This case serves as a reminder to local and international
retailers, to be wary of what representations they make in New
Zealand about their products and to ensure they meet all standards
required. Especially for standards that can be complex or in this
instance health related, it is imperative that companies have
credible research or evidence to support the claims they make about
Nationwide dessert companies Frozen Yoghurt Limited and Yoghurt
Story New Zealand Limited (the parent companies of the franchised
network of 'Yoghurt Story' businesses) were recently fined
$270,000 after a prosecution brought by the Commerce Commission.
This related to misleading representations of the health benefits
of yoghurt as well as their product simply not being yoghurt at
all, as it failed to meet the definition of yoghurt according to
the Australia New Zealand Food Standards Code. Judge Sharp in the
Auckland District Court dismissed the charges brought under section
13 (false representations) of the Fair Trading Act and instead
found Yoghurt Story guilty under section 10 (misleading conduct),
as he regarded the conduct to be misleading as opposed to
completely false. It was that the product they sold was not yoghurt
rather than whether the health benefits of yoghurt were true hence
the dismissal of section 13 charges.
Judge Sharp found that Yoghurt Story knew that their product was
closer to an ice cream product rather than frozen yoghurt, yet
continued to make misleading representations. He regarded Yoghurt
Story as engaging in "a cynical attempt to take advantage of
consumers desire to make healthier food choices". He balanced
this with a view that the Act recognises that consumers who buy
products on the basis of representations do so with a great deal of
trust. Because of this, a significant fine of $270,000 was imposed.
However since the two parent companies were both in liquidation,
these fines were reduced to only $70,000.
The Fair Trading Act is designed to protect consumers from
companies taking advantage of consumers with false claims and the
New Zealand Commerce Commission frequently brings prosecutions
against businesses for misleading conduct. Alongside this the
Courts are now following a tough approach to any misleading conduct
that is brought to their attention.
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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The Ministry of Corporate Affairs ("MCA") vide Notification1 dated December 7, 2016 had notified various provisions of the Companies Act, 2013 (hereinafter referred as "CA 2013") which have come into force with effect from December 15, 2016.
When buying a franchise, you should understand your rights, to make an informed decision before signing the agreement.
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