Sponsorships and endorsements

Claims your business makes about the success, skills, test results or backing you have, or which your employees, products or services have, must be truthful. These claims are usually made to convince potential customers of the merits of going to one business over another and can give an unfair competitive advantage if they are untrue.


Claims about qualifications and skills

You should not claim membership or approval of trade organisations unless that membership has been approved and is current. You must also be able to prove any claims you make about qualifications or skills. Claims should not be based on pending applications, certifications or part membership.

Example: A building firm was suspended from the Registered Master Builders Federation as a result of a complaint made about the quality of work on a property. Despite the suspension, the firm continued to represent that it was a member of the Registered Master Builders Federation and that customers would receive Master Build Guarantees for work it had undertaken. In other instances the firm accepted payments for Master Build Guarantees but did not forward the applications and payments to Master Build Services until physical construction had begun on site. As a result, when the firm subsequently went into liquidation, some customers were not covered by a Master Build Guarantee. The directors of the company were convicted, fined and ordered to pay reparation.


Claims about success

You must not make misleading claims about your own success. If a claim is made about the success of a certain product, service, or business, this claim must be current and accurate. Any claims you make about a past success, such as an award won two years ago, must clearly state the date of that award. For example, a restaurant claiming to be the 'best budget restaurant of the year', when it was awarded the title five years ago, would breach the Fair Trading Act unless the date of the award was clearly stated.

Example: A real estate agent distributed leaflets which created the impression that she had been responsible for the sale of a property. In fact, she was not the selling agent and the sale could not be attributed to her in any way. Both the agent and her real estate company were convicted and fined.


Sponsorship's and endorsements

To promote a product or service, your business may want to use an endorsement from a prominent person or organisation. Any endorsement claims must be true, and the person or organisation must agree that your business can make the claim.

It is illegal to make false or misleading claims that a product or service has the support or endorsement of any person or organisation when it does not. Such endorsements include medical or product safety certification. Businesses must also not claim the endorsement of a fictitious or disbanded organisation.

You should only make a claim that someone uses a certain product if they do. Any claims made by the person endorsing the product or service must also be true and current.

Example: A business supplied free exercise books to schools, recovering the cost from advertising that appeared on the books. An employee falsely claimed to be the chair of the local school committee when approaching potential advertisers. The business also falsely claimed that the scheme had been endorsed by two government departments. The business was convicted and fined.

The Commerce Commission does not endorse or approve any organisation, person, scheme or marketing strategy, and making this claim will breach the Fair Trading Act.


Tests and surveys

The results of tests or surveys which are favourable to a product or service may be quoted in advertising. If this is done, the results must not be distorted to make them appear more favourable. Businesses should be able to provide evidence to substantiate the accuracy and relevance of the results, should they be questioned.

Alluding to a non-existent test or survey will also breach the Fair Trading Act. It is also important that any statements made do not mislead consumers as to the nature, extent or standard of any test or survey.


Image advertising

Image advertising is when a business attempts to create a favourable image of itself or its products or services in the minds of consumers.

For example, a business may try to convey an image of being environmentally friendly by using scenery in advertising or designs with dolphins or plants. Alternatively, you may use a well-known personality, with appropriate associations, to promote a product and strengthen its image.

If a representation has been made, it may be in breach of the Fair Trading Act if it is found to create an impression which cannot be substantiated. Likewise advertising should not create an image for your product or service which cannot be backed up by the facts.


Puffery

The law does not prohibit 'puffery' exaggerations which are so obvious that they are unlikely to mislead anyone. However, you must still take care that you do not make claims that are seemingly factual when they are not actually true.

Read more about Jargon, exaggerations and puffery.