Your rights when businesses make unfair, false or misleading claims or use unfair sales practices.

You have rights under the Fair Trading Act

When you buy products or services, you are often persuaded to do so by advertising. This includes fantastic claims made by traders and retailers about their products or services. You’ve probably heard or read claims such as:

  • eco-friendly, green and sustainable (eg household cleaning products)
  • 100% organic food
  • miracle cures for weight loss, hair loss and health issues
  • once-in-a-lifetime chance to earn thousands of dollars from home!

No guidelines define what these claims or words like ‘eco-friendly’ actually mean. You can also pay much higher prices because of these kinds of labels. Read on about your rights with these sorts of claims.

You have rights under the Fair Trading Act (FTA). This means that a business can’t:

  • Mislead or deceive you by words or conduct. This includes statements in advertising, or any other deceptive conduct in trade. It doesn’t matter if they didn’t intend to mislead you or the general public.
  • Make false or unsubstantiated claims that have no evidence or grounds to back them up.
  • Use unfair sales practices that are banned such as pyramid selling, bait advertising, ie luring you in with cheap items that are unavailable and offering you a more expensive item, and other specified practices.
  • Not disclose they are in trade when selling online.

Someone is in trade if they:

  • regularly offer to sell products or services online
  • make or buy products with the intention of selling them
  • have staff or assistants or automated orders to deal with orders
  • are GST registered, have a business logo, website, and brochures, or are a registered company.

See also:

Know your rights

Businesses and traders aren’t allowed to behave in a way that is misleading or false. They also can’t make misleading or false statements about their products or services. In particular, misleading advertising or claims related to:

  • price, standard, quality, origin or history
  • particular uses or benefits
  • endorsements or approvals eg from celebrities or sports people using those products.

Misleading or false statements can be made:

  • in advertising brochures, signs, newspapers, and contracts
  • as part of a sales pitch
  • on TV, radio and websites.

Some examples of how an advertisement could be misleading are:

  • statements about the origin, quality and use of the goods that are not clear and accurate
  • comparisons with other competitors about the same products that are not accurate.

Misleading advertising includes special offers or discounts and sales, which are not genuine.

Businesses must be accurate when they describe in advertising whether goods are ‘as new’, second-hand or reconditioned.

See also:

False or unsubstantiated claims

Businesses and traders may not make claims without reasonable grounds, eg evidence to back them up otherwise it’s an unsubstantiated representation. This rule is particularly relevant for health, nutrition and environmental claims.

Similarly, businesses making environmental claims about sustainability, recycling, carbon neutrality, energy efficiency, or use of natural products must make sure those claims are accurate and based on solid scientific evidence.

For more information about unsubstantiated claims and what isn’t allowed, read the Commerce Commission’s factsheet on Unsubstantiated representations. (external link)

Unfair sales practices by businesses

Many different unfair sales practices are illegal under the Fair Trading Act (FTA). These practices include pyramid-selling schemes (external link) , referral selling, bait advertising (external link) , false offers of gifts and prizes, taking payment without intending to supply, pro-forma invoicing, using force or coercion to pressure customers, importing goods with inaccurate labels and much more.

To find out more about these different unfair sales practices, read the Commerce Commission’s Fair Trading factsheets (external link) . The Commerce Commission is responsible for enforcing the rules that apply to businesses under the FTA, including the ban on unfair sales practices.

Contracting out of the Fair Trading Act

Businesses and traders are not allowed to contract out of the FTA when they are supplying products or services to you. This means they can’t try to get around the FTA or tell you that it does not apply to them.

But if the buyer is a business, a trader can contract out of the FTA, but only where this is agreed in writing by both parties and it is fair and reasonable to rely on this agreement.

For more information see the Commerce Commission’s factsheet on Contracting Out of the Fair Trading Act (external link) .

Private sales and false advertising

The FTA does not apply to private individuals but the Contractual Remedies Act (CRA) may help you. If you have a problem with products or services because the seller misled you, you may be able to cancel the contract and get compensation. You have to show that:

  • you were persuaded to buy the products or services by the seller’s untrue statements
  • these statements caused you to lose money.

Compensation would be based on the difference between what you paid and what the item would have been worth if the seller’s statements had been true or to cover the cost of repairs.

Also under the Sale of Goods Act, (external link) if products sold by description don’t match that description, you can reject them.

See also:

You have different options if you have been misled by the seller in advertising or by them making unsubstantiated claims, depending on if they are a trader or a private seller.

Contact the seller first

For a private seller, you have rights under the Contractual Remedies Act to:

  • cancel a contract if the other party has misled you into entering into a contract
  • claim compensation for any other loss or damage as a result of being misled.

You also have rights under the Sale of Goods Act to reject the products if they don’t match the description provided by the seller.

For a business, you have rights under the Fair Trading Act (FTA) to ask the trader to:

  • vary of cancel all or part of the contract
  • get repairs done free of charge
  • give you a refund or return your property
  • pay compensation if you have suffered loss or damage from the misleading conduct.

Read Resolve a problem for more information.


Next steps

If you are unable to resolve your issue directly with the advertiser or trader, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Adverts


Need more help?

Contact us for more guidance.

Common situations

Misleading advertising

Examples of misleading advertising include:

  • A motor vehicle dealer selling a car as new when in fact it has a second-hand transmission.
  • A travel agent selling inexpensive holiday packages to Hawaii. The advertising failed to disclose there was a minimum stay, which had to be in specified hotels. These hotels were in fact more expensive than those available from other travel agents
  • A business not telling you about hidden costs like booking fees for entertainment or travel, or postage and packaging for online goods.

Pyramid selling

Janet sees an online advertisement about a new cosmetics sales opportunity selling from home. After finding the products don’t sell that well, Janet is advised by the business not to worry about sales, but to just recruit new salespeople, so she can earn more money on commission from their sales.

Harassment

A debt collector comes to an elderly person’s door and threatens to beat them up if they don’t pay the outstanding rent owed to the landlord. This is coercion and is illegal. Report the debt collector to the Commerce Commission.

Misleading descriptions

Hannah decides to buy a car from a private seller on Trade Me. The car is described as in sound condition for $2,500 ono with a current WOF. Hannah buys it without doing a mechanical inspection and three months later the car breaks down. She finds out from the local mechanic that the engine needs extensive repairs costing $1,500. Hannah is unhappy with the sale and contacts the seller. He refuses to negotiate, so she makes a claim to the Disputes Tribunal for misleading advertising under the Fair Trading Act and breach of the implied warranty as to matching its description under the Sale of Goods Act.