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Claims made must be able to be 'substantiated'

Making unsubstantiated claims about your products 'powers' is a no-no. The onus is on the vendor to prove claims made.

3 March 2022

At Trade Me we sometimes get into things that others might think are impossible.

Such as when we made the site 'blink' operated (a terrible April Fool's joke).

Why would anyone need that?

Of course this could probably be a made up example, maybe… But let’s imagine for a moment that we had gone out and recklessly advertised functionality that our website may not have.

Prior to 17 June 2014, if someone was to make a complaint about our outrageous advertising to the Commerce Commission, the Commission would have been required to prove, on the balance of probabilities, that the claim was untrue.

While in our example, this may have been quite a simple task, there are other examples where the Commission would have been put to considerable difficulty and expense to prove that the claims being made were false.

Consider the case of a credence good like orange juice, which cannot be readily tested by the buyer*. The advertising says that there is a certain amount of vitamin C or added sugar in the bottle.

Maybe my morning orange juice is leaving me feeling dull and lifeless and from that I suspect that the vitamin C content is low, but how can I tell whether the claims are true?

Oddly, until now the onus was on me to show that I was being misled, rather than on the orange juice company to show it was telling the truth.

That feels a bit back to front, especially when I am potentially paying extra for the benefits the orange juice is advertising.

The Commerce Commission actually takes vitamin C claims very seriously.

What is changing?

Under amendments to the Fair Trading Act that came into effect on 17 June 2014, this anomaly is reversed and a prohibition introduced against “unsubstantiated claims”.

Vendors must now have reasonable grounds for making the representation.

If they can’t back the claims up, the Commerce Commission can take proceedings against them.

This is a win for consumers.

This requirement of the person/company making the claim(s) should reduce the expense the Commission has traditionally incurred establishing misrepresentation.

Being able to back up your claims is now an operational overhead for traders.

The extent of substantiation required will depend on the nature of the claims. A higher level of substantiation will be required for claims that a consumer cannot easily verify (like on credence goods).

What do the changes mean for Trade Me users?

Buyers and sellers on Trade Me should be aware of these requirements.

Traders should always be able to substantiate the claims they are making about their products and buyers should know that they have the right to ask for traders to back up their claims (feel free to use the Community Watch function to ask).

The Commerce Commission provides the following advice:

  • Don’t make claims that you don’t have reasonable grounds for believing to be true
  • Rely on facts, figures and credible sources of information, not guesses and unsupported opinions
  • Keep documentation or other information that you have gathered in the process of sourcing or researching a good or service
  • You must have reasonable grounds for claims at the time they are made, substantiating a claim after it was made may not get you off the hook.
  • However, like in the case of our scented website, if the claim is (based on current technology) so outrageous that no one would reasonably believe it, it’s okay to make – as no one is likely to be misled. This is commonly referred to as puffery, traders using puffery should take care to make it obvious and remember that the Fair Trading Act aims to protect the gullible as well as the well-informed.

If a trader can’t or won’t back up their claims, get in touch with us so we can look into it further.

You can also make a complaint direct to the Commerce Commission.

This is also a good time to remind that persons 'in trade' need to let other members know. Here's how to do it.

* Credence goods are goods that cannot be readily tested by the buyer – the buyer must trust that the manufacturer is telling the truth about them.