The Fair Trading Act prohibits misleading and deceptive conduct in trade. It is the most commonly breached piece of New Zealand business regulation, largely because the test is not what you meant but what impression you created.
Intent is irrelevant
Section 9 prohibits conduct in trade that is misleading or deceptive, or likely to mislead or deceive. There is no requirement that the trader intended to mislead, was careless, or knew the statement was wrong.
The test is objective and looks at the overall impression created on the relevant audience. A statement that is literally true can breach the Act if its overall effect misleads — through omission, emphasis, fine print that contradicts a headline, or context.
This catches businesses that consider themselves honest. “We believed it was true” is not a defence, though it may be relevant to penalty.
The areas where breaches cluster
- Pricing. Was-now comparisons where the was price was never genuinely charged for a reasonable period. Prices that exclude unavoidable fees. “From $X” where almost nothing is available at $X.
- Country of origin and composition. “Made in New Zealand” claims where the substantial transformation happened elsewhere.
- Environmental and green claims. An area of active regulatory focus internationally and in New Zealand. Vague claims like “eco-friendly” or “sustainable” without substantiation are increasingly challenged.
- Testimonials and reviews. Fake reviews, incentivised reviews presented as independent, and selective publication of positive feedback.
- Scarcity and urgency claims. “Only two left” or countdown timers that reset are straightforward breaches.
- Misrepresenting consumer rights. Telling customers there are no refunds, or that they must go to the manufacturer, misrepresents rights under the Consumer Guarantees Act and breaches the Fair Trading Act separately.
Unsubstantiated representations
A separate provision prohibits making an unsubstantiated representation — a claim about goods or services made without reasonable grounds, regardless of whether it later turns out to be true.
This shifts the practical burden. If you claim a product lasts twice as long, reduces energy use by 30 percent, or is the most popular in its category, you need a reasonable basis at the time you make the claim. Producing evidence afterwards does not cure it.
For marketing teams the discipline is simple: before a comparative or quantified claim goes out, someone should be able to point at the substantiation.
Unfair contract terms
The Act allows the courts to declare terms in standard form consumer contracts and small trade contracts unfair, and enforcement action can follow. Terms that cause significant imbalance, are not reasonably necessary to protect legitimate interests, and would cause detriment are vulnerable.
Common candidates: unilateral variation clauses, automatic rollovers with onerous exit terms, and broad liability exclusions. Businesses using standard terms drafted years ago should have them reviewed.
Penalties
Fair Trading Act penalties are substantial — well into six figures for companies per offence, with individuals also liable. The Commerce Commission enforces the Act and can also accept enforceable undertakings, issue warnings, and seek orders including corrective advertising and compensation.
Reputational cost frequently exceeds the fine. Commission enforcement outcomes are published and get picked up widely.
Practical compliance
- Before any campaign runs, ask what impression it creates on someone reading quickly, not what it says on careful reading.
- Keep substantiation for every factual or comparative claim, filed with the campaign.
- Ensure fine print qualifies rather than contradicts the headline. A disclaimer cannot rescue a misleading main message.
- Check pricing practices, particularly any was-now or sale claim, against whether the reference price was genuinely charged.
- Review standard terms for unfair contract term risk.
- Train sales staff. Verbal representations bind the business the same as advertising.
The Commerce Commission publishes detailed, plain-language guidance on the Fair Trading Act, including specific material on pricing, environmental claims and unfair contract terms, free at comcom.govt.nz. It is written for businesses rather than lawyers and is the right first stop.
General information only, not legal advice.
