Fair Trading Act 1986 — Commerce Commission enforcement
Fair Trading Act in New Zealand — misleading conduct and unfair practices
The Fair Trading Act prohibits misleading and deceptive conduct, false representations, and unfair contract terms. It applies to all businesses, in all transactions.
📋 Fair Trading Act 1986 — Commerce Commission enforced
Who must comply?
Unlike the Consumer Guarantees Act, the Fair Trading Act applies to all commercial transactions — both consumer and business-to-business. It also applies to online conduct, advertising, and marketing. Sole traders, companies, and incorporated societies all have obligations.
Misleading and deceptive conduct (Section 9)
The most important provision
A business must not engage in conduct that is misleading or deceptive, or likely to mislead or deceive. This is a broad and objective test — it doesn't matter whether the business intended to mislead. If the conduct would mislead a reasonable person, it breaches the Act.
Examples: false pricing, misleading product descriptions, non-disclosure of material facts, fine print that contradicts headline claims.
False representations (Section 10)
Specific false statements that are prohibited include representations about:
- The nature, quality, or characteristics of goods or services
- Price — including misleading "was/now" pricing
- Endorsements or testimonials — including fake reviews
- The availability of goods or services
- A product's history or previous use
- Any affiliation or connection with another person or organisation
Unsubstantiated claims (Section 12A)
You must be able to back up your claims
Making a claim that you do not have reasonable grounds to support is an offence under the FTA. If you advertise that your product has "the lowest price in NZ" or "clinically proven" benefits, you must have evidence to support that claim before making it.
Unfair contract terms (Part 2A)
Applies to standard form consumer contracts
A term in a standard form consumer contract (terms you present to consumers on a take-it-or-leave-it basis) is unfair if it:
- Creates a significant imbalance in rights and obligations
- Is not reasonably necessary to protect the business's legitimate interests
- Would cause detriment to the consumer
Unfair terms include: one-sided cancellation rights, automatic price increase clauses, restrictions on consumer remedies, and excessively broad indemnities.
Penalties
Commerce Commission can impose penalties of:
- Up to $600,000 per breach for a company
- Up to $200,000 per breach for an individual
- Court orders requiring corrective advertising
- Injunctions preventing further conduct
- Compensation orders for affected consumers
Source: Fair Trading Act 1986. Commerce Commission:
comcom.govt.nz. General information only.
Frequently asked questions
Does the FTA apply to online advertising and social media?
Yes. The FTA applies to any commercial communication, including websites, social media, email marketing, and influencer advertising. Sponsored posts that aren't clearly marked as advertising may breach the Act.
What if a mistake was made in an ad — does that breach the FTA?
It depends. A genuine, isolated mistake that is promptly corrected is treated differently from systematic or reckless misleading conduct. But the FTA does not require intent — a misleading ad breaches the Act even if the mistake was honest.
Do comparison ads breach the FTA?
Not automatically. Comparison advertising is lawful if it is accurate and not misleading. Comparing your product favourably to competitors is fine if the comparison is fair and substantiated.
What is the Commerce Commission?
The Commerce Commission is NZ's consumer protection and competition regulator. It investigates FTA breaches, can issue warnings, file proceedings in court, and seek penalties. Consumers can also bring private proceedings under the FTA.