Commerce Commission v Brillance International Ltd [2018] NZDC 7359

Published 16 May 2019

Sentencing — false and misleading representations — reinforcing steel mesh — failures to comply with standard testing requirements — Commerce Commission v Timber King Ltd and NZ Steel Distributor Ltd [2018] NZDC 510 — Commerce Commission v LD Nathan and Co Ltd [1990] 2 NZLR 160 — Premium Alpaca Ltd v Commerce Commission [2014] NZHC 1836 — Fair Trading Act 1986, ss 10, 13(e). The defendant appeared for sentence after pleading guilty to 20 representative charges under the Fair Trading Act, relating to steel reinforcing mesh known as 147E. The defendants sold the mesh as 500E grade. The charges fell into two categories: representations liable to mislead the public, that the mesh was 500E grade and complied with the Standard for steel reinforcing materials; and false and misleading representations that the mesh had been independently tested and shown to meet the Standard. These representations were widely disseminated over the four-year period that the charges covered. The mesh in question was used in construction to strengthen buildings in the event of an earthquake. It failed in multiple ways to meet the 500E grade set by the Standard: it had not been properly aged, meaning it was probably not ductile enough to meet the Standard; was produced in over-large batch sizes; had not been properly tested; did not have proper quality data attached; and the testing certificates lacked some of the required information. Testing by an independent laboratory revealed the shortcomings of the steel mesh, with seven of 10 batches failing to meet the Standard. The defendants failed to take action to improve the mesh, and continued to knowingly make false representations that it complied with the Standard and was 500E grade, until the Commerce Commission ordered it to stop. The Court considered that the offending was very serious; the misrepresentations were deliberate (at least for the final year), and continued for a number of years. The defendants had likely gained increased sales as a result of its false claims, and its conduct had undermined both the Fair Trading Act and the Standard. The offending had potentially serious consequences, given the importance of the mesh in earthquake-proofing new buildings; it also had the potential to undermine confidence in the independent laboratory that had tested the mesh. Therefore a deterrent sentence was required. The Court adopted starting point for the fine of $600,000 for the compliance misrepresentations, and $200,000 for the independent testing misrepresentations. The defendant earned discounts of 10% for cooperation with the Commerce Commission Investigation and complying with the Commission's "stop now" letter, and 25% for its early guilty plea. The final fine was $540,000. Judgment Date: 16 August 2018.