Scorching fine for baseless claims
Australian skincare company Ego Pharmaceuticals has been fined $280,000 in the Auckland District Court after it made unsubstantiated claims about the protection factor (SPF) of two sunscreen products.
In 2019 and 2020, Ego claimed two products, Ego Sunsense Ultra SPF 50+ and Ego Sunsense Sensitive Invisible SPF 50+, provided ‘‘very high’’ protection for consumers and were ‘‘SPF50+’’ in accordance with an Australian and New Zealand standard for sunscreen products.
But Ego accepted that between February 2019 and June 2020 it did not have a reasonable basis to make the claims. That was due to an accumulation of adverse SPF results from various labs (between 2017 and 2019), followed by fraud allegations in August 2019 about the testing facility it relied on.
Ego Pharmaceuticals is an Australian-owned skincare manufacturer that supplied its products into the New Zealand market via a wholesale distributor.
In a judgment released by the Auckland District Court last Friday, Judge Nevin Dawson said: ‘‘The principle sentencing factor in this case must [be] that of deterrence. While none of the harm to persons using the product or commercial competitors can be accurately quantified, its existence needs to be acknowledged in the sentence imposed.’’
It ruled the brand had breached the Fair Trading Act, which requires businesses to ensure they have a proper basis for the claims they make about their products when they make those claims. The Commerce Commission opened an investigation into Ego following Consumer NZ’S testing in 2019 and a subsequent complaint filed with the commission.
Commission chairperson Anna Rawlings said as any new information about product testing became available to Ego, it should have recognised that it did not have a reasonable basis to make the performance claims it was making about some sunscreen products already on the market.
‘‘Businesses have an obligation to ensure that representations can be substantiated, and this is an ongoing obligation,’’ she said.
‘‘If new information comes to light which impacts on the claim being made, as it did in the Ego case, a business should reassess the implications of that evidence and revisit its product packaging and promotion if required.’’
Rawlings said the case highlighted the importance of businesses having a proper basis for the claims they made about their products when they made them, and that they continued to do so.
The two Ego products had not been distributed in the New Zealand market since December 2019. Ego issued a withdrawal notice for the products in June 2020.
If consumers felt a business had breached the Fair Trading Act, they could complain on the commission’s website.
‘‘The principle sentencing factor . . . must [be] that of deterrence.’’
Judge Nevin Dawson