focus on your products’ low environmental impacts in your advertising to draw customers worried about sustainability.

When you make claims about your products’ nature in this way, you need to back them up or ‘substantiate’ them. You need to have evidence or facts you can rely on that prove the claims you are making. If you do not have reasonable grounds to believe these claims are valid, they are ‘unsubstantiated’. You are misleading your customers when you make claims about your products you cannot prove, such as claims about a product’s:

• country of origin;
• health and nutrition benefits;
• environmental impacts;
• organic nature;
• manufacturing processes; or
• energy efficiency.

2. Deceptive Representation of Goods

When you describe a good to a customer or display it for sale, the customer should reasonably expect that the product they see is the product they buy. Making misleading or false statements about your goods is illegal, such as misleading customers about your products’:

• quality;
• quantity;
• style;
• standard;
• origin; or
• history.

3. Misleading Advertising

Advertising involves promoting your goods, focusing on their positives to draw in customers. However, you cannot advertise in a way that is deceptive or false. The overall impression of any of your advertisements needs to be true. You cannot rely on fine print or disclaimers that greatly contradict the general thrust of your advertisement to protect you against liability. 

For instance, you may market the cellphones you sell as ‘completely waterproof’ when in reality, they can only withstand some splashes of water. Unless you use a prominent disclaimer that your reasonable everyday shopper would see and understand, then you could be misleading your customers.

4. Misleading Pricing

The previous points about false or misleading statements also apply to your pricing and sales promotions. When you advertise a discount, it has to be a genuine discount where you are selling your goods at a lower price than usual. There has to be a marked difference between the discounted price and the usual price. You will be misleading your customers if the usual price is:

• one that you had never sold at before;
• out of date; or
• inflated.

5. Misleading Customers About Their Consumer Rights

There are certain situations where you need to ensure that customers know about their consumer rights. You need to do this if you:

• sell to customers in an uninvited direct sale;
• provide unsolicited goods or services;
• offer an extended warranty with your products; or
• sell used vehicles with a Consumer Information Notice.

If a customer comes to you complaining of a legitimately faulty product, you cannot attempt to mislead them about their options under the Consumer Guarantees Act. Under this law, customers can get a remedy (such as a refund) if you have failed to meet the consumer guarantees.

Key Takeaways

If you deceive or mislead a customer, then there will likely be legal penalties. This fact is especially true if the deception relates to their consumer rights or breaches your obligations as a fair trader. Therefore, you need to ensure you are upfront and transparent with your customers and do not omit important information from your sales strategy. If you would like more information or help with avoiding misleading or deceptive practices within your business, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions