Business fined for advertising campaign that breached the Fair Trading Act and intentionally misled consumers

A New Zealand business has been reprimanded after using an advertising campaign that intentionally misled consumers. The business was ordered by the Commerce Commission to pay a fine of $800,000 for leading consumers to believe that they were obtaining goods in clearance sales for significantly below the retail value, when they were actually paying full price.

The advertising campaign was:

• valued at $2 million;
• widespread, reaching a large audience by radio, TV, social media and print;
• live for a considerable amount of time; and
• intentionally misleading and premeditated.

The Commerce Commission held that because of the business’ significant position within its market in New Zealand it had a high level of responsibility to adhere to the Fair Trading Act’s advertising standards.  The fact that the business pleaded guilty to the 14 charges laid against it after an investigation by the Commerce Commission was taken into account when calculating the fine.

Businesses trading in New Zealand must abide by the Fair Trading Act 1986 when advertising their goods or services.  The Act aims to protect consumers from unfair trading practices, including preventing businesses from making false or misleading representations in order to obtain sales.  

The business in this case faced considerable cost (both in terms of the campaign value and the fine imposed), and may have had its reputation tarnished because of its advertising campaign.  These consequences could have been avoided had the business sought legal advice about the potential repercussions of its advertising strategy before commencing the campaign.

If your business is reviewing its advertising strategy, or you want to know more about your legal obligations under the Fair Trading Act, see your lawyer or legal advisor early to discuss your particular circumstances. 




Claire Tyler
Commercial Lawyer
Wellington