In Short
- Businesses must comply with the Fair Trading Act to ensure advertising is not misleading or deceptive.
- Advertisements targeting New Zealand consumers must adhere to the Advertising Standards Authority codes.
- Consider potential breaches of intellectual property rights when using others’ content in advertising materials.
Tips for Businesses
Regularly review marketing content to ensure it complies with the Fair Trading Act and Advertising Standards Authority codes. Ensure your advertising does not infringe on someone else’s intellectual property rights by seeking permission or using original content. Keeping your advertising honest and fair protects your business and enhances customer trust.
Advertising is one of your primary sources for attracting new customers and getting your brand out into the world. Whether you manage all marketing yourself or pay someone else to, the law still has certain advertising standards for what you can say to your customers. If you mislead customers at all in your advertising, you may face severe legal repercussions. Therefore, it is crucial to keep your legal obligations in mind when planning advertisements. This article will go through some important legal considerations when advertising for your New Zealand business.
Accurate Demonstrations
When you sell your goods or services to consumers, the law guarantees the quality of those goods or services. If you sell a faulty product, you must give the affected customer a remedy in the form of a:
- repair;
- replacement; or
- refund.
Some of these consumer guarantees may also apply to the way you advertise your products. When you sell a product to a customer, you guarantee that product will match any descriptions, samples, or demonstrations you give in-store. For example, if you advertise your products with photos, you guarantee that they will match the photos you provide. Alternatively, if you air a commercial where someone demonstrates what a product can do, a customer can expect that their product will be capable of doing the same. If the product you sell to a customer is vastly different from the way you advertised, you will likely need to provide a remedy. When advertising your goods, ensure that any descriptions or product demonstrations are truthful and accurate.
Avoiding Misleading or False Claims
Under the Fair Trading Act, you cannot mislead or deceive your customers. The Fair Trading Act applies to the way you advertise or market your goods, meaning that you cannot:
- engage in generally misleading or false advertising;
- make unsupported or false claims in your advertising; or
- employ unfair sales tactics, such as bait advertising.
If a court finds your business guilty of any of these actions, you could face severe fines, with the maximum penalty for each offence being up to:
- $200,000 for individuals; and
- $600,000 for companies.
Bait advertising is an illegal form of advertising where you falsely claim you have certain goods available at your store. For example, you may falsely advertise that you sell a new and popular bike model in your store, aiming to draw customers in with this product. However, when customers come to your shop, you instead try to sell them your older models in stock because you do not have this newer model.
Therefore, you must ensure that any claims you make in your advertising are:
- honest and accurate;
- backed up by evidence;
- provable; and
- not hiding special conditions or charges in their fine print.
Complying With Advertising Standards
In addition to consumer guarantee laws, the Advertising Standards Authority (ASA) also regulates advertising in NZ with various advertising codes. There is an overall Advertising Standards Code that is updated as needed and codes for specific industries, such as alcohol advertising.
Members of the public can complain to the ASA, who will analyse your advertisement to see if it has breached any rules. If it has, then they will ask you to change or remove the advertisement. You also have the opportunity to appeal this decision and plead your case. This is a voluntary process, but non-compliance is virtually unheard of in NZ. The ASA releases their decisions publicly, and it may negatively reflect on your business if you do not cooperate. Depending on the advertisement, if you have breached one of the advertising codes, there may be legal penalties or fines.
The Advertising Standards Code operates on several principles, with the overall purpose of making sure that all advertising in NZ is legal, honest and respects the principles of fair competition. Each principle makes sure that the public can have confidence in advertising. These principles are social responsibility and truthful presentation.
Social Responsibility
Under this principle, your business should plan advertisements with social responsibility to consumers and society. For your advertising, this means:
- respecting customer privacy; and
- obtaining consent to use personal information.
You also should not:
- use indecent or offensive material;
- exploit children or young people;
- condone unsafe behaviour unless for education purposes or similar;
- cause fear or distress without justification;
- undermine health or wellbeing; or
- encourage environmental harm or degradation.
Truthful Presentation
This principle specifies that you must identify any advertising as such. You cannot mislead your customers with your advertising, whether this is through implication or inaccuracy. You must also:
- not deceptively use data or statistics;
- ensure all advertising is factual and accurate when comparing your product to your competitors;
- obtain permission for personal testimonials or endorsements;
- make a clear distinction between advocacy and facts;
- ensure all food and beverage claims are supported; and
- maintain accuracy in any claims you make about the environment.
Further guidance is available on the ASA’s website.
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Key Takeaways
When advertising for your business, ensure that you keep these legal considerations in mind. Otherwise, you could face legal and reputational penalties.
If you would like more information or help with meeting your legal obligations when advertising, our experienced regulatory and compliance 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
If you use a customer’s words or information, it is generally good practice to get their permission. If this is personal information that could identify them, then the law requires that you get their consent to use it.
The Advertising Standards Code is a set of principles and guidelines for advertising agencies regulated by the NZ Advertising Standards Authority. Its goal is to promote honest and responsible advertising.
Consumer guarantees are legal promises to consumers if you sell them goods or services. If you fail to uphold one of these guarantees, you need to provide a remedy to the affected customer.
It is illegal to mislead or deceive anyone with your advertising, including making claims you cannot prove or back up with evidence.
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