As of 17 June 2014, representations made in the course of trade will need to be “substantiated” at the time they are made. This means there must be some basis for every claim you make about your products or services.

For example, a claim that your product is five times faster than your competitor’s would be substantiated if you relied on an independent research body’s test results, which backed up your claim. It would not be substantiated if you just said that…even if later testing proved you right.

Even comments which are true could lead to criminal liability under the Fair Trading Act if they are not substantiated at the time they are made. Companies can face fines of up to $600,000, and individuals could be fined up to $200,000.

To comply with the Fair Trading Act…

1. Don’t make any representation about your product or service unless you have good grounds for believing it to be true.
2. Don’t make any representations without some kind of evidence to back up that representation. For example, a publicly available Government research report.
3. Rely on credible and reliable sources to back up your claims and representations.
4. Keep records of all the sources you use to back up your representations.
5. Keep records of all the representations you make to potential purchasers.

Depending on the kind of business you run, further compliance measures may also be necessary. As always, we are happy to discuss with you how to put in place a comprehensive compliance mechanism and how to structure your contracts to minimise any risk.