1. Fair Trading Act 930633

2. Fair Trading Act 2 Overview General framework Green marketing Carbon claims Comparative advertising Dealing with the Commission

3. Fair Trading Act 3 General framework Section 9: No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive Must consider “the astute and the gullible, the intelligent and the not so intelligent, the well-educated as well as the poorly educated”

4. Fair Trading Act 4 Tested from the consumer’s perspective If your advertising affects the public at large, all people within that group must be considered. This includes the intelligent and not so intelligent, educated and not educated, the astute and the gullible, men and women of various ages pursuing a variety of vocations. The Commission says “you should consider more susceptible members of your audience when putting together your campaign”.

5. Fair Trading Act 5 Green marketing The Commission’s Green Marketing Guidelines (2008) The Commission’s Carbon Claim Guidelines (2009)

6. Fair Trading Act 6 Green marketing Commission (and other regulators) are concerned that environmental claims have become a powerful marketing tool Is an enforcement priority Commission “will vigorously pursue any claims which may breach the Act”.

7. Fair Trading Act 7 Key ideas Level of accuracy General statements Overall impression

8. Fair Trading Act 8 Accuracy Level of accuracy required is demanding The question is not whether a customer will be harmed by an exaggeration or inaccuracy. The question is whether the statement is liable to mislead A real or not remote possibility

9. Fair Trading Act 9 Accuracy cont. The Commission takes the view the harm is to the competitive process. This means there are no boundaries on the Commission’s zeal for accuracy Good intentions are no defence

10. Fair Trading Act 10 Accuracy: the CC says … Claims must be accurate You should be able to substantiate your claims Differentiate between product and packaging Consider whole product lifestyle Provide customers with an opportunity to find out more

11. Fair Trading Act 11 Accuracy cont. Customers are diverse. We need to check statements are accurate for all/not misleading for some Price increase letter “These prices include GST and any changes in the cost of network services” If it is an average, say so

12. Fair Trading Act 12 General statements Ambiguity or generality can bite It is not what we intend, but what a customer can take from the text that counts. If a statement has multiple meanings, all must be true …

13. Fair Trading Act 13 General statements: the CC says... Claims should be specific ―In most cases a claim should refer specifically to a part of the product or production process Not unqualified and or / general statements Use plain language, not jargon ―Technical language can lead consumers to make misleading assumptions

14. Fair Trading Act 14 General green statements The Commission has identified certain statements as particularly problematic, including: ―“green” – very vague and gives rise to a wide range of meanings among consumers, which risks misleading them. ―“environmentally safe/friendly” – may suggest that no harm is caused to the environment, which is unlikely to be true when considering the life cycle of a product. ―“energy efficient” – should be quantified by comparison to existing benchmarks or at least explained in more detail ―“low carbon” – is ambiguous and broad. Don’t use it. ―“carbon neutral” – explain what you have done.

15. Fair Trading Act 15 Overall impression The overall impression can be misleading, even where each individual statement is true Obviously a highly judgmental area

16. Fair Trading Act 16 Overall impression: the CC says... Claims should be made only for a real benefit ―Eg claiming absence of CFCs, when all products are now CFC free Don’t overstate the benefit ―Eg claiming a 50% improvement, when the baseline was 1% Pictures can suggest environmental benefits that are misleading

17. Fair Trading Act 17 Check list Could we prove it? Is it a generalisation or average? Is an exception or qualification needed Will it be true for all customers – cities, rural, all networks? Could it be misread? Sentence by sentence Overall impression

18. Fair Trading Act 18 Carbon claims Same general issues Commission: ―Currently different methodologies and understanding of carbon reduction, neutrality, footprints ―Which means different consumers may take different understandings away from general messages ―Onus on you to avoid risk of misunderstanding by being specific AND grapple with the CC’s view of overall impression

19. Fair Trading Act 19 Carbon claims :offsets Both purchasers and suppliers of offsets responsible for accuracy Additionality claimed must be robust Forward crediting carries risks – buyer should think about requiring an obligation from seller to obtain replacements if project doesn’t deliver If the offset project has permanence risks (eg forest fire) contract should cover that also No double counting, must be retired etc

20. Fair Trading Act 20 Carbon claims : carbon neutral The term conveys a wide range of meanings to consumers Overall impression may be that the full business or product life cycle is carbon neutral Commission has set a high hurdle If that is not the case, must be made clear Similar issue with scope 1 / 2 / 3 choice

21. Fair Trading Act 21 Comparative advertising Key idea: the advertising must tell the full story so that the consumer can make a well informed decision

22. Fair Trading Act 22 Requirements for comparative ads Like with like ―The products must be exactly the same, not similar Clarity as to the basis for comparison – price, quality, service? ―Commission reacts to general claims Accuracy Must be comparing with a competing product in the same market

23. Fair Trading Act 23 Some trip-ups Apples and oranges ―Comparing custom wood furniture with laminated ―Comparing leather lounge suites of greater quality Accuracy ―Hyundai warned for claiming its hybrid was more efficient. Impossible to accurately test

24. Fair Trading Act 24 Price comparisons Must refer to the price the competitor is actually charging (eg not necessarily the RRP or list price) Comparisons against specific competitor prices put you at risk of the competitor changing their pricing But claims that are too general – our prices are competitive – can mislead too Comparator must be available in the local market – take care with national campaigns

25. Fair Trading Act 25 Dealing with the business Emphasise the accuracy needed – given the volume of communications, accuracy must be hard wired in at source This discipline is needed for all communications with customers and potential customers ―Letters ―Currents ―Market report ―Posters, website, flyers, postcard

26. Fair Trading Act 26 Dealing with the Commission Be responsive Build a relationship Engage with the complaint and the facts Flush out any “overall impression” considerations Identify the outcome you want and work toward that

27. Fair Trading Act 27 What are the consequences? Criminal and civil liability. Individuals in breach may be fined up to $60,000. Companies in breach may be fined up to $200,000. Injunctions may be granted to stop a person or company from engaging in the misleading or deceptive conduct. You might be asked to disclose information or publish a corrective statement or advertisement. If loss or damage has occurred as a result of your misleading conduct, you might have to pay compensation, refund money, supply services to the person(s) harmed, etc.

28. Fair Trading Act 28 Any questions (or challenges...) Andy Nicholls Partner andy.nicholls@chapmantripp.com 04 498 6319 027 491 4892