The Fair Trading Act – Misleading claims

Following changes to the Fair Trading Act on 17 June 2014, it is now illegal for businesses to make claims about goods or services without having reasonable grounds for the representations at the time the claims are made.

“Whether the claim is express or implied, businesses should only make claims based upon facts, figures and credible sources of information that support their accuracy. Traders cannot simply rely on general information they find in books and online,” said Commerce Commissioner Anna Rawlings.

When considering whether a business has reasonable grounds for a claim, the following factors are taken into account under Section 12B of the Fair Trading Act:

  • the nature of the goods or services about which the claim was made;
  • the nature of the claim;
  • any research steps or other steps taken by or on behalf of the business making the claim, before it was made;
  • the nature and source of any information the business relied on to make the claim;
  • the actual or potential effects of the claim; and
  • compliance with the requirements of any standards, codes or practices relating to the grounds for the claim.

For more information on misleading claims and the Fair Trading Act please see the Commerce Commission’s website.

The Advertising Standards Authority’s guidance note on Responding to a complaint about misleading claims also provides useful information about the nature of substantiation expected by the Advertising Standards Complaints Board to support a claim.