The Commerce Commission has recently released a new video, "If you can't back it up, don't say it", giving guidance to traders on false, misleading, or unsubstantiated claims.

The video provides a good overview of what is prohibited under the Fair Trading Act 1986 and shows how strange sheared alpacas look. It is a useful reminder to all traders to make sure labels and advertising can be substantiated and are not misleading, to ensure compliance with the Fair Trading Act.

When making any claim on a label or in advertising, make sure you consider:

• To whom is the representation directed (target audience)?
• What does the message as a whole convey to the target audience?
• Is that message capable of being misleading?
• Can the representation be substantiated?

Below is a brief summary of the law and two recent cases.

Unsubstantiated representations

A trader must have reasonable grounds for making a claim (at the time the claim is made), irrespective of whether the claim is false or misleading. Therefore even if a claim is later proved to have been true, a trader can still be held liable.

In determining whether a trader has reasonable grounds for a representation, the Court will have regard to the:

• nature of the goods or services the claim was about
• nature of the claim
• research or other steps taken before the claim was made
• nature and the source of any information relied on to make the claim
• extent to which the trader has complied with any standards, codes, or practises, relating to the grounds for the claim.

Case Example - Fujitsu General New Zealand Limited

In 2017, Fujitsu was fined NZ$125,000 for making unsubstantiated representations (it was also fined NZ$185,000 for making misleading representations). The unsubstantiated representations included "New Zealand’s most energy efficient solutions", "New Zealand’s most energy efficient heat pump range", and statements that its e3 range was the most efficient system ever.
The Court said that the representations gave the overall impression that Fujitsu’s heat pumps were more efficient than its competitors, and the representations were not substantiated.

Misleading or deceptive conduct 

The Fair Trading Act prohibits traders engaging in conduct that is misleading or deceptive, or is likely to mislead or deceive. The Act also prohibits false representations concerning the nature, manufacturing process, characteristics, suitability for a purpose, quantity, or price of goods, etc.

The terms ‘misleading’ and ‘deceptive’ are not defined, but include conduct that causes someone to believe facts that are false, lead someone astray, or lead someone to error.

In determining whether claims made are misleading or deceptive, the Court’s focus is on the consumer—what the consumer understood the claim to be, and whether they were in fact misled. It is not necessary to prove that a trader intended to mislead, or even that loss was suffered.

Case Example - Reckitt Benckiser (New Zealand) Limited

• In 2016, RBNZ pleaded guilty and was fined NZ$1.08 million for misleading consumers about the nature, characteristics and suitability of its Nurofen products.
• RBNZ had sold a range of different Nurofen products that claimed to target specific pain such as backache, menstrual pain and migraines. However, each product contained the same active ingredients in the same quantity, and therefore all worked identically. Furthermore, RBNZ had been previously made aware (by a media article) that the products were potentially misleading, yet they continued to market and sell the products.
• RBNZ argued it had not attempted to deliberately mislead consumers, and that consumers could look at the ingredients list on each package to make comparisons. The Judge rejected this argument, stating that the very nature of pharmaceutical products meant the majority of consumers would not have known how to make the detailed product comparisons required.

The Judge said a high level of trust had been placed on the marketing of such products and RBNZ had breached that trust.

If you can’t back it up, don’t say it

The video and recent cases are a useful reminder to ensure all product labelling and advertising can be substantiated and is not misleading or false. The Commerce Commission has demonstrated its commitment to pursuing companies that breach the Fair Trading Act and traders should ensure their claims do not run the risk of facing prosecution.