More and more, businesses are prioritising sustainability and ethical practices when they create and sell their products. However, some companies do not ensure that their operations are ethical but are advertising as such to try to keep up with consumer trends. If you sell products online, you must be correctly labelling and advertising your products and ensure that they are objectively ethical to comply with consumer laws. This article will helpfully outline:
- what an ethical product is;
- when you can label a product as ethical;
- what happens if a product is falsely labelled; and
- how selling ethical products is governed by the Fair Trading Act.
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What is an Ethical Product?
Ethical products typically are created in a way that is:
- safe;
- healthy;
- fair; and
- environmentally-conscious.
You make ethical products with the mindset of protecting the environment and the people involved in creating the product. Therefore, the materials used to make the product should be environmentally-conscious. Additionally, the workers and supply chain engaged in making the product should:
- be protected;
- have safe working conditions; and
- be paid a decent wage.
When Can I Label a Product as Ethical?
No specific body can provide an ‘ethical stamp’ to ensure that a product is ethical in New Zealand. Often, consumers do their own research about a product to see if it is ethical, even when it has already been labelled as such. You will need to ensure that your products uphold ethical standards based on a set of well-considered criteria. If you mark a product as ethical, you should use clear, objective standards for your products. You should base these on:
- sound scientific principles;
- relevant, attainable, and verifiable criteria; and
- international standards and academia.
In effect, you should be able to substantiate all claims that you make about your business based on sound and fair standards.
Continue reading this article below the formWhat Happens if I Falsely Label a Product?
If you do not think your product is ethical, but you label it as such, you are at risk of facing severe legal consequences if you falsely label your products. This applies no matter if you sell through a website, online marketplace, or another forum.
It is essential that you correctly advertise all products that you sell in New Zealand. If you are ‘in trade,’ which means you are regularly selling products for a commercial purpose, you will need to obey consumer law in New Zealand. This includes the Consumer Guarantees Act and the Fair Trading Act.
The Relevance of the Fair Trading Act
The Fair Trading Act states that any person in trade must accurately represent the goods they sell, including the advertising and information provided. You must:
- accurately present the product;
- provide all relevant information about the product; and
- not mislead customers or neglect to tell them important information.
Therefore, you cannot simply label a product as ‘ethical’ without ensuring that the product has been made ethically. If you do this, you are greenwashing. If you are incorrectly advertising products as ethical, you will mislead customers into purchasing a product. Therefore, you may be in breach of the Fair Trading Act which can lead to significant legal penalties, including a fine of $200,000 for an individual or $600,000 for a company.
Additionally, your business’ reputation will likely face severe damage if it is uncovered that you have been misrepresenting your products. Many consumers look poorly on greenwashing practices, and your business will likely take a significant hit.
Key Takeaways
Producing and selling ethical products is a great way to start a business while limiting the harmful impact consumerism can have on the planet and the people who make products. While there is no official ‘stamp’ to ensure that your product is ethical, you should look to international standards, science, and relevant criteria to ensure that your product is made ethically. Additionally, you should not advertise a product as ethical unless you are sure it is and can verify this based on generally accepted standards. Otherwise, you risk breaching the Fair Trading Act, which can have serious legal consequences.
If you need help understanding consumer law when advertising ethical products, our experienced eCommerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
To be trading, you have to sell goods and services for commercial purposes regularly. It can sometimes be challenging to know for certain if you are in trade, but generally, if you are selling goods on a regular basis for the purpose of making a profit, you are in trade.
If you breach the Fair Trading Act by misleading customers through the false advertising of a product as ‘ethical,’ you may face fines of up to $200,000 as an individual and $600,000 as a business.
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