An Australian skincare company has been fined NZ$280,000 in the Auckland District Court after making unsubstantiated claims about the Sun Protection Factor (SPF) of two of its sunscreens.
Ego Pharmaceuticals supplied its products into the New Zealand market via a wholesale distributor and was investigated by the Commerce Commission after concerning results came from testing by Consumer NZ in 2019.
Ego was later found to not have a reasonable basis to make the performance claims listed on two of its sunscreen products.
"As new information about product testing became available to Ego, it should have recognised that it did not have a reasonable basis to make the performance claims it was making about some sunscreen products already on the market," Commerce Commission Chair Anna Rawlings said in a statement on Wednesday.
"Businesses have an obligation to ensure that representations can be substantiated, and this is an ongoing obligation. If new information comes to light which impacts on the claim being made, as it did in the Ego case, a business should reassess the implications of that evidence and revisit its product packaging and promotion if required."
In 2019 and 2020, Ego claimed that two of its products - the Ego Sunsense Ultra SPF50+ and Ego Sunsense Sensitive Invisible SPF50+ - provided "very high" protection for consumers. The products both claimed they had been certified SPF50+ in accordance with the Australian and New Zealand Standard for sunscreens.
When the products were first released in Aotearoa in 2016, Ego is said to have had reasonable grounds to make the claims. However, this stopped being the case from February 2019 due to an accumulation of adverse SPF results from various labs between 2017 and 2019, followed by fraud allegations in August 2019 about the testing facility it relied on.
In a judgement released by the Auckland District Court on November 25, 2022, Judge Dawson said the principle sentencing factor in this case must be deterrence.
"While none of the harm to persons using the product or commercial competitors can be accurately quantified, its existence needs to be acknowledged in the sentence imposed."
Rawlings said the case highlights the importance of businesses having evidence to support claims they make about their products, from the product's inception and throughout the time it continues to be sold.
"We expect representations about the effectiveness of products can be supported by credible and reliable evidence, at the time the representations are made and throughout the supply of the products, particularly if new evidence calls into question the reliability of the earlier evidence," she said.
"This is particularly important because effectiveness claims are difficult, if not impossible, for consumers to be able to verify themselves."
The two products have not been distributed in the New Zealand market since December 2019, with Ego issuing a withdrawal notice for the sunscreens in June 2020.
The Commerce Commission encourages consumers with any concerns about a sunscreen to contact the supplier or manufacturer in the first instance. If consumers feel a business has breached the Fair Trading Act, they can complain on the Commission's website.
If you can't back it up, don't say it
Ego has been found guilty on two charges under Section 12A of the Fair Trading Act. Section 12A of the Fair Trading Act 1986 prohibits the making of unsubstantiated representations and came into effect in June 2014.
The law prohibits a trader from making an unsubstantiated representation about goods or services. A representation is unsubstantiated if the trader does not, when the representation is made, have reasonable grounds for making it.
When considering whether a business has reasonable grounds for a claim, the following factors are taken into account under the law:
the nature of the goods or services about which the claim was made
the nature of the claim
any research steps or other steps taken by or on behalf of the business making the claim, before the claim was made
the nature and source of any information the business relied on to make the claim
the actual or potential effects of the claim
compliance with the requirements of any standards, codes or practices relating to the grounds for the claim.
The prohibition does not apply to representations that a reasonable person would not expect to be substantiated.
Consumers are entitled to rely on the accuracy of claims made about the products they buy and businesses should ensure they have sufficiently credible information to hand to support the claims they make, when they make them.
It is an offence for a trader to make a claim about a good or service without reasonable grounds for doing so, whether or not the claim is also proved to be false or misleading in breach of other provisions of the Fair Trading Act.