Unsubstantiated Claims in New Zealand Consumer Law
In New Zealand, consumers are protected from unsubstantiated claims by traders (persons or businesses engaging in trade) who make statements about goods or services without sufficient proof. Legislation such as the Fair Trading Act 1986 and, in some contexts, the Consumer Guarantees Act 1993, governs the accuracy and substantiation of representations made to consumers.
The Fair Trading Act 1986 (FTA)
The Fair Trading Act 1986 (FTA) is the primary legislation addressing misleading conduct and unsubstantiated representations in trade. Its purpose is to protect consumers from misleading and deceptive conduct and unfair trading practices [Source: Fair Trading Act 1986, s 1A].
Misleading or Deceptive Conduct
A trader must not, in trade, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This general prohibition applies to any representations made about a product or service. A representation is a statement, claim, or promise made by a trader. Even if a trader does not intend to mislead, their conduct can still be considered misleading or deceptive if it has that effect or is likely to have that effect on a reasonable consumer [Source: Fair Trading Act 1986, s 9].
Making a claim such as a product being "the best" can be considered misleading or deceptive if it implies an objective truth that cannot be substantiated. For instance, if a product is claimed to be "the best for cleaning cars" and this is presented as a factual statement without supporting evidence, it may breach this provision.
Additionally, specific sections of the FTA address false or misleading representations about goods or services. For example, a trader must not make false or misleading representations concerning the nature, characteristics, suitability for a purpose, or quality of goods or services [Source: Fair Trading Act 1986, s 13(a), s 13(c)].
Unsubstantiated Representations
The FTA specifically addresses unsubstantiated representations. A trader must not, in trade, make a representation about a good or service if the trader does not have reasonable grounds for making the representation [Source: Fair Trading Act 1986, s 12A(1)]. This means that before a trader makes any claim about a product or service – whether it's about its performance, benefits, composition, or quality – they must have a sound basis for that claim. For a representation to be substantiated, the trader must have reasonable grounds at the time the representation is made [Source: Fair Trading Act 1986, s 12A(2)].
When assessing whether a trader had reasonable grounds, factors considered may include: the nature of the goods or services; the nature of the representation; any research or analysis conducted; the generally accepted standards of research or analysis; and the cost of substantiation [Source: Fair Trading Act 1986, s 12A(3)]. Therefore, simply asserting a product is "the best" without any objective, verifiable information to support that claim can constitute an unsubstantiated representation under the FTA.
Consequences of Breaching the FTA
Breaching the Fair Trading Act 1986 can lead to significant penalties. Individuals can face fines of up to $200,000, and companies can face fines of up to $600,000 for each offence [Source: Fair Trading Act 1986, s 40(1)]. The Commerce Commission, which enforces the FTA, can also issue cease and desist notices, seek injunctions (court orders requiring a person to do or stop doing a specific act), or apply for corrective advertising orders [Source: Fair Trading Act 1986, s 41, s 42, s 43]. Consumers who have suffered loss or damage due to misleading conduct or unsubstantiated representations may also apply to the courts for various remedies, including damages (monetary compensation for loss or injury) [Source: Fair Trading Act 1986, s 43(2)(d)].
The Consumer Guarantees Act 1993 (CGA)
The Consumer Guarantees Act 1993 (CGA) provides guarantees for goods and services ordinarily acquired for personal, domestic, or household use. While the FTA deals with the claims made before a purchase, the CGA focuses on the quality and performance of goods and services after they have been supplied to the consumer [Source: Consumer Guarantees Act 1993, s 1A].
Guarantees as to Quality and Fitness for Purpose
If a claim like "the best" implicitly or explicitly suggests certain qualities or performance levels, and the goods or services do not meet these, the CGA may provide remedies. For example, goods must be of acceptable quality, which means they must be fit for all the purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6, s 7]. If a claim that a product is "the best" implies superior durability or performance, and the product fails to meet this implied standard, it may breach the guarantee of acceptable quality.
Goods must also be fit for any particular purpose that the consumer makes known to the supplier, and for any purpose for which the supplier represents they are reasonably fit [Source: Consumer Guarantees Act 1993, s 8]. If a trader makes a representation that a product is "the best" for a specific task, and it fails to perform that task adequately, the consumer may have remedies under the CGA.
Remedies Under the CGA
If goods or services fail to comply with a guarantee under the CGA, the consumer may be entitled to remedies such as repair, replacement, refund, or compensation for any reduction in value or for any loss or damage resulting from the failure [Source: Consumer Guarantees Act 1993, s 18, s 23, s 24, s 27].
Overlap and Distinction
The Fair Trading Act 1986 and the Consumer Guarantees Act 1993 work together to protect consumers. The FTA primarily addresses the truthfulness of representations and conduct in trade, ensuring that claims made by traders are substantiated and not misleading. The CGA, on the other hand, provides a set of minimum standards and guarantees for the quality and performance of goods and services once purchased. A trader making an unsubstantiated claim like "the best" may breach the FTA, and if that claim influences a purchase and the product fails to meet expected standards, it could also lead to remedies under the CGA.
When to Seek Independent Legal Advice
Individuals seeking to understand their specific rights and obligations regarding unsubstantiated claims, or who believe they have been affected by misleading conduct, should obtain independent legal advice. The Commerce Commission can investigate breaches of the Fair Trading Act. For specific consumer disputes, information can be obtained from Consumer Protection. Community Law Centres throughout New Zealand offer free legal advice and assistance on a range of issues. Consumers can also contact Consumer Protection (consumerprotection.govt.nz) or the Commerce Commission (comcom.govt.nz) for guidance.