High Court upholds $600K fine against souvenir sellers

The High Court has rejected an appeal by four companies and four individuals who were convicted and fined a total of $601,900 for selling visiting Asian tourists imported alpaca goods as “Made in New Zealand”, and making claims that duvets were 100% alpaca or merino wool when they were not.

In September 2013 the four companies and four directors pleaded guilty in the District Court at Rotorua and were convicted and fined a total of $601,900 for breaches of the Fair Trading Act. Organised tour groups from China, Korea and Taiwan were taken to several premises where they were sold items such as alpaca rugs, alpaca and merino duvets.

The tourists were misled about the origin of alpaca rugs, labelled as being made in New Zealand when in fact they were imported from Peru.

False claims by two of the companies were also made about the duvets, claims they were 100% alpaca or merino wool when they were not.

The High Court decision endorses the District Court Judge’s finding that there was a significant loss suffered by  affected consumers because they had no opportunity to shop elsewhere and if the products were labelled correctly they would have paid a fraction of the prices they did.

In the High Court judgment, which confirmed the sentences, Justice Ailsa Duffy dismissed claims that the defendants did not realise the mislabelling was false or misleading because they were naïve and because English was not their first language, saying “This argument is not tenable, given the circumstances of the offending.”

Justice Duffy said “The magnitude of this fraud required a stern sentence.” The Judge emphasised that the products were “….knowingly sold to customers who, because they were mainly overseas visitors and English was their second language had little, if any, means of discovering this fraud.“

Commerce Commission Chairman, Dr Mark Berry, said “The Commission is pleased that the sentences have been confirmed on appeal. It is important that New Zealanders and visitors to New Zealand can trust that what they are being told is true.

Labelling and representing products in this manner not only misleads buyers but also has the potential to discredit the New Zealand tourism industry.”

In April 2013 two other companies (Top Sky and Kiwi Wool) and two individuals were convicted and fined a total of $259,000 for similar breaches. Two additional companies are due to be sentenced in the Auckland District Court later this year for similar conduct.

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Do we need to guess the country of origin of those prosecuted?

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