You should “probably” read this: Substantiation under the Fair Trading Act

A recent warning from the Commerce Commission has highlighted how important it is for businesses to have reasonable grounds for any claims or implications they make about their goods or services. The warning was issued on Monday 18 December to NZ Fibre Communications Limited (“Stuff Fibre”) for making unsubstantiated claims that it is “Probably NZ’s Fastest Internet.”

Stuff Fibre has admitted it did not know if its broadband services were actually faster than that of its competitors and that it had not undertaken any broadband speed comparisons. Stuff Fibre, therefore, had no reasonable grounds for making the claim. The Commission’s investigation found that by making this claim without any reasonable grounds at the time, Stuff Fibre is likely to have breached the substantiation requirements of the Fair Trading Act 1986.

Verification

The Commission took the stance that business cannot rely on qualifying a verifiable claim with the word “probably” to get out of the fact it had not actually done its research, and that this caveat was ineffective to prevent potential consumers from being misled. Consumers who saw or heard the claim were likely to think it meant Stuff Fibre’s broadband was faster than other providers according to Commissioner Anna Rawlings. Rawlings commented that “The internet speed claim is a matter of scientific fact that consumers would expect to be known and verified. If a trader is prepared to say it is “probably the fastest”, this will suggest to many consumers that they have done their research and are comfortable they are performing at that level. In fact, Stuff Fibre had not verified its claim.”

Last month, solar panel systems retailer New Zealand Home Services Limited (NZHS) was issued with a similar warning over the claims it made about the financial benefits of its solar panel installations. Both these recent warnings closely proceed heat pump supplier Fujitsu General New Zealand Limited’s conviction and fine under the unsubstantiated representation provisions of the Fair Trading Act in September this year which was the first company conviction and fine under these provisions.

Main take-away

It is important to remember that a claim is unsubstantiated if a business or trader does not have reasonable grounds to make the claim at the time they make it. This applies irrespective of whether the claim is an express or implied claim and irrespective of whether the claim is false or misleading.

If you have any questions in relation to advertising, substantiation or your rights/obligations under the Fair Trading Act, please contact one of our experts.

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