Hair-loss treatment service provider Ashley & Martin has been fined $367,500 for making unsubstantiated marketing claims in breach of the Fair Trading Act.
The Fair Trading Act requires businesses to have “reasonable grounds” for a claim about products or services when they make it.
Between November 2016 and May 2021, the company repeatedly claimed and marketed that its program – costing up to $5000 – had a 98 per cent success rate though it did not have a reasonable basis for these assertions made on its website, radio and television advertising.
Vanessa Horne, the GM of fair trading at the Commerce Commission, said claims about the effectiveness of products, particularly medical treatments, are very difficult for consumers to verify themselves.
“Consumers purchasing medical or other personal treatment products invest their trust, confidence and money to fix a specific problem.
“A claim of a 98 per cent success rate could have the potential to sway consumers into making significant health and financial decision. They are entitled to assume that the claims made can be backed up.”
To counter the investigation, Ashley & Martin provided the commission with a customer satisfaction survey of 109 customers from 2007 and clinical trial results of 10 customers from 1999. The commission did not find these “sufficient” to scientifically support the claim.
“The study and survey were based on extremely small sample sizes relative to Ashley & Martin’s customer base. The study may also have excluded unfavourable results and was based, in part, on a treatment formulation that has since changed,” said Horne.
Judge Nicola Mathers of Auckland District Court, said: “It is not only detrimental to the public but also competitors who substantiate their representations at a significant cost.”
Horne said businesses making claims about the effectiveness of a product must have credible evidence to support them. The business now no longer makes the “98 per cent success” rate claims.
In September, online gift-box retailer Occasion Box was warned by the commission for making false and unsubstantiated claims misleading online shoppers.
