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If your business is just starting out, it can be hard to stand out against your competitors. Through effective marketing and brand management, you can make consumers recognise that your product is the best option for them. However, there are certain legal regulations you must abide by when making claims about your products. If you mislead your customers in any way about the nature of the goods you sell, you could face severe legal penalties. This article will explain how New Zealand consumer law affects what you can claim about your products and what you can say.

Complying With Consumer Law

The Fair Trading Act (FTA) regulates what claims you can make about your products, with a focus on creating a fair commercial landscape for consumers to navigate. You cannot expect consumers to have the time or the resources to confirm everything you say about your products. Consequently, the law implies specific standards so that a business cannot mislead the public about the products they sell.

In particular, the FTA prohibits:

  • general misleading or deceptive conduct;
  • unfair sales tactics, such as bait advertising or referral selling;
  • unsubstantiated claims; and 
  • misleading or deceptive claims.

For example, bait advertising refers to the practice of advertising or offering goods that you do not actually hold in stock. This is a kind of false advertising, and if you engage in this tactic, you are breaking the law.

Ensure that you are familiar with your other consumer law obligations whenever you make a claim, such as those under the Consumer Guarantees Act.

Fair Trading Act Penalties

If you engage in any of the above kinds of activity, customers can complain to the Commerce Commission and they will launch an investigation. This could result in court proceedings where, for each offence, you may face penalties of:

  • $200,000 for an individual; or
  • $600,000 for a business.

Being Truthful About Your Products

To avoid such penalties, it is best practice to be honest with your customers about your products. Do not make any fictitious claims about what they can do or their quality. This applies to all aspects of how you communicate with your customers, ranging from the words you say to your promotional or advertising materials.

Examples of misleading claims may include misrepresentations about:

  • the quality or standard of a product;
  • a product’s materials or origin;
  • product endorsements;
  • the extent of a discounted price;
  • the true demand for your products; or
  • any extended warranties you offer.

However, a claim that is clearly exaggerated or fictitious is likely not to mislead a reasonable consumer. Therefore, you would not be breaching your consumer law obligations by making a claim like this. This is known as puffery.

A claim may also be misleading if you neglect to disclose any required information.

For example, say that you tell a customer that a phone you sell is waterproof. However, you fail to mention that the phone can only withstand water spray, and would not stand up to full submersion. This would be a misleading claim.

If you sell products with a relevant Consumer Information Standard, you need to provide this information. These include standards regulating:

  • product care labelling, such as washing instructions;
  • country of origin labelling;
  • fibre content labelling;
  • used motor vehicles; and
  • water efficiency.

Do Not Say What You Cannot Prove

The law also prohibits unsubstantiated claims, whether they are express or implied. These are claims that you cannot prove to be true. In particular, this applies to specific characteristics you may claim your product has, such as claims about the characteristics set out below.

Health or Nutritional Value

Whether your product has any extra health or nutritional benefit, such as being ‘low-fat’ or ‘high in Vitamin C’.

Place of Origin

Where your product comes from, such as saying your product is ‘100% NZ Made’.

Environmental Impact

The sustainable value of your product and its environmental effects, such as claiming it is carbon-neutral.

Organic Status

Whether your product is organic or not, referring to how it was grown or farmed.

Customers may seek out your products precisely because of these characteristics, and be willing to pay a higher price. Therefore, you need to be able to provide evidence of any such special characteristics or similar, such as reports or certification documents. In advertising or promotional materials, try to keep jargon or scientific terms to a minimum, or explain these terms when you can.

For example, if your business sells face masks claiming to prevent the spread of COVID-19, you need to provide evidence that you are meeting the legal medicinal requirements for such products. Claims about health products need a higher standard of proof.

Key Takeaways

When you make claims or representations about your products to consumers, you need to be honest about the nature of these products. If you mislead your customers in any way or make a claim you cannot back up with evidence, you could be breaching your consumer law obligations. If you would like more information or help with how you can advertise your products legally, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is the Fair Trading Act?

The Fair Trading Act is a piece of law that protects consumers. It does so by outlawing misleading conduct and requiring them to provide evidence for the claims they make about their products.

What is a misleading claim?

A claim about your product is likely misleading if it is untrue or deceives consumers in any way. For example, if you say that your products are the expected acceptable quality when they are not, this would be a misleading claim.

What is an unsubstantiated claim?

You make an unsubstantiated claim when you say something about your products that you cannot back up with facts or evidence. For example, if you say that your products are ‘NZ Made’, you have to prove that you complete enough of the manufacturing process in New Zealand.

What is puffery?

Puffery refers to statements or claims made by businesses that are clearly untrue because they are obviously exaggerated or a matter of opinion. For example, claiming that you sell the ‘best coffee in Wellington’ is puffery because this is a matter of opinion and an exaggerated statement.

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