Unsubstantiated Representations

Unsubstantiated Representations
Monday August 11, 2014

Advertisers make a lot of claims in advertising material. They might say that their product or service is better, cheaper or provides other benefits that similar products or services do not. Consumers often don’t have the time to research whether these claims are true, and even if they buy the product (or service) they might still be unable to assess whether the representation is true, especially if buying one product meant not buying the other (so there is no basis to compare). In response to this, Parliament has made it illegal, under the Fair Trading Act, to make these sorts of representations without any reasonable basis for doing so. Any claim that a business makes about its products or the goods and services it offers, must be based on reasonable grounds. This applies whether the claim is express or implied. An express claim is one that is literally stated – such as “All products half price” or “Studies show that …”. An example of an implied claim or statement might be “Available to you at factory prices” (implying that the product is available “at wholesale”), or “Eco-protect dishwashing liquid” as the implication is that the dishwashing liquid is friendly on the environment. Reasonable grounds means information provided about the product or service by a reputable supplier or manufacturer, information held by the business making the claim and any other reasonable source (e.g. scientific journals). If a representation is unsubstantiated and not made on reasonable grounds, but was still true, that may still constitute a breach of the Fair Trading Act. So, before advertising goods or services for sale, a business must take reasonable steps to verify what they are saying about their goods or services. These changes are important, as Parliament has widened the scope of the Fair Trading Act (and the Consumer Guarantees Act) to capture statements made and products/services bought and sold online. Particularly affected will be people and businesses that sell via Trademe accounts. As from 1 June 2014, the Fair Trading Act requires anyone who is “in trade” for the purposes of the Act (generally where the vendor did not initially purchase the goods for their own personal use), to make this clear to consumers, when offering goods or services for sale online and Trademe accounts are now starting to declare “vendor is in trade” where relevant. This confirms to consumers that they will be covered by the Fair Trading Act and the Consumer Guarantees Act when trading with that seller.

By Chris Patterson, 2014

 

By Chris Patterson