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Back up any claims about your products

If something sounds too good to be true, it probably is. That was what the Commerce Commission concluded when it looked into claims made by a solar panel systems retailer which suggested that installing a solar system would significantly increase property value; generate double-digit financial returns and combat dramatically rising power prices.

The claims were made by New Zealand Home Services Limited (NZHS) on its website and on flip charts used during sales presentations. The Commerce Commission has concluded the company is likely to have breached the Fair Trading Act by making unsubstantiated representations.

“It is important for traders to properly substantiate claims which cannot easily be verified by the consumer,” says Ritchie Hutton, the Commission’s Head of Investigations. “Solar panel installation requires significant up-front cost and in our view NZHS made claims about the financial benefits of installing solar systems without sufficiently backing up those claims in the New Zealand market.”

The ComCom provided quoted evidence of the claims NZHS made:

  • “Installing a solar system increases the average property value by 3 to 4% and houses that have a solar system installed usually sell twice as fast as other properties on the market”
  • “In many ways, your solar power system is a financial product – one that is capable of generating annual returns ranging anywhere from 10% to more than 30%”
  • “the cost of power is always increasing – in this case, between 2.5 to 7% each year”
  • “over the past 20 years, electricity prices have risen between 2.5% and 7% every year”.

It requested NZHS provide materials to substantiate these claims, describing what was submitted as “of varying degrees of reliability”. Some were from overseas sources and not relevant to the New Zealand market, and others were created or compiled after the representations were made.

The Fair Trading Act requires the person making any given representation to have “reasonable grounds” for making it at the time it was made.

NZHS has removed the representations from its website and sales presentations. Baltic amber product retailer and wholesaler Baa Baa Beads has previously been cautioned for making health claims about its product, and this year, Fujitsu became the first trader convicted under the provision for its claims about energy efficiency.

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