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The Fair Trading Act (FTA) governs New Zealand’s consumer safety standards. It applies to any person or business who engages in trade, which covers most businesses, trades and professions; overseas businesses that have supply goods or services in NZ; and online sales. The FTA’s purpose is to protect consumers by promoting product safety and making sure they can get the most accurate information possible. If your business breaches the FTA, you may receive a hefty fine – the maximum penalty is $200,000 for an individual and $600,000 for a business, for each offence. So, you must be aware of your obligations under the law. This article outlines five ways to make sure your business complies with these fair trading obligations.

1. Clearly and Accurately Represent What You Are Selling

It is against the law to mislead or deceive your customers about what you are selling, even if you do so unintentionally. This covers all aspects of how you communicate with customers, including:

  • what you say;
  • when you make a sales pitch;
  • your advertising; and
  • your promotional materials.

You cannot hide details in the fine print either. If you make a false claim about your product in big, bold letters, the law considers this misleading even if you put a disclaimer in the fine print. 

You should also avoid using confusing jargon and language without a clear explanation as to what customers should expect from the product or service. Customers may make assumptions about what the words mean and get the wrong impression. 

Some of the most common examples include misleading or deceiving people about:

  • the characteristics of your product, or its manufacturing process or price;
  • your product’s suitability for a particular purpose or desired benefit; or
  • the availability or nature of a job in an offer of employment.

If a customer thinks you have misled them, they can complain to the Commerce Commission, which will launch an investigation.

2. Do Not Make Claims You Cannot Back Up

If you make a claim about your products, you have to be able to back it up with evidence. This means that, under fair trading laws, you cannot make a claim about your business’ goods or services without a reasonable basis. 

For example, without proper research and evidence, you cannot make statements about a product’s:

  • health or nutritional value;
  • origin, e.g. saying it is 100% NZ Made;
  • sustainable or environmentally-friendly nature; or
  •  organic nature.

However, this does not apply if the claim is clearly an exaggeration for the purpose of advertising, also known as “puffery”. 

For example, you can claim that your hairdresser gives the “best haircuts in town,” because it is a matter of opinion and an obvious exaggeration. But, you cannot claim that your business was “voted as the best hairdressers in town” without being able to prove that fact.

3. Sell in Good Faith

Engaging in unfair sales tactics and setting unfair contract terms are also against the law. Unfair sales tactics include:

  • bait advertising, which is where you advertise products or services you cannot actually supply;
  • harassment and coercion, including the use of threats, physical force or other controlling tactics;
  • pyramid schemes, where you give financial rewards to customers for recruiting new members;
  • referral selling, where you encourage customers to buy something with a promised reward if they provide the names of other potential customers; and
  • false or misleading representations, about the profitability and other aspects of a business activity that a customer has to invest their time or work in, e.g. selling makeup from home.

Make sure your contracts with customers are fair as well. If a court rules that a term in your standard form contract is unfair, you can be liable under the FTA.

4. Follow Safety Standards

Some products also have specific safety standards that you need to follow. Correspondingly, the FTA specifies certain features you need to tell customers about. If the government finds that any of your products are unsafe, they can order a product recall and you will need to inform your customers. Currently, there are safety standards protecting these six products:

  • bicycles;
  • children’s nightclothes;
  • cigarette lighters;
  • toys;
  • cots; and
  • baby walkers.

If you sell any of these products, you should make sure you comply with their safety standards.

5. Do Not Withhold Important Information

The FTA specifies certain information that you have to disclose about your products when selling them. This includes:

  • care labelling, explaining how customers should care for that product, e.g. laundry care;
  • country of origin labelling, identifying where the product was made;
  • fibre content labelling, detailing the composition of fabric products ;
  • an accurate and complete Consumer Information Notice for used motor vehicles; and
  • water efficiency labels, detailing the water efficiency of certain products, like dishwashers or washing machines.

Key Takeaways

Ensuring that you comply with your obligations from the FTA will protect you from future legal issues and ensure that you are operating lawfully. Misleading your customers about your products could get you into serious legal trouble. If you would like help with making sure your business complies with the Fair Trading Act, contact LegalVision’s New Zealand regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is the Fair Trading Act?

The Fair Trading Act is a law that regulates trading in New Zealand to ensure that consumers can buy products without the fear of being misled or ill-informed. It also provides some product safety standards and information disclosure requirements.

Does the Fair Trading Act apply to my business?

If you engage in commercial activity regularly, then the Fair Trading Act will apply to you. The Act applies to anyone who is “in trade”, which means anyone regularly selling goods or services.

How do I make sure I am following the Fair Trading Act?

You can make sure that you follow the FTA by being upfront about your products and not making claims that you cannot back up with facts or evidence. You also should not engage in unfair selling tactics or have unfair contract terms in your business’ terms and conditions.

Can I contract out of the Fair Trading Act?

Generally, you cannot contract out of the Fair Trading Act, even if the consumer agrees to it. You can only contract out of it if the buyer is another business, you both agree to it in writing and it is fair and reasonable that you conduct the sale.

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