Commerce Commission v Kiwipure Ltd [2019] NZDC 12149

Published 23 July 2021

Unsubstantiated representations — whether reasonable grounds for representations — water filtration — benefits of water filtration — Commerce Commission v Fujitsu General New Zealand Ltd [2018] DCR 200 — American Home Products v Federal Trade Commission 695 F 2d 681 (3rd Cir 1982) — Commerce Commission v HRV Clean Water Ltd [2018] NZDC 22699 — Pom Wonderful v Federal Trade Commission D.C. Cir 2014, 13-1060, January 30, 2015 — Re Pfizer Inc 81FTC23 (1972) — Fair Trading Act 1986, ss 12A & 12B — Commerce Committee on the Consumer Law Reform Bill — Competition and Consumer Act 2010 (Australia), s 219, sch 2. The defendant company developed a water filtration system and sold it to some 300 to 400 customers between 2015 and 2018. In doing so it made a number of representations about the benefits of its system. It claimed that the system used magnetism, which softened the water and led to benefits such as lower electricity consumption, more efficient household products, healthier gardens and a reduction in skin irritations. The Commerce Commission argued that the defendant had made seven claims that amounted to unsubstantiated representations, in breach of s 12A of the Fair Trading Act. According to the Act, an unsubstantiated representation is one that is made without reasonable grounds; it is not necessary that the representation be false or misleading, but it must be a representation that a reasonable person would expect to be substantiated. The Commerce Commission submitted that the defendant's stated grounds for its representations (including an article on an experiment conducted by a Japanese university, tests that the defendant itself had conducted, the lack of complaints from customers) were scientifically invalid and not sufficient to amount to substantiation. The defendant countered this argument by detailing the investigations and research it undertook before launching its product, and arguing that therefore it did have reasonable grounds to make its representations. The Court considered that the defendant's investigations and research were simply inadequate, and its tests and trials were too small and unscientific. The defendant did not have the resources or the willingness to undertake necessary research and development, and the fact that none of its customers had complained was irrelevant. The defendant's claims were unsubstantiated. The Court found that all seven of the charges brought to trial were proven, and the defendant was found guilty of each charge. Judgment Date: 5 September 2019.