Ashley & Martin Could Not Back Up 98% Success Rate For Hair Loss Treatment

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.

The hair loss treatment company repeatedly claimed that its programme, costing up to $5,000, had a 98% success rate. 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 no longer makes the 98% success rate claims.

There is more information on unsubstantiated representations on the Commerce Commission’s website here.

Background
Ashley & Martin
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.

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 are entitled to rely on the accuracy of claims made about the products they buy and businesses should ensure that they have sufficiently credible information to hand to support the claims they make, when they make them. It is an offence for a trader to make a claim about a good or service without reasonable grounds for doing so, whether or not the claim is also proved to be false or misleading in breach of other provisions of the Fair Trading Act. You can watch our video

If you can’t back it up, don’t say it

and see more about unsubstantiated representations

here

.

Relevant cases

• In 2022, Ego Pharmaceuticals was fined $280,000 in the Auckland District Court, after it made unsubstantiated claims about the Sun Protection Factor (SPF) of two sunscreen products.
• In 2019, Kiwipure Limited was found guilty of making unsubstantiated claims about the benefits and effectiveness of its magnetic water filtration system.
• In 2015, Baa Baa Beads received a warning from the Commission after it failed to substantiate its claims about the therapeutic benefits of its Baltic amber products.

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