New Zealand Commission to retailers, “If you can’t back it up, don’t say it”

The warning comes as e-commerce and online retail continues to celebrate meteoric growth in New Zealand consistent with retail trends elsewhere around the globe, with online retail achieving sales results of more than NZ$2.2 billion during the first quarter of 2022 according to NZPost – a 31 percent increase from the results of Q1 2021 in the country.

Online gift-box retailer Occasion Box, the Commerce Commission claims, used ‘sales pops’ purchased from a third-party provider to generate pop-up notifications of “fake purchases from fictional consumers” which were likely to be misleading to website visitors about product demand for the retailer and the brand’s popularity.

“The representations were clearly false and could not be substantiated or verified against the retailer’s sales records, despite claiming to be ‘verified purchases’,” says Vanessa Horne, Commerce Commission New Zealand’s General Manager of Fair Trading, “We know that Kiwi consumers are increasingly shopping online and rely on claims businesses make on their websites.” 

“In many cases, consumers cannot establish for themselves if these claims are accurate.”

The warning issued to Occasion Box comes following another online retailer in New Zealand being subject to a fine in excess of NZ$800,000 earlier this month, for making similar claims the Commerce Commission viewed as likely to mislead consumers.

Online retailer 1-Day (now trading as TheMarket), the Commerce Commission claimed, routinely promoted sales deals as being ‘one day only’ despite often running these deals over multiple days while also programming its website to systematically reduce stock numbers visible to consumers.

As a result, the Commission found, consumers were likely to be misled as to the time in which they could make a purchase and take advantage of the retailer’s reported sales deals, as a result inherently discouraging opportunities for consumers to better consider their purchasing decisions and assess other available options.

The conduct as identified by the Commission occurred over a substantial time period, with the Judge presiding over sentencing describing it as a “central plank” of the retailer’s business strategy.

“The defendant’s method of selling was intended to encourage consumers to view these promotions as available on that date only. Given that the defendant’s business was almost entirely centred around Daily Deals, the representations had the potential to cause harm to competitors. It was both culpable and serious and caused harm to consumers in the long term,” Judge Winter of the Auckland District Court asserted in his judgment handed down in early September, “Given the lengthy period over which the defendant’s offending occurred, the nature of the offending which involved a two-pronged pressure misrepresentation of limited time to purchase and limited stock availability as well as the background guidance and experience of the company, I find the defendant’s offending was more than careless. The defendant’s offending was wilful.”

“The defendant’s conduct gave it an unfair advantage in the market place over its competitors who did not employ pressure-selling techniques of this type and therefore prevented effective competition.”

The developments against the pair of online retailers in New Zealand emerge even as online retail has gained considerable ground in the local retail market, continuing to see sales growth despite declines in total sales numbers for the country since a peak in the lead-up to Christmas last year.

But as online retail looks to continue its successes in New Zealand, this month’s developments from the Commerce Commission enforces stern warnings to retailers that aspirations should not circumvent adherence to lawful business practices.

“Businesses marketing their products in new ways to reach more consumers and generate additional sales still need to understand their obligations under the Fair Trading Act so that they don’t mislead their consumers,” Horne says, “Our message is simple – if you can’t back it up, don’t say it.”

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