Don’t make claims you can’t back up – Consumer Law Reform

June 26, 2014

in Corporate & Business

Corporate & BusinessAs previously advised there have been significant changes to the Fair Trading Act 1986 as a result of the consumer law reform.  One of the significant changes is in respect to unsubstantiated claims.

From the 17th June this year the Fair Trading Act was amended to include a prohibition on traders making unsubstantiated claims or representations.   The Act makes clear that “a person must not, in trade, make an unsubstantiated representation”.  A representation will be unsubstantiated if the trader making the representation does not believe, or have reasonable grounds to believe, the representation at the time it was made.  This is in addition to and irrespective of whether the representation is false or misleading.

Traders must have reliable information in their possession at the time of making the claim in order to substantiate it.  It will not be sufficient to retrospectively research or obtain the information.   If proceedings are brought for a breach the Court will need to be satisfied as to the belief of the trader at the relevant time, and in that regard the Court will need to consider the nature and source of any information that the trader relied on at the time.

The trader can seek to establish such belief by providing copies of the information they relied on at the time the representation was which could also include print outs showing dates, times and details of any reliable internet research that was undertaken and any copies of any scientific information that was in their possession at the time of making the claims.  The aim of the new legislation is to encourage traders to verify, confirm and corroborate evidence to support claims made in relation to their goods or services.

A trader will be able to rely on the current defences available under the Act, namely;

  • Reasonable mistake;
  • Reasonable reliance on information supplied by another person. In this regard the trader would need to show it was reasonable to rely on the knowledge/reputation of that person or that it was reasonable to rely on the information; or
  • That the breach was due to the act or default of another person, or to an accident or to some other cause beyond the trader’s control and that the trader took reasonable precautions and exercised due diligence to avoid the breach.

The exemptions of “puffery” and hyperbole will continue to apply, so that traders can still make claims which a reasonable consumer understands is puffery, for example claiming your goods are “the best in the world”, is so beyond belief that a reasonable person would not take the claim seriously.

In order to comply with the Act, retailers of products should consider including warranties/indemnities in their terms of trade relating to claims made by their manufacturers and/or suppliers which they have relied on. Businesses should also hold a review around individual processes for substantiating information and consider putting in place robust balance and check sheets to assist.

We are specialists in consumer law and can assist you with amending your terms of trade and preparing your business for the changes.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co who normally advises you, or alternatively contact:

Kirsten Maclean

(03) 477 8870 or (09) 379 0055


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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