Kiwipure Limited has been found guilty of making unsubstantiated claims about the benefits and effectiveness of its magnetic water filtration system, in what was the first defended case in New Zealand against a trader accused of making unsubstantiated representations.
Kiwipure pleaded not guilty to seven charges under the Fair Trading Act 1986 relating to marketing claims on its website.
Kiwipure claimed that:
- A magnetic ‘virtual ionizer’ in its water filtration system softened water.
- The benefits that consumers could expect of soft water after using the water filter, were ‘no scum build up’, ‘use less washing powder’ and ‘no scale build-up in hot water systems and pipes saves electricity and maintenance.’
- Use of the water filter would lead to a “reduction in skin irritations and eczema”.
Kiwipure sold between 300 and 400 of its claimed “world’s first” magnetic water filtration systems between 2015 and 2018, at a cost of $1,395 excluding installation. The Commission alleged that Kiwipure did not have reasonable grounds for making the marketing claims about the product.
The case was heard in the Auckland District Court in May before Judge Gibson.
Kiwipure’s website stated that the benefits of its water filtration system were “scientifically proven”. At trial the company argued that it had reviewed literature on the internet, including a report on tests conducted by a University in 2005 that Kiwipure said demonstrated the effect of treating water with a magnetic field. Kiwipure also claimed to have undertaken its own product trials that established the product’s efficacy and benefits, and that users of the system had reported satisfactory results.
The Commission argued that Kiwipure had no objectively reasonable basis for making the representations; that the University report did not demonstrate effectiveness of magnetic water treatment in domestic situations; and that Kiwipure did not test its own product in a scientific manner, instead relying on anecdotal evidence and assumptions when making the claims.
Judge Gibson held that the Commission’s case was proven, and that Kiwipure “did not go far enough in its testing and research” before it made the representations, and that the testing it did undertake was “simply inadequate”.
The representations were ‘credence claims’ which were difficult or impossible for consumers to evaluate. Many consumers would assume that the scientific claims would be supported by research, but they were not.
Judge Gibson noted that marketing claims relating to health benefits, such as those relating to skin irritations and eczema, needed to be substantiated to a higher degree than bare reliance on anecdotal evidence and limited testing. The Court accepted the Commission’s argument that consumers might rely on the health benefit claims instead of seeking proper medical advice and attention, so particular care was needed to ensure that the health claims were substantiated.
In his written judgment Judge Gibson accepted that Kiwipure was likely to have limited its testing and research because it did not have the financial resources for the necessary tests and trials – but that “a reasonable person would expect the representation[s] to be substantiated.” He also accepted the Commission’s argument that scientifically controlled testing and trials were necessary to remove unreliable subjectivity from product performance claims.
Judge Gibson affirmed that the Commission should not have to undertake tests of the product to ensure the representations made were accurate. His Honour records that Kiwipure itself needed to ensure the claims were substantiated at the time the claims were made, not later when the representations might be questioned.
The Judge also rejected submissions by the company that substantiation could be inferred from the fact that no purchasers had complained, and found that evidence of customer satisfaction following a purchase was not reliable and could not provide support for pre-purchase product claims.
Commerce Commission Chair Anna Rawlings says this case is an important precedent for the Commission, reinforcing to traders that marketing claims must be well-grounded in evidence at the time the claims are made.
“Our case did not challenge whether the product worked as described, and the Commission’s job is not to test products and services to establish whether performance claims are true in every case. In cases like this, we are challenging whether a trader had a credible basis for making the claims that it did at the time that it made those claims. The burden rests on the trader to prove the credible basis for its claims. As our published guidance says – if you can’t back it up, don’t say it,” says Ms Rawlings.
Kiwipure is due to be sentenced on February 12, 2020.
As the case remains before the court, we cannot comment further at this time.
A full version of the judgment can be found on our website.
Kiwipure was incorporated in New Zealand in 2006. It developed and distributed household water filtration systems that utilised magnets. Since 2011 Kiwipure has wholesaled and, later, directly retailed the water filter to consumers, predominantly through its website.
HRV fined over water filter claims
In October 2018, HRV Clean Water Limited (HRV) was fined $440,000 after pleading guilty to making unsubstantiated claims about the benefits of the Kiwipure water filters and for making misleading claims about the quality of New Zealand’s home water supply.
Hard water versus soft water
Hard water is the term used to describe water containing high levels of minerals. When water contains high levels of minerals, it tends to deposit these minerals onto surfaces – often referred to as “scale”. Hard water can also make soap form a scum on surfaces. Conventional methods of treating hard water (reverse osmosis and ion exchange) involve removing the minerals from water which cause it to be hard. The result is softer water and reduced scale, or scum build up.
If you can’t back it up, don’t say it
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 need to be able to rely on the accuracy of claims. It is an offence for a trader to make a claim about a good or service without reasonable grounds for doing so. You can watch our video If you can’t back it up, don’t say it and see more about unsubstantiated representations here.