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If you can’t back it up, don’t say it

If you sell products or services, you need to be able to back up the claims you make about them. A new video from the Commerce Commission gives tips for traders on false, misleading or unsubstantiated claims and how to avoid making them.

Consumers rely on what you say – make sure it’s true

A new video from the Commerce Commission provides advice on how traders can avoid making false, misleading or unsubstantiated claims – especially when consumers can’t verify those claims themselves. Since 2014, the Fair Trading Act has specified the need for businesses to be able to back up all claims made about their products or services.

Claims about food products, like ‘free range’ and ‘organic', and country of origin claims like ‘made (or grown) in New Zealand’ are examples of what the Commerce Commission calls credence claims, and they’ve become a focus for the Commission. Consumers often pay a premium price for these products.

“If those claims are misleading, they are harmful to consumers because consumers may pay a price premium for characteristics of a product that do not exist. They’re also harmful to competition because they give an unfair advantage to traders who make claims without backing them up. Finally, they can have an impact on New Zealand’s reputation with tourists and in export markets,” says Commissioner Anna Rawlings.

Transcript of video

Unsubstantiated representation (external link) — Commerce Commission

What you need to know

  • Any claim a business makes about goods or services must be able to be proven – whether the claim is express or implied.
  • An express claim is one stated in advertising or other material, eg ‘all kids’ clothes half price,’ ‘clinical tests prove,’ ‘free range,’ or ‘our technicians are all registered and qualified.’
  • An implied claim is one that’s implied or made indirectly, eg ‘available to you at wholesale prices' implies the customer will pay what a retailer would pay the wholesaler or manufacturer for the product. The claim ‘eco-friendly’ implies the product or service is environmentally friendly.
  • You can be prosecuted for making claims you don’t have reasonable grounds to make, or can’t back up. Reasonable grounds can come from:
    • information provided by reputable suppliers or manufacturer
    • information held by the business making the claim
    • any other reasonable source (like scientific or medical journals).
    If you sell free range eggs, for example, you could back up claims with independent certification, track the eggs back to the farm of origin, or at least retain records showing what you ordered and what you were promised.
  • Claims that are so obviously exaggerated or overstated that they’re unlikely to mislead, eg ‘the greatest coffee in the world,’ ‘the most delicious pastry you’ll ever taste’ – are considered ‘puffery’. The Fair Trading Act allows some leeway when statements are clearly puffery, because most reasonable consumers are aware that some exaggeration occurs in advertising. But it’s still important not to misrepresent goods or services, or claim they have benefits they don’t have.

The law applies equally to services

Have a look at the statements below. If you make claims like these on your website or marketing they must be accurate at the time you make them, and they must continue to be accurate. That means you need to keep your website up to date.

Our techs are all registered and qualified

Are all your techs really registered and qualified? What about that new trainee? Is his or her qualification the appropriate one for the trade or business?

We are the only providers of this service in the city!

What’s your basis for making this claim? Have you commissioned research to show this is accurate?

We are the cheapest – We are the fastest

You need to take care when making claims like these about the service you provide. They relate to fact more than opinion, and they need to be accurate.

However, consumers would realise that a claim like ‘the fastest installer the world has ever seen’ is an obvious exaggeration, and that would be considered puffery. Consumers are unlikely to be misled by these types of claims.

HALF PRICE!

Be particularly careful when making pricing claims about the service you provide. Pricing claims generate a lot of complaints to the Commission.

This company was just outstanding. I can’t recommend them highly enough.

Did a genuine independent customer say this, and did they genuinely say it about your company? Testimonials and reviews must be accurate and not give a misleading impression.

Trusted, unbiased information

Is there anything you aren’t disclosing which might make claims like this inaccurate? Do you have any commercial relationships which are relevant to that sort of claim?

Pricing claims (external link) – Commerce Commission

Guidance on reviews and endorsements (external link) - International Consumer Protection and Enforcement Network

Cautionary tales

A health supplement company and its owner were fined $526,500 for breaching the Fair Trading Act after they claimed bee pollen was New Zealand-made, when in fact it was produced and processed in China.

Cases against multiple companies who made claims about ‘pure alpaca’ or ‘100% cashmere’ products, which actually contained little or no such fibres, have resulted in fines just over $1.5 million.

A heat pump supplier was fined $310,000 for making unsubstantiated or misleading claims about the energy efficiency and performance of some of its heat pumps.

Do you have more questions about this?

Do you have more questions about this?

Contact the Commerce Commission on 0800 943 600, or email contact@comcom.govt.nz

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