Four more souvenir companies fined for misleading tourists

Four more souvenir companies fined for misleading tourists

Four companies and four individuals have been convicted and fined a total of $601,900 for selling visiting Asian tourists a range of imported alpaca goods as “Made in New Zealand”, and making claims that duvets were 100% alpaca or merino wool when they were not.

This is the second tranche of companies being sentenced for breaches of the Fair Trading Act. In March two other companies, Top Sky and Kiwi Wool, and two individuals were convicted and fined a total of $259,000 for similar breaches.

These charges resulted as part of a multi-agency initiative involving the Commission, Police, Customs, Immigration and Wildlife Enforcement Group, assisted by Tourism New Zealand, where 10 premises in Rotorua and one in Auckland had search warrants executed on them in August 2011.

Organised tour groups from China, Korea and Taiwan were taken to several of the premises and were sold items such as alpaca rugs, alpaca and merino duvets. Due to misleading representations, the tourists paid significantly more for these items than they were actually worth.

“The Commerce Commission makes no apology for taking strong action against companies that deliberately mislead consumers in this way. The tourist market, and New Zealand’s reputation for producing premium wool products must be protected,” said Commerce Commission Chairman Dr Mark Berry.

“When tourists come to our shores they must be able to trust that what they are being told is true. Re-labelling items as being made in New Zealand when they are not, misleads buyers and can harm the New Zealand tourism industry,” said Dr Berry.

The misrepresentations were not only made on labels and in brochures but also verbally by staff selling the goods. In one case tourists were told the alpaca items came from ‘snow alpaca’ that are ‘raised above the snow line in the South Island’. No such animal exists.

The defendants were sentenced in the Rotorua District Court after earlier admitting the breaches of the Fair Trading Act, detailed below. In his reserved judgement released yesterday, Judge Thomas said the untrue representations about the origins of the Alpaca products and contents of duvets were very important in the eyes of the target market [tourist shopping tour market] and in achieving sales at a high level and also at a higher price than was merited.

He further described the conduct as “a major fraud by any description” and “serious dishonest offending at a high level”.

Hyeon Company Limited

Charged with 30 breaches of the Fair Trading Act, was fined $105,000
Imported alpaca rugs from Peru, removed the ‘Made in Peru’ labels and replaced them with ‘proudly hand made in New Zealand’ labels.
Hyeon wholesaled the rugs and contended that by “servicing” the rugs on arrival from Peru (essentially brushing, repairing and putting a backing on the rugs) this meant the rugs were made in New Zealand.
When these rugs were retailed, the rugs sold for between $4,000 and $8,000 each when Peruvian alpaca rugs sold elsewhere for between $1,000 and $1,600 each.

Duvet 2000 Limited

Charged with 30 breaches of the Fair Trading Act, was fined $200,000
Ordered alpaca rugs from Peru via Hyeon Company Limited, and sold them with the Hyeon applied ‘proudly hand made in New Zealand’ label even though they knew they were imported.
Manufactured and sold duvets stating on the labels they were ‘100% pure alpaca wool’ when the alpaca wool content was 20%.
Manufactured and sold duvets stating on the labels they were ‘100% New Zealand merino lamb wool’, when the wool was not merino.

Mr Chae (Director of Hyeon and Duvet 2000)

Charged with 20 breaches of the Fair Trading Act and was fined $24,500
Mr Chae was charged as a party to the offending by each of his two companies (listed above).

JM Wool Limited

Charged with 42 breaches of the Fair Trading Act, was fined $182,000
Its Director Mr Jong Myung Lee faced 40 charges and was fined $21,000
JM Wool purchased alpaca rugs from Premium Alpaca New Zealand Limited and Hyeon Company Limited and knew that these rugs although labelled “made in New Zealand’ were imported from Peru.
JM Wool manufactured and sold woollen duvets with labels stating they were ‘100% pure alpaca wool’, but the alpaca wool content was only 20%.
Manufactured and sold duvets with labels stating they were ‘100% New Zealand merino lamb wool’, but the wool content was not merino.
Manufactured and sold duvets labelled as ‘Southdown wool’ when the wool used did not come from Southdown sheep.

Premium Alpaca New Zealand Limited

Charged with 10 breaches of the Fair Trading Act, was fined $56,000.
Directors Mr Yun Duk Jung and Mr Bo Sun Yoo each faced 10 charges and were fined $6,700 each.
Premium Alpaca imported rugs from Peru, removed ‘Made in Peru’ labels and added ‘Made in New Zealand’ labels. The company told the retailers they were supplying that the rugs came from Peru.

There are two further companies and one individual facing who have pleaded guilty to charges as a result of the investigation and are awaiting sentencing.

Background

The Fair Trading Act 1986 is designed to protect consumers and make competition more effective. If competition is to be effective, consumers need to be able to rely on the information provided by companies about the goods and services they offer.

False or misleading representations can distort competition and a competitive advantage can be gained by using unfair methods. The Commission is responsible for enforcing the Fair Trading Act. You can read more about the Fair Trading Act and Country of Origin claims on our Place of Origin Representations page http://www.comcom.govt.nz/fair-trading/fair-trading-act-fact-sheets/place-of-origin-representations/.

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