Ashley & Martin (NZ) Limited has been fined $367,500 for making unsubstantiated marketing claims about its widely advertised hair loss treatment between November 2016 and May 2021, breaching the Fair Trading Act.
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The hair loss treatment company repeatedly claimed that its programme, costing up to $5,000, had a 98% success rate, Commerce Commission New Zealand said. The claims were made on its website, in radio and in television advertising. However, Ashley & Martin did not have a reasonable basis for its claims.
Commerce Commission General Manager of Fair Trading, Vanessa Horne, says claims about the effectiveness of products, particularly medical treatments, are very difficult for consumers to verify themselves, making this an important case for reminding businesses that they must have a proper basis for the claims they make about their products.
“Consumers purchasing medical or other personal treatment products invest their trust, confidence and money to fix a specific problem. A claim of a 98% success rate could have the potential to sway consumers into making a significant health and financial decision. They are entitled to assume that the claims made can be backed up.”
Ashley & Martin provided the Commission with a customer satisfaction survey of 109 customers from 2007 and clinical trial results of 10 customers from 1999. The Commission argued that combining these two results was not sufficient to scientifically support the claim.
“The study and survey were based on extremely small sample sizes relative to Ashley & Martin’s customer base. The study may also have excluded unfavourable results, and was based, in part, on a treatment formulation that has since changed,” Ms Horne says.
In the Auckland District Court on 5 December 2022, Judge Nicola Mathers said: “I note in particular that it is not only detrimental to the public but also competitors who substantiate their representations at a significant cost.”
“…the important facts in this case which distinguish it from the other cases [referred to by the parties for sentencing purposes] relate to the length of the charge period and the extensive advertising by television and radio and on its website, together with the very dominant claim of 98% success.”
The Fair Trading Act requires businesses to have reasonable grounds for a claim about products or services when they make it.
“If you are a business making claims about the effectiveness of a product, then these claims must be supported with credible evidence at the time you’re making them,” Ms Horne says. "You must also make sure the claims accurately reflect the information you hold and do not stretch or exaggerate beyond that.”
Ashley & Martin is a wholly owned subsidiary of Ashley & Martin Pty Limited (AMPL), an Australian Registered Company that provides hair loss treatment programmes and hair replacement services to customers through its clinics in Australia, New Zealand and Singapore.
The average cost of a one-year hair treatment programme ranged between $3,000 and $5,000 in New Zealand.
Ashley & Martin no longer makes the 98% success rate claims. ■
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