The competition regulatory agency had picked up on Endeavour Consumer Health's prominent use of the term 'pharmacy strength' in its promotional material and product labelling, as it sparked concern over the possibility of misleading consumers.
While the agency acknowledged that the company's Red Seal Pharmacy Strength line of products — sold in supermarkets — were generally more potent or complex than the regular range of Red Seal supplements, it emphasised that none of the products in the range contained sufficient amounts of regulated substances to substantiate a solely pharmaceutical status.
Misleading mishap
Commissioner Anna Rawlings said: "The Commission believes that the term 'pharmacy strength' is likely to mislead reasonable consumers about the potency or effectiveness of these products, or to draw unsound comparisons between them and competing products.
"We are concerned that use of the 'pharmacy strength' term is not merely confusing, but may indicate that the range is endorsed or approved for sale in pharmacies when it is not. Some consumers may also think the range is not usually available in supermarkets or outside pharmacies, when this is not the case.
"These representations can in turn create misleading consumer impressions about the effectiveness or value of the treatment."
In its official media release, the Commerce Commission stated that using such a term would likely constitute a breach of several sections of the Fair Trading Act 1986, involving potentially misleading practices, as well as false claims and misleading representations.
Closely watched
Rawlings added: "It's important for traders to consider how their marketing claims will be perceived by reasonable consumers, and to ensure that they can back up their marketing claims, particularly when consumers are not in a position to test them themselves.
"The Commission has just released a short video with advice on avoiding making false, misleading or unsubstantiated claims of this nature."
The video's message was "if you can't back it up, don't say it", and warned that marketing claims that cannot be proven by credible sources — such as independent certification boards — can incur large fines and other penalties for companies making said claims.
Responding to a query from NutraIngredients-Asia, Endeavour's marketing director Sue Millinchip said: "Endeavour Consumer Health used the 'pharmacy strength' description on a small range of higher-potency supplements that are typically of strengths consumers would seek to purchase in pharmacies.
"While Endeavour does not agree with the Commerce Commission's view that the consumer could be misled by the use of 'pharmacy strength' labelling, we respect the Commission's decision and have agreed to modify the terminology used to describe these products."
The Commission will not be taking any further action against Endeavour, though its warning letter will be kept in view if the latter continues to make such claims or repeats this conduct in future.
Business talk
Endeavour's parent company, EBOS Group Limited, acquired Red Seal, a natural health products business, for US$58m in 2015.
This was in line with the group's Asia expansion plans, which outgoing CEO Patrick Davies recently called "a logical progression".
Sales of Red Seal products have seen considerable growth in countries such as Japan, Taiwan and South Korea. Currently, EBOS has distribution arrangements in China, Singapore, Malaysia and South Korea, but intends to add to its existing export markets.
Its overall profits for the half-year ended 31 December 2017 were reported as a record US$55.6m, higher than the previous year's US$50m.
Davies will step down on 31 March, and will be replaced by CFO John Cullity.
The group, which is publicly listed on the NZ and Australian stock exchanges, specialises in the marketing, wholesale and distribution of healthcare, medical and pharmaceutical goods, and has over 2,700 employees across Australasia.