Steel mesh investigations into five companies completed

Issued 5 December 2016
Release no. 60

Commission completes steel mesh investigations into five companies

The Commission has now completed its seismic steel mesh investigations into five of the companies under investigation. Three companies, who cannot be named at this time, have been advised that the Commission intends to issue criminal proceedings under the Fair Trading Act. Two other companies have been issued with lower-level investigation outcomes. Fletcher Steel Limited (Fletchers) has been issued with a warning and United Steel Limited (United Steel) has been issued with compliance advice. Investigations are continuing into several other companies.

The Commission began investigating seismic steel mesh in August 2015 after a complaint was laid that some steel mesh products did not comply with the Australia/New Zealand standard (AS/NZ 4671:2001) (the Standard). The Standard mandates various physical characteristics required of steel mesh, and the testing methods that must be applied during their production. The complaint related to grade 500E steel mesh, which is ductile steel mesh often used in concrete slabs like house foundation slabs and driveways.

Early mesh testing results gave the Commission concern that some steel mesh being sold in New Zealand did not meet the requirements of the Standard as to ductility (elongation). As the investigation developed, and more companies were investigated, the Commission also developed concerns about compliance with testing procedures.

The three companies who are to be prosecuted cannot be named at this time, to provide them an opportunity to seek name suppression. The Commission will be alleging that the companies misrepresented that their mesh was “500E” and complied with the Standard, when it was not and did not. The Commission will also allege that the companies made unsubstantiated representations that the mesh complied with the Standard, when it did not.

Commission Chairman Dr Mark Berry, said “Our focus has been on the claims that these companies made about the steel mesh they were selling. The Ministry of Business, Innovation and Employment (MBIE) is the building regulator, and sets and enforces the Standards and Building Code. While the Commission is not responsible for the Standard or the Code we can take legal action where we see misleading or deceptive claims about compliance.”

The Commission is aiming to the file these criminal charges in early 2017.

The Commission has warned Fletchers for engaging in conduct that was likely to breach the Fair Trading Act in relation to 19 specific batches of Fletchers 500E product. The Commission was concerned that these 19 batches did not comply with the requirements of the Standard because:
• Fletchers’ retesting of the batches was not conducted in line with the strict requirements of the Standard; and
• Fletcher’s quality data recorded some values that were lower than required by the Standard.

However, the Commission was satisfied that the mesh had the strength and ductility required by the Standard, and was therefore comfortable in restricting its response to a warning letter.

United Steel has been sent compliance advice by the Commission for similar retesting deficiencies. In its case, United retested two batches in a way that did not comply with the Standard. However, United Steel was not required to retest that mesh as it already complied with the Standard. The Commission’s advice says that where a company chooses to retest mesh, it must adopt a retesting method that complied with the Standard, to ensure that accurate results are recorded on test certificates and in its database. The Commission was satisfied that the United Steel mesh had the strength and ductility required by the Standard.

“Our investigations concerned batches of 500E seismic steel mesh sold before April 2016. The Commission has had court enforceable undertakings in place with several steel mesh providers since April to ensure more stringent testing. In addition MBIE has recently issued a clarified Standard and made changes to the testing requirements. This should give New Zealanders greater confidence that the steel mesh currently being sold in New Zealand meets the Standard,“ Dr Berry said.

As this investigation is ongoing and prosecutions will be brought against three companies, the Commission will not be commenting further at this time.

Background

Steel mesh
Ductile steel reinforcing mesh (sometimes referred to as welded wire fabric) is typically used as reinforcement in concrete floor slabs and driveways. It strengthens concrete slabs and is generally used to reduce concrete cracks and limit crack width.

The Standard
The Australia/New Zealand standard (AS/NZ 4671:2001) (the Standard) specifies both the performance characteristics of the mesh and the procedures (ie, sampling and testing) that must be followed to comply including:
• Manufacturing methods that must be used by steel manufacturers;
• The chemical, mechanical and dimensional requirements of mesh;
• The sampling and testing of each batch of mesh; and
• The identification and 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.

Our investigation
On 5 August 2015 the Commission received a complaint raising concerns with regard to the validity of claims being made by three companies selling steel mesh in New Zealand. This complaint related to problems with a particular size of 500E mesh. The first six months of our investigation focussed on the conduct of these three companies. During that time we asked each of the companies to substantiate the claims they made about compliance with the Standard.

On 4 March 2016 we announced we had asked two companies to stop selling steel mesh until our concerns were resolved. As a result of the information received during our initial investigation, in March and April 2016 we extended the investigation to other mesh suppliers. In April and May the Commission entered into enforceable undertakings with three companies that ensure 500E grade steel mesh can only be sold once it passes specific stringent testing. These undertakings are still in place.

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 will be implemented by 30 May 2017.

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