It’s no joke to mislead the public

What do Ribena, Adidas and a piece of 4 x 2 have in common?  Sounds like the start of a bad joke but the companies involved are certainly not laughing.  They have all hit the headlines before for trying to pull the wool over our eyes.

Possibly the most attention of the three examples was given to the advertising of Ribena.  As a result, Ribena became something other than every kid’s favourite drink.  It became something of a dirty word.  Fines of nearly $230,000 and some corrective advertising were amongst some of the repercussions.  Brand damage was possibly an even more significant penalty.

You might remember that the court case involved guilty pleas to 15 charges of misleading and false claims about the levels of vitamin C in Ribena products.  It also involved a very public trial-by-media, and was described as a “massive breach of trust with the New Zealand public.”
Many of us have bought Ribena products for ourselves or our children, and while perhaps not believing that it’s “healthy” in the true sense of the word, we have at least taken at face value claims that with more Vitamin C, it must be better than a sugary fizzy drink.  But apparently not!
The sense of outrage and feelings of being tricked or duped were numerous.  It was a topic for Talkback radio for many days.

Then we heard that Adidas had cut labels from their sports clothing in an attempt to present them to consumers as having been made in New Zealand.  They had in fact been produced in China.  Adidas was fined $20,000 and, given the Kiwi consumer’s pride in wearing “New Zealand Made,” likely suffered brand damage.

Carter Holt Harvey was next to hit the headlines in relation to their attempt to label some timber in a way that indicated a higher level of quality than it actually was.  Originally fined $900,000 as a company, an Executive of the company at the time was also later fined $20,000 for the same conduct.

So what is the legal position around misleading and false claims?  What can businesses do to ensure they do not face a similar potential disaster?

Legal Position

Another complaint reported in the media since the Ribena case was about bacon.  The Commerce Commission investigated any advertising that evoked a belief by consumers that they were eating New Zealand pork.

The complaint alleged that a significant percentage of the bacon is imported from overseas.  If such allegations are proven a company faces not only fines, but potentially, as it is their company name that is impugned, total re-branding as an aspect of a corrective advertising order.
The Commerce Commission regularly investigates these types of situations, and it is not only goods that can be investigated.

Along with a prohibition on misleading or deceptive conduct generally, and conduct that is likely to mislead regarding “the nature, manufacturing process, characteristics and suitability for a purpose” of goods, the Fair Trading Act also prohibits misleading or deceptive conduct in relation to services and false or misleading representations as to the quality, composition, style or nature of goods or services.

Recently we helped a representative from an industry association.  Membership of the association in question requires and indicates a certain skill-level that consumers rely on when engaging their services.  Therefore, when the association found out that a non-member was using the association logo when advertising his services they complained to the Commerce Commission.

If the Commerce Commission confirms that the complaint is valid and determine that the public interest requires it, they will bring a criminal prosecution which can result in fines of up to $60,000 per offence for an individual and $200,000 per offence for a company.

The Court can require a business to implement and pay for corrective advertising.  They can also order that a contract formed on the basis of the misleading information be altered or made void, that money be refunded or that goods be repaired or services supplied.  But it is the media headlines that could really cause your business damage.

What Can Your Business Do?

As a business providing either goods or services, you need to be aware of your obligations under the Fair Trading Act.  It is important that you advertise in a manner that accurately reflects what you are going to provide.  You need to consider the overall impression that your adverts or labelling create.  For example, a Bacon company might argue that their products are produced in New Zealand and is, literally, bacon for Kiwis.  However, the “impression” it also gives is that it is New Zealand pork, and in this way it may well be found to be inaccurate and misleading.

Many businesses have their own Compliance Programme which involves checks to ensure that all facts and claims in proposed advertising are true, and don’t create a misleading impression.  The Commerce Commission website (www.comcom.govt.nz) provides a lot of helpful information about the Act and your obligations as a business-owner or operator.  However, if you are in any doubt consult a professional.

Goodwill and reputation are crucial to the prosperity of a successful business.  Years of building a good reputation can be lost literally overnight and many businesses would struggle to survive the fallout from a “Ribena” saga of their own.