Misrepresentation - It's not my fault!

Used car salesmen and real estate agents are the frequent butt of jokes about misrepresentation. The reality is that they are probably no better nor worse
than any other profession which sells goods or services to the public. If you are a retailer you have more potential to have problems in this area, mainly because you sell more goods than most other professions and tend to advertise goods more widely. Remember also that misrepresentations may be made verbally as well as in print (or on the internet).

Any statement which is dishonest or misleading is a breach of at least the NZ Fair Trading Act – many other countries have similar legislation. As a rule it
does not matter whether you intended the statement to mislead or not – only that a statement was made which was misleading. It is a particular problem when the
misrepresentation can be seen as promoting the sale of goods (or services) or
completing a sale.

While any affected party can initiate legal action under the Fair Trading Act, the
Commerce Commission is the normal legal watchdog and has no hesitation in
pursuing (in justifiable cases) small businesses through to large multinationals. Both Carter Holt Harvey ($900k fine) and the makers of Ribena ($275k fine) have historically been fined large sums of money for misrepresentations. In addition, some forms of misrepresentation may also open you up to legal action under the laws of passing off.

Claiming something can do what it can’t may also cause you problems with the
Consumers Guarantee Act. More serious false information or claims could open you up to other legal action to recover damages, consequential loss, or for any breach of contract (e.g. your sales agreement or sales transaction) – these are occurring in the CHH case. Misrepresentations and errors are serious, and should not be ignored.

How and when you respond can significantly affect the consequences.

Common Cases of Misrepresentation

There are a number of common areas which retailers are prone to. These include:
- failing to disclose the true price of an article – you can’t hide additional
expenses in the small print, or mislead the customer regarding the parts
which are expected to come with the product. For instance, if you are selling
a vacuum cleaner without the hose attachment, this needs to be clearly stated
with the displayed purchase price;

- Failing to disclose hidden service costs – these need to be clearly displayed.
Additionally there are rules governing how interest rates for hire purchase
should be displayed, so that the true interest rate is shown. All those
establishment fees, and insurance fees, need to be clearly shown as well;

- Stating that a product can do what it can’t. Apart from poor customer
relations and a loss of goodwill, the customer is entitled to return the product.

- Misleading statements about the origin of an article. We all know there is a
stigma associated with products from some parts of the world, so don’t try
and mislead the public that the goods come from somewhere else. If you sell
wine, you should be well aware that you cannot sell products under the name
of Champagne, Bordeaux, or Burgundy etc. unless it is a genuine product
from these regions. The wine industry is especially heavily regulated
regarding the use of names denoting the origin of the product, and is not
afraid to take action against those who step over the line.

- Trying to pass a product off as being made by someone else. If it is not a
genuine Chanel® then don’t try and pass it off as being by Chanel®. If you
intend to claim it is inspired by Gucci® then don’t word your statements so
that they are suggestive of being designed or made with the permission of
Gucci® (unless they were). Otherwise you are at risk of passing the goods
off as being those made by Gucci® - see also the section on Passing Off, and
also on counterfeits. Using someone else’s trade mark in comparative
advertising may also open up a whole legal can of worms for you as well –
best not to use Gucci ® at all (e.g. use ‘Italian inspired design’ instead).

- Advertising items for sale but not having enough in stock to satisfy normally
expected demand (effectively this is bait advertising). If there are only 5
items, then this should be clearly stated on the advertisement – e.g. “Only 5
left – limited to one per customer!”

- If goods are parallel imported, don’t claim that they are NZ new. For instance,
some parallel imported cellular phones cannot take advantage of all of the
services available to cellular phones made specifically for the NZ market. In
many respects it is best to indicate if goods are parallel imported.

Avoiding Trouble & Due Diligence

This area of the law can be quite difficult. The recommendation is that you join
industry specific groups such as the Retailers Association, who can usually
provide valuable information and resources about this area of law. Similarly,
organisations such as the Consumers Institute publish and archive information
affecting consumer’s rights. This includes information that retailers need to be
aware of, and changes in law or its interpretation. Finally, the Ministry of
Economic Development and the Commerce Commission also publish guidelines.

However, joining a Retail Group to discuss problems and issues with other
retailers is often one of the best ways of staying abreast of current issues you
need to be aware of.

In summary, any type of misrepresentation, whether deliberate or unintentional, is a potential problem. Taking liberties with accuracy is a common form of
misrepresentation, and usually are to sway customers into thinking something
which is not accurate (yes, little white lies are misrepresentations too). If you
don’t know, or are not sure, then say so. Customers appreciate honesty. Once
you discover, or are made aware, of a problem then take immediate action.

Next, seek informed advice on how to properly deal with the situation. Seriously
consider joining organisations such as the Retailers Association, and Consumers Institute – or any other relevant group. These can usually provide you with informed support, answers to questions, and advice to avoid problems

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