3 Key Responsibilities As An Online Small Business

The Commerce Commission of New Zealand has recently highlighted a few key things to avoid as a business owner. These mostly revolve around the obligations that you owe your consumers.

In this article, we’ll highlight three important obligations your small business owes to your consumers. We’ll also discuss what you are owed as a small business interacting with other businesses. 

1. Your Obligations When You Advertise Online 

Everyone wants their business to look as good as possible online. However, this information has to be accurate and truthful. It does not matter if you intend to make false or misleading advertising laws. This is the reason that the Commerce Commission wants small business owners to be aware of the law surrounding false or misleading advertising. This is why it’s important to know what false or misleading advertising is, what makes it illegal and the penalties. 

What Counts As False Or Misleading Advertising?

False or misleading advertising is advertising that contains statements that aren’t true or create a false impression. You should always be aware of what the overall impression your advertising gives. 

Some examples of potentially false or misleading advertising practices are: 

• Comparing your product to another. If you are comparing your product to another in an online advert you must be careful. You can legally compare the price, quality, range or volume of your products. However, if you falsely claim your product is superior, this will count as a false or misleading claim. 
• Advertising an unavailable discount or sale. It is commonplace to advertise a sale when your business has one available. However, if the sale is disingenuous or extremely limited it may be labelled as ‘bait advertising.’ This is advertising that is designed to bring the customer in under an impression of getting a deal but then not offering the deal. 

So What Makes It Illegal? 

New Zealand law, specifically the Fair Trading Act 1986, governs advertising by businesses, online or not. For false and misleading advertising, it is sections 9, 10, and 13 of the Fair Trading Act that prohibits such practices. 

The penalties for contravention of this law can be significant. For individuals, such as those running a small business, the fine for breaking this law can be substantial. For corporations, penalties can include hefty fines or even criminal charges depending on the severity of the breach. 

2. Your Obligations Regarding Online Reviews Of Your Business

Lots of people base their decision on where to spend their money on online reviews. It is an important part of a business with an online presence to manage and maintain. However, online review platforms can also be easily manipulated. As a business owner, you cannot make or allow untrue reviews to be made on your platform. The reviews need to be genuine. 

A review cannot be portrayed as genuine if it was written by yourself or someone in your business, a business you directly compete with, or a paid reviewer who falsely claims to have experienced your product. 

But I Have Seen Businesses Offer Freebies For Reviews Before? 

Offering incentives for reviews is legal. However, the incentive needs to be available for anyone who makes a review – good or bad. You must also let all prospective reviewers know if they leave a review – good or bad – the incentive is still available. 

What About Editing Online Reviews? 

As a business, you are encouraged to edit your online reviews – if they are fake, false or misleading. While a one-star may bring your average star count down, you should still not edit or delete this review because it is misleading.

You should always read the policy of the platform on which people review your product. These policies contain instructions of when you should edit your reviews and complying with their policy will likely keep you out of trouble. 

Alternatively, if there was a misunderstanding between your services/product and the customer, you can always reach out to them to rectify the issue. If successful, you could ask them to change their rating of your business. 

What Are The Consequences? 

If your online reviews make a false or misleading representation to your consumers then you will be in breach of the Fair Trading Act. This is because it will qualify as misleading and deceptive conduct which is illegal under the same sections as false and misleading advertising. The possible penalties are also significant. 

3. Do I Have Any Obligations After The Customer Clicks Away?

You must guarantee your product or service. This applies to any business selling goods or services. A guarantee is a promise that your product or service will be as you said, suggested or advertised it would be. These guarantees apply automatically and are separate to any warranties you may offer. 

So What Must I Guarantee Exactly? 

There are different guarantees that you must offer if you are dealing with a product or a service. 

You must guarantee your product:

• Is of acceptable quality. 
  • I.e. it matches descriptions of the product made, it is fit for its purpose, comes with no hidden defects, the possession of the product by your customer cannot be challenged. 
• Matches the description given to the consumer 
• Is fit for any purpose the consumer has made known

You must guarantee your service:

• Is provided with reasonable care and skill 
• Will be fit for a particular purpose or achieve a result that the consumer has made known
• Is provided within a reasonable time when there is no agreed end date

What Happens If My Product Or Service Does Not Live Up To Its Guarantee?

The customer has a right to a remedy if your product or service does not live up to its guarantee. This remedy comes in different forms according to if you are offering a product or a service. 

If you are selling a product and it fails the guarantee, your customer has the legally enforceable right to a:

• Refund, 
• Replacement, 
• Repair 

If you are selling a service and it fails, your customer has the legally enforceable right to:

• Cancellation of the service or,
• If loss or damage has occurred – a right to compensation for said loss or damage. 

The requirement to guarantee your products and the customers’ right to remedy if they do not live up to these guarantees is contained in the Consumer Guarantees Act 1993. Specifically, the requirements are contained in Part 4 of the Act. 

As A Small Business, Am I A Consumer?

Of course! As a business, you need to interact with other businesses. This means you are a consumer and can be protected under the same laws applied above. 

The Commerce Commission does want small businesses to have steps in place to take caution. They advise doing thorough checks of any business you become involved with. Before interacting with another business, ask questions, get evidence of any claims made, have contracts in place and protect yourself.

Still Unsure? 

Getting your rights and obligations to the consumer is really important. Knowing what obligations you owe as a small business helps you know what rights you have when interacting with other businesses as well! If you are unsure of an obligation that you are owed or owe a customer Get in touch with us at [email protected] or on 0800 002 184 for a free, no-obligations chat

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