Supplement Firm Fined For Mislabelling Products And Found Guilty Of Failing To Supply Information

Invercargill firm Gateway Solutions Limited (formerly trading as Silberhorn Limited) has been fined $194,400 in the Dunedin District Court for misrepresentations it made about its deer velvet health supplements. The company and its director and majority shareholder, Mr Ian Carline, were also found guilty of failing to supply information to the Commission during its investigation.

Silberhorn produced and sold health and dietary supplements, including a range of health supplements made from deer velvet. The range included products endorsed by golfer Sir Bob Charles. The deer velvet supplements were marketed as effective to support strength, activity and joint mobility.

In February 2014 the Commission received a complaint alleging that Silberhorn’s deer velvet health supplements sold from March 2011 contained less deer velvet than was described on the product labels, with capsules being topped up with carob – a manufacturing aid.

In November 2017 the company pleaded guilty to 26 charges under the Fair Trading Act for conduct that was liable to mislead the public as to the nature or characteristics of the products, including four charges for claims made on its website www.silberhorn.co.nz.

In a written judgment issued on 8 June, Judge K J Phillips said the actions in underfilling the capsules were "deliberate acts” representing “a serious deficiency in the actual amount of product being supplied to the consumer.”

Judge Phillips found that Mr Carline believed his deer velvet product was “a superior powder” because of a change in the production process and “his belief, albeit not supported by scientific research or by any objective analysis, was a belief that he had through his own use of the deer velvet powder.” However, Judge Phillips found that although Mr Carline held that belief, it was not supported or established by other evidence that the judge accepted.

The mislabelling of the products was “deliberate ... on the part of the defendant company and that hidden from consumers was that the capsules contained a lesser amount of powder than what was stated to be in each capsule as was detailed on the labels, attached to the container they were in. Similar representations were made in the marketing and selling of deer velvet products through the company’s website,” Judge Phillips said

“It would have been impossible for “Joe Bloggs” a prospective consumer to have realised the lesser amount of deer velvet powder in the capsules he was consuming,” said Judge Phillips.

Commission Chair Anna Rawlings said Silberhorn instructed its manufacturers to produce products containing less deer velvet than its consumers were promised on the product labelling and marketing.

“Products that were marketed as ‘premium’ and as containing ‘100% deer velvet’ or ‘traces of carob’ actually contained up to a third carob. This was liable to mislead its consumers about the true composition of the products,” Ms Rawlings said.

“Consumers had no way to determine whether the promised quantities of active ingredient were included in the capsules. Consumers have a right to know what they are ingesting and are entitled to trust that product labels are accurate. This is especially the case when the products claim to support health and consumers are unable to independently verify the truth of the claims made.”

The retail value of affected products was approximately $5 million, with 22 batches of product containing reduced quantities of deer velvet. This translates to more than 120,000 bottles and packs of the products, and more than 11 million capsules.

Failing to supply information to the Commission
Silberhorn along with its director and majority shareholder Ian Allan Carline also both pleaded guilty to one charge of failing to produce documents required by a statutory notice issued by the Commission during its investigation into the matter. Mr Carline was fined $6,885.

Judge Phillips said Mr Carline’s “culpability for this conduct is at the very high end of such offending”, holding that the conduct went as far as obstructing the Commission’s investigation into the matter.

“There was obstruction, unreasonable conduct and response and a total failure to comply with the information requested of the company and Mr Carline” said Judge Phillips.

For the Commission, Ms Rawlings said “this judgment underlines the importance of co-operation with the Commission’s investigations and compliance with the Commission’s requests to produce information relevant to our work. Parties who refuse to comply with statutory notices to produce information, or who obstruct the Commission’s investigations, risk criminal conviction and a fine.”

Background
Deer velvet
Deer velvet is derived from the growing bone and cartilage that develops into deer antlers and is marketed as aiding a variety of health conditions, as well as supporting joint mobility. Deer velvet retails at around $95 per kilogram + GST. Carob retails for approximately $6.95 per kilogram.

Carob is an inert substance used as a manufacturing aid.

The products affected were:
Sir Bob Charles SPORTSVEL x100 capsule bottles – 250mg (retailed at $52 on www.silberhorn.co.nz during offending period)
Sir Bob Charles SPORTSVEL x180 capsule bottles – 250mg
Deer Velvet capsules x80 capsule bottle – 250mg
Sir Bob Charles SPORTSVEL Red Pack x 30 capsules – 300mg
Sir Bob Charles SPORTSVEL Black Pack x50 capsules – 300mg (retailed at $40 on www.silberhorn.co.nz during offending period)

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