3 Jun 2011

Celebrity endorsement liability 'unclear'

10:11 am on 3 June 2011

The Advertising Standards Authority says more detail is needed about what is covered by a proposed law that would fine celebrities up to $1 million for making false statements when endorsing financial services.

Commerce Minister Simon Power has drafted the bill as part of a review of the securities law.

The role of celebrity endorsements was raised following the collapse of several finance companies, prompting the Government to review the regulations.

Under the proposed changes, celebrities who make misleading statements in a product disclosure statement or advertisement will be liable for a civil penalty of up to $1 million. Companies will be liable to penalties of up to $5 million.

The Advertising Standards Authority says the definitions of endorsement or a false statement are not made clear.

The authority also questions whether there is a difference between doing a voiceover for a commercial and appearing in a television advertisement.

And lawyer Steven Price told Nine to Noon that many questions remain, such as whether a celebrity is making a misleading statement if they believe assurances they are given, or do not have the knowledge to ask the right questions of companies they are endorsing.

Consumer New Zealand chief executive Sue Chetwin welcomes the proposals as the celebrities are chosen because they lend credibility to products and services.

She told Morning Report she suspects some celebrities do not know much about the products they are representing.

The minister, Simon Power, says celebrities will not be considered liable if a product fails and they have not made misleading statements.

A draft of the proposed changes will be released for public consultation in August.