Archive | Commerce Commission

Lawyer says interest in class action grows as steel mesh sentence awaited

on Friday 27 July 2018 in Commerce Commission, Court, District court, Gainz, Regulation, Sectors, Securities – NZ, Steel & Tube

Class action specialist, Auckland lawyer Adina Thorn, said yesterday Steel & Tube Holdings Ltd’s 24 guilty pleas last November relating to false & misleading representations about steel mesh had boosted interest in a proposed class action.

Steel & Tube pleaded guilty in November to 24 of 29 charges laid by the Commerce Commission relating to false & misleading representations concerning 500E earthquake-grade steel mesh. A sentencing hearing was held in the Auckland District Court in May but no sentence has been handed down yet.

Ms Thorn said: “This has led to further owners from across New Zealand signing up for a proposed steel mesh class action against Steel & Tube.

“Our registrations of interest are currently running at a high level and we expect that the sentencing itself will encourage more owners to join the proposed class action against Steel & Tube.

“The proposed action is funded, which means that while funding is in place owners will face no out-of-pocket costs, as all the legal, technical & court costs involved in a claim of this scale will be picked up by the funder in return for them receiving a share of any proceeds of success.”

Ms Thorn said the proposed class action was designed to deliver compensation for the stress & uncertainty for property owners who had ended up with non-compliant steel mesh in their homes & driveways: “The mesh is there forever. Everyone wants to know their home is compliant. Steel & Tube cannot give that assurance – we know the mesh is non-compliant. What we don’t know enough about is performance of that non-complaint mesh in an earthquake. That uncertainty is stressful & unacceptable. We are seeking for owners to be compensated for that.

“This mesh was sold between about March 2012 & April 2016 and much of it was used in the rebuilding of Canterbury following the earthquakes there. However, the mesh people were buying was supposed to be earthquake-grade, when it wasn’t.”

Link: Steel class action

Earlier stories:
23 May 2018: Review puts Steel & Tube ebit loss at $38 million
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Thorn release.

Commission opens investigation into Fulton Hogan’s Stevenson acquisition

on Friday 15 June 2018 in Commerce Commission, Construction, Gainz, Infrastructure, Land use, Regulation, Sectors

The Commerce Commission has opened an investigation into Fulton Hogan Ltd’s proposed acquisition of Stevenson Group Ltd’s construction materials business.

The commission said yesterday it would consider whether the acquisition would be likely to result in a substantial lessening of competition in any relevant market in breach of section 47 of the Commerce Act. The acquisition is due to be completed by 31 July, but the parties haven’t applied for clearance for it.

Fulton Hogan is one of New Zealand’s largest roading & infrastructure construction companies. The commission said it would focus initially on the potential competitive effects of the proposed acquisition on quarry markets in Auckland & North Waikato.

It would also consider whether any competitive effects arise from Fulton Hogan’s proposed acquisition of Stevenson’s concrete plants, transport, laboratory services and associated plant & equipment.

The commission seeks input to its investigation by Friday 29 June.

The sale would leave Stevenson’s with its property development & mining operations. Its biggest property interest is the 360ha Drury South industrial park it’s begun developing.

Related stories:
7 April 2017: Kiwi Property plans new town centre next to Stevenson’s Drury development
30 August 2013: Drury South industrial area plan change & MUL extension approved

Attribution: Commission release.

“Cynical & deliberate” repossession practices earn Allan Hawkins’ companies fines & refund orders, commission seeks banning orders

on Friday 1 June 2018 in Commerce Commission, Court, District court, Finance, Financiers, Gainz, Regulation, Sectors

2 finance companies headed by former Equiticorp boss Allan Hawkins – Budget Loans Ltd & Evolution Finance Ltd – were fined $720,000 in the Auckland District Court yesterday on 125 charges under the Fair Trading Act.Judge David Sharp also ordered the companies to pay $53,000 emotional harm reparations to 9 victims and $38,000 in refunds & credits to borrowers for repossession tactics he described as “cynical & deliberate”.

The Commerce Commission is seeking banning orders against Mr Hawkins, now 76, and his elder son, Wayne Hawkins, who was also a director at the relevant times, following this sentencing & the earlier conviction of Budget Loans on 34 charges under the Fair Trading Act in 2010.

6 years of misrepresenting repossession rights

The Commerce Commission’s general counsel for competition & consumer, Mary-Anne Borrowdale, set out the companies’ practices. She said that, over 6 years from 2009 until 2014, Budget Loans misrepresented its right to repossess goods and recover interest & costs from borrowers. It also misrepresented amounts borrowers were required to pay under attachment orders and made misrepresentations about the benefits of refinancing existing loans.

Budget bought the distressed loan books of National Finance 2000 Ltd in 2006 and Western Bay Finance Ltd in 2008, and has twice been convicted for its handling of them. After the company was fined in 2010, it undertook to return $500,000 in overcharged interest & fees to borrowers.

In 2016, Budget Loans was convicted on 106 charges but 19 charges were dismissed. The Commerce Commission successfully appealed the dismissal decision, and Budget Loans’ application for leave to appeal to the Court of Appeal was dismissed in November 2017.

Mr Hawkins founded 1980s high-flier, the Equiticorp group. After its demise in the 1987 sharemarket collapse, he & other Equiticorp executives & an advisor were tried in relation to financing arrangements behind the group’s $166 million purchase of NZ Steel Ltd from the Government in 1987. Mr Hawkins was sentenced to 6 years’ jail in 1993.

After yesterday’s court hearing, Ms Borrowdale said: “The court acknowledged today that Budget Loans attempted to create cashflow by getting Western Bay & National Finance borrowers to pay as much as possible for as long as possible. It continually added costs & interest to loans and then repossessed essential goods from borrowers without notice when they couldn’t pay, regardless of whether it was legally entitled to do so. “The costs of the repossession were, for the most part, higher than the value of the goods and sometimes Budget Loans simply threw repossessed goods away rather than selling them. It also obtained judgments against some borrowers, but continued to add interest & costs and demanded more from borrowers than the courts had awarded, and to misrepresent its right to repossess.

“Where loans were not secured, Budget Loans sought to convince some borrowers to sign new, secured loans by telling them that they would get a discount on their loan balance. However, the amount of the discounted loan was higher than the amount the borrower was actually required to pay.

“Budget Loans’ conduct & misrepresentations kept vulnerable borrowers in a cycle of debt & repossession. It knowingly engaged in illegal repossessions of essential items from people that it knew were already living in hardship. The financial & emotional distress caused by this conduct to borrowers & their families should not be underestimated.”

83 of the charges were for misrepresentations around repossession, including where there was no valid right to repossess a secured item of property, such as a vehicle or household goods, or where there was no outstanding loan balance to be paid.

“In some cases Budget Loans stripped houses almost bare. In other cases, it repossessed items that it should have known were of low value, and dumped them. Its own loan notes include such comments as ‘someone’s great idea to undertake an illegal repo’ and ‘debtor not to know we can’t repo’.”

29 charges were for adding interest & costs to a loan balance after repossession, when that is not allowed under the Credit Repossession Act.

Ms Borrowdale said: “One borrower declared herself bankrupt when told her loan had ballooned from about $9000 to $57,000. In fact she had less than $2500 to pay at that time. 10 charges were for misrepresentations about adding interest to loans, beyond amounts in attachment orders issued by the courts. One borrower’s loan balance was $8600 following an attachment order, but it was ‘recalculated’ to nearly $56,000.”

The final 3 charges were for misrepresentations about the benefits of refinancing with Budget Loans.

Allan Hawkins is now sole director of Budget Finance & its shareholder, Cynotech Securities Ltd. He & his wife, Laurel, own 99.98% of Cynotech.

He is also sole director of Evolution Finance. Its owner, the previously NZX-listed Cynotech Holdings Ltd, went into liquidation in 2013 after close funding supporters decided they’d no longer pay its overhead & infrastructure costs.

Earlier stories:
19 April 2017: Judge told to reconsider 19 dismissed charges against Hawkins loan companies
118 July 2016: Hawkins’ finance companies guilty on loan contract enforcement
7 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
31 July 2013: Hawkins goes to McDonald Vague for Cynotech liquidation
11 July 2013: Cynotech share trading halted after backers end support
15 June 2011: Cynotech loss increases as it clears decks
12 August 2010: NZX refuses Cynotech request for waiver
11 August 2010: Cynotech suspended
4 August 2010: Cynotech talks departure, NZX talks suspension
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
16 June 2010: Cynotech slips to loss
14 April 2010: Remaining Cynotech shares to move to NZAX
20 January 2010: Hawkins renews Cynotech privatisation bid
23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months
9 October 2006: Allan Hawkins buys National Finance (Payless Cars) loan book

Attribution: Commission release.

First companies sentenced arising from steel mesh investigation

on Thursday 26 April 2018 in Commerce Commission, Court, District court, Gainz, Regulation, Sectors

2 related companies, Timber King Ltd & NZ Steel Distributor Ltd, have been fined $400,950 for making false & misleading representations relating to their steel mesh products, which are used to strengthen buildings. NZ Steel Distributor imports steel from China and Timber King was the retailer.

They’re the first companies sentenced after Commerce Commission investigations into steel mesh sales, which began after the commission received a complaint from a Timber King customer in August 2015.

Auckland District Court judge Robert Ronayne heard the case in December and handed down his decision on Tuesday, fining Timber King on 5 charges and NZ Steel Distributor on 2 charges under the Fair Trading Act. The 2 companies pleaded guilty to making false, misleading & unsubstantiated representations relating to their TS10 steel mesh between June 2015 & February 2016.

From a starting point of $660,000, Judge Ronayne reduced the penalties by 10% for co-operation and 25% for early guilty pleas, and another 10% for claimed inability to pay a fine that big, although the judge was sceptical about the audit & accounting evidence provided to him.

Fake certificate

Judge Ronayne said the customer above bought 3 sheets of TS10 steel mesh from Timber King, noted the mesh had no tags and asked for a copy of the test certificate demonstrating compliance with the standard. After he received a photograph of a batch tag, the customer sought further verification of compliance. In reply, Timber King sent the customer a certificate on the letterhead of external building product testing laboratory SGS NZ Ltd.

Judge Ronayne: “As a result of further enquiries, it was revealed that the certificate was fake and had not been produced by SGS. SGS had not carried out testing of the mesh to determine compliance with the standard. Instead, the certificate had been created by an employee of Timber King using a genuine SGS test certificate that had been obtained in relation to testing of a different product and altering it so that it appeared to show that TS10 had been tested & found to comply.”

Jackie Liu is a director of both companies and, Judge Ronayne said, was for all intents & purposes the controlling mind of both companies. He owns 75% of the shares in Steel Distributor and effectively controls a 55% holding in Timber King through holding companies, Three Brothers Group Ltd & NZ Liu Family Trustees Ltd. He’s sole director of both.

Ringo Liu is also a director of both Timber King & Steel Distributor. He owns 25% of the shares in Steel Distributor and effectively controls a 45% holding in Timber King through Three Brothers.

This in a quake-prone country?

Judge Ronayne said: “It is quite obvious in New Zealand, given our history of earthquakes & the consequences of them, that there is a vital need for consumers to rely on representations as to standard compliance and, in particular, earthquake standard compliance.”

He concluded that the companies were “grossly negligent” in the steps they took to ensure that the product complied with the standard: “The creation of the fake certificate can only have been deliberately carried out in order to provide an additional false assurance of compliance with the standard.

“The use of non-compliant steel mesh, especially in the context of earthquake compliant mesh, has actual & potentially enormous consequences for consumers, for competitors and for the reputation of the building industry. Very strong specific & general deterrence is required in these circumstances.”

Mesh went into 32 homes

Timber King sold 2600 sheets of TS10 over a 9-month period, of which 614 are known to have failed both aspects of the standard and the others to have failed its testing requirements. Judge Ronayne said it appeared the 614 sheets went into the ground slabs for 31 homes and a suspended concrete floor of another home: “5 homes were considered to be high risk, 24 medium risk & 3 low risk. The 5 high risk homes were then referred to an engineer who considered one of them to be ‘of concern’. Obviously, this exercise has not been without cost.”

The judge added: “The misleading conduct appears to have been carried out with a focus to remain competitive in the market. It can therefore be assumed that this gave an unfair competitive advantage over compliant competitors.”

Background

The Commerce Commission has filed charges against a number of companies relating to false & misleading representations about 500E steel mesh. In 500E, the ‘E’ stands for earthquake, and the NZ Standard specifies strength & ductility (elasticity) requirements for steel reinforcing materials. The standard also specifies the procedures (ie, sampling & testing) that must be followed to comply including:

manufacturing methods that must be used by steel manufacturers
chemical, mechanical & dimensional requirements of mesh sampling & testing of each batch of mesh, and
identification & labelling of different grades of mesh.

To be sold in New Zealand as 500E grade steel mesh, the mesh must be produced in accordance with the requirements of the standard. If mesh is produced in any other way, it cannot be described as 500E mesh. The Ministry of Business, Innovation & Employment is the building regulator, and sets & enforces the standards & Building Code. The commission can investigate misleading or deceptive claims about compliance with the standard.

Other inquiries

The commission has carried out a series of investigations into steel mesh following the complaint in August 2015. Following its investigations:

Fletcher Steel Ltd was issued with a warning
United Steel Ltd & Pacific Steel (NZ) Ltd were issued with compliance advice
Brilliance Steel Ltd pleaded guilty to 20 charges and will be sentenced on 25 May
Steel & Tube Holdings Ltd pleaded guilty to 24 charges and is awaiting sentencing
The commission filed 59 charges against Euro Corp Ltd in December 2017.

Links:
Timber King & NZ Steel Distributor judgment
Fletcher Steel warning
United Steel & Pacific Steel compliance advice

Earlier stories:
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried
25 April 2016: Commission lifts ‘stop’ on Euro Corp steel mesh

Attribution: Judgment, commission release.

Steel & Tube owns up to mesh label & testing guilty pleas

on Wednesday 29 November 2017 in Commerce Commission, Gainz, Regulation, Sectors, Securities – NZ, Steel & Tube

After revelations in news outlets this morning that Steel & Tube Holdings Ltd had pleaded guilty – in August – to 24 charges of making false & misleading representations about its seismic mesh products, the company issued a statement to the NZX confirming the guilty pleas.

The company set out numerous dates concerning testing, logos & methodologies, but didn’t mention that it had gone from co-operating with the Commerce Commission to guilty pleas over 3 months ago. It will be sentenced in March.

Steel & Tube interim chief executive Mark Malpass said in today’s statement to the NZX: “On 7 June 2017, Steel & Tube confirmed that the Commerce Commission had filed charges against the company under the Fair Trading Act in relation to 500E grade seismic mesh. The charges in regards to compliance with the testing standard for seismic mesh relate to the application of testing methodologies only, not the performance characteristics of the seismic mesh.

“12 charges relate to the inadvertent use of a testing laboratories logo at the bottom of the test certificates of SE62 mesh. Steel & Tube acknowledged the mistake in March 2016 and immediately removed the logo.

“The remaining 12 charges relate to the application of testing methodologies in the applicable standard, not the performance characteristics of the mesh.

“Steel & Tube has been co-operating with the commission to reach an appropriate resolution of the charges and has entered guilty pleas to the charges.

“Steel & Tube takes quality & compliance very seriously and, since April 2016, the company has had external accredited laboratories testing seismic mesh. The company has also taken significant steps to enhance its quality & product assurance systems.

“These charges relate to historical matters that are before the courts and the company cannot comment further.”

Others too

As if to make itself look not so bad, Steel & Tube added: “The commission has previously confirmed it has filed charges against 2 other companies in relation to false & misleading representations about seismic mesh. The commission has also said previously that it expected to lay charges against one other company, and that investigations continued into another.”

Background

Steel & Tube also added some background – which, through this 2-year episode, has made the company look less bad, even good, for its proactive approach.

Mr Malpass said: “There were significant interpretational issues with the standard for testing seismic mesh. The ambiguities in the standard led to Steel & Tube calling for a Government/industry review of the testing standard and, in November last year, the clarification that Steel & Tube had sought was issued by the Ministry of Business, Innovation & Enterprise.

“Clarification of the standard gives all seismic mesh manufacturers & sellers certainty regarding how seismic mesh is to be tested to ensure it complies with the standard. It also gives building owners reassurance that all seismic mesh will now be tested in the same way.”

Earlier stories:
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Company release.

Customers billed though their fire extinguishers weren’t serviced

on Tuesday 28 November 2017 in Commerce Commission, Gainz, Regulation, Sectors

The Commerce Commission has issued a ‘stop now’ letter to Aero Fire (NZ) Sales & Service Ltd (Mira Singh) for charging customers to service, test, refill & recharge fire extinguishers, then not providing the service.

Aero Fire operates mainly in Auckland & Hamilton. Commissioner Anna Rawlings said the company had confirmed it would comply with the commission’s requests.

Ms Rawlings said the commission’s investigation showed Aero Fire charged customers for refilling, pressure testing or recharging over 300 fire extinguishers, but the company had admitted it performed none of those services: “From information obtained, it appears that only 2 of those extinguishers were pressure tested & recharged by a third party for Aero Fire. In our view the conduct may breach the Fair Trading Act.

“Aero Fire has been asked to immediately cease making false or misleading representations relating to the servicing of fire extinguishers, including that it operates in accordance with the relevant NZ Standard, when it does not.”

The commission also asked Aero Fire to cease misleading conduct, including the punching of maintenance tags to indicate pressure testing had been done, when it had not.

Ms Rawlings said the commission was continuing its investigations.

Attribution: Commission release.

Commission sets out preliminary issues on Daiken takeover of Dongwha MDF business

on Wednesday 18 October 2017 in Business sales, Business sales, Commerce Commission, Fletcher Building, Gainz, Market, Regulation, Sectors, Securities – NZ

The Commerce Commission published a statement of preliminary issues yesterday relating to Daiken NZ Ltd’s proposed acquisition of Dongwha NZ Ltd.

It’s a standard but comprehensive list of competition checks & balances (see the link below).

Daiken lodged its application on 3 October. The commission has invited submissions by Thursday 2 November and is scheduled to make a decision on the application by 30 November. However, the decision date could be extended.

Daiken is the New Zealand subsidiary of Daiken Corp, a Japanese company specialising in the manufacture & supply of wood-based construction materials. In New Zealand, Daiken manufactures & supplies medium density fibreboard (MDF) from a plant it operates in North Canterbury.

Laminex gets supply agreement

Under a product supply agreement with Daiken, Laminex would continue to be supplied with raw MDF from the Southland plant.

Daiken said the agreement would enable Laminex to continue to compete with it and with New Zealand’s third raw MDF manufacturer, Nelson Pine Industries Ltd, in the supply of raw MDF to customers in New Zealand.

Daiken submitted that Dongwha NZ was a “fringe competitor” in the supply of raw MDF within New Zealand because it had long been primarily export focused and, setting aside its sales to Laminex, accounted for a very small proportion of sales in New Zealand.

Daiken also submitted that the proposed merger would not give rise to a material lessening of competition in the manufacture & supply of raw MDF in New Zealand because:

Nelson Pine is the largest competitor in the New Zealand market at present, and would continue to exert significant competitive constraint on the merged entity, including by being able to divert significant volumes destined for export to New Zealand customers if market opportunities were to arise;
raw MDF is sold in a global commodity market, meaning that prices to New Zealand customers are pinned to conditions in that global market, rather than by standalone competitive dynamics in the New Zealand market;
overseas manufacturers of raw MDF in Australia, Asia & South America could import & supply raw MDF in New Zealand if New Zealand manufacturers were to price raw MDF above global market levels;
substitutability of MDF for particle board placed additional competitive constraint on the supply raw MDF in New Zealand;
new entrants could be incentivised to enter;
customers are highly price conscious, push back in negotiations on price increases, and are willing to switch suppliers if they can obtain a cheaper price; and
the merger would not materially change the existing degree of competition in New Zealand because the product supply agreement Daiken & Laminex would enter into ancillary to the merger would ensure that Laminex has sufficient volumes to continue to compete, as market opportunities arise, with the merged entity & Nelson Pine in the sale of raw MDF in New Zealand.

The parties

Dongwha is 80% owned by Dongwha International Co Ltd (incorporated in Hong Kong, controlled by Dongwha Group of South Korea) and 20% owned by Fletcher Building Ltd subsidiary Laminex Group (NZ) Ltd. In New Zealand, Dongwha manufactures & supplies MDF from a plant it operates in Southland.

Its minority shareholder, Laminex, buys MDF from Dongwha for its own wood products business in New Zealand. Laminex also on-sells some of the MDF it purchases from Dongwha to other parties.

Dongwha bought the New Zealand business from US timber company Rayonier Wood Products LLC in 2005, and Laminex bought 20% from Dongwha in November 2007.

Link:
Commerce Commission, clearances register, Daiken-Dongwha

Attribution: Commission release & website.

Vector to repay consumers after acknowledging breach

on Sunday 9 July 2017 in Commerce Commission, Gainz, Regulation, Sectors, Securities – NZ, Vector

Vector has reached a settlement with the Commerce Commission for an unintended breach of its regulated price path.

The breach arose in April 2013 when Vector restructured its prices to enable residential consumers to benefit from either a low user fixed charge or standard user tariffs.

Vector chief financial officer Dan Molloy said on Friday: “While Vector was legally prevented from unilaterally switching consumers onto the optimal tariff for their usage pattern, it relied on electricity retailers to identify & proactively request Vector to switch those consumers who would benefit from a low use fixed charge tariff.

“Vector assumed that competition in the electricity retail market would ensure retailers selected the most beneficial tariffs for their customers. This did not occur. The Commerce Commission noted that this has highlighted the need for consumers to check that, if eligible, the low use tariff is being used as it could save households up to $200/year.”

Mr Molloy said Vector would return $13.9 million to Auckland electricity consumers by reducing the amount of revenue it recovers over 2 regulatory years starting in April 2018. In the 2018 financial year, Vector’s electricity revenues (& ebitda) will be $900,000 lower than they would otherwise have been, and the rest will be spread across the 2019 & 2020 financial years. The $13.9 million to be returned to consumers also includes accumulated interest of $3.8 million.

Attribution: Company release.

Commission rules on Juken J-frame labelling

on Friday 30 June 2017 in Commerce Commission, Gainz, Regulation, Sectors

The Commerce Commission has made 3 determinations regarding labelling of J‐frame laminated veneer lumber manufactured by Juken NZ Ltd.

The commission said this week Juken’s J-frame lumber:

didn’t meet the requirements of NZS 3640
was incorrectly labelled as H1.2, and
may not have complied with AS/NZS 1604.4 because it doesn’t carry an “E” label signifying that it’s an envelope treatment.

The commission said its decision was about labelling and it made no judgment about the durability & performance characteristics of Juken’s J‐frame product or whether it was fit for purpose.

The commission added: “J‐Frame has a BRANZ appraisal and a CodeMark certificate. These are unaffected by the Commerce Commission decision. This means that J‐Frame can be used as an alternative solution where the H1.2 hazard class applies. If J‐Frame is specified in plans for a use in situations where the H1.2 hazard class applies, then a building consent authority is obliged to accept this, on the basis of the CodeMark certificate.

“If consented plans specify ‘H1.2’ and a code compliance certificate has not yet been issued, then a consent variation will be needed if the builder uses (or proposes to use) J‐frame.”

Attribution: Commission release.

Updated: Commission files 29 charges against Steel & Tube over mesh

on Thursday 8 June 2017 in Commerce Commission, Gainz, Regulation, Sectors, Securities – NZ, Steel & Tube

Published 7 June 2017, updated 8 June 2017:
The Commerce Commission said on Wednesday it had filed 29 charges against Steel & Tube NZ Ltd for making false & misleading representations about its steel mesh product known as SE62.

Steel & Tube responded, which appears at the foot of this article.

The commission said it had filed the charges in the Auckland District Court under the Fair Trading Act. They relate to conduct between 1 March 2012 & 6 April 2016 and were part of the commission’s wider investigation into steel mesh.

The commission said in today’s release: “The charges allege that Steel & Tube made misleading representations on their batch tags, batch test certificates, advertising collateral & website that SE62 was 500E grade steel, when it was not. The charges also allege that false & misleading representations were made by Steel & Tube that SE62 steel mesh had been independently tested & certified, when it had not. This included using the logo of an independent testing laboratory on SE62 test certificates when the product had not been tested by the laboratory.”

The commission also filed charges this year against Timber King Ltd & NZ Steel Distributor Ltd in relation to false & misleading representations about 500E steel mesh. The commission said these companies had entered guilty pleas and would be sentenced in August. The commission expects to lay charges against one other company, and is continuing its investigations into one more company.

Background

The commission began investigating after receiving a complaint on 5 August 2015 raising concerns about the validity of claims being made by 3 companies selling steel mesh in New Zealand. This complaint related to problems with a particular size of 500E mesh, which is ductile steel mesh often used in concrete slabs like house foundation slabs & driveways.

The Australia/NZ standard (AS/NZ 4671:2001) mandates various physical characteristics required of steel mesh, and the testing methods that must be applied during their production. In April & May 2016 the commission entered into enforceable undertakings with 3 companies that ensured 500E grade steel mesh could only be sold once it passed specific stringent testing.

In November 2016 the Government made changes to testing requirements, increasing the number of samples which need to be tested, clarifying how that testing is done and requiring testing be done by internationally accredited testing laboratories. The changes were fully implemented on 30 May 2017.

Steel & Tube responds

Steel & Tube said it had been co-operating with the commission throughout its investigation and was aware of the decision to file charges: “The commission’s charges against Steel & Tube in regards to compliance with the testing standard relate to the application of testing methodologies only, not the performance characteristics of the seismic mesh.

“Steel & Tube is working with the Commerce Commission to reach an appropriate resolution of the charges, however cannot comment further as the matter is before the court. Steel & Tube continues to stand behind its products and, since April 2016, all of the company’s seismic mesh has been tested externally by accredited laboratories.”

Earlier stories:
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Commission release.

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