The inclusion of a new prohibition on businesses making
unsubstantiated representations is one of the key amendments to the
Fair Trading Act.
Businesses are prevented from making representations about their
products or services if they do not have reasonable grounds for the
representation when it is made, whether or not it later turns out
to be true. These changes come into effect on 17 June 2014.
What is the purpose of the change?
Businesses will often make claims about their products or
services in advertising material to induce consumers to buy from
them. Usually consumers are not in a position to check whether
those claims are true.
These new provisions are intended to put the onus on businesses
to ensure they have evidence to back up their claims. Consumers
should be able to rely on what they are told by a trader so they
can make informed decisions.
What types of claims are caught?
Both express (e.g. "50% off everything in store") and
implied (e.g. "eco-friendly") claims must be
Puffery is not caught by these new provisions. This means that
the prohibition does not extend to inventive advertising that no
reasonable person would expect to be substantiated.
When will you have reasonable grounds to make a claim?
Your business may have reasonable grounds to make a specific
claim about your products or services if you have reliable
supporting information from:
Documentation held by your business;
Testing you have commissioned;
The supplier or manufacturer of the products;
Scientific or medical journals and other reputable
The courts are required to consider a range of factors when
deciding whether a business had reasonable grounds for making a
Compliance with other laws
If a business must comply with other laws which stipulate the
grounds for making claims, these new provisions in the Fair Trading
Act do not need to be complied with. For example the New Zealand
Food Standards Code covers requirements for health and nutrition
However, compliance with non-binding guidelines or codes will
not exempt compliance with the unsubstantiated representation
requirements in the Fair Trading Act.
What do you need to do?
You need to retain documentation supporting any claim you make
about your products or services.
You need to be satisfied that any claims you make can be
substantiated at the time they are made.
If you are a retailer and rely on claims made by the
manufacturers or suppliers of the products you sell you should
ensure that your contracts with them include warranties or
indemnities from them relating to their claims.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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