First sentence handed down in steel mesh investigation

26 April 2018
Release no. 119

First sentence handed down in Commission's investigation into steel mesh

Timber King Limited and NZ Steel Distributor Limited (NZSD) have been fined $400,950 for making false and misleading representations relating to their steel mesh products which are used to strengthen buildings.

In his judgment released today, Auckland District Court Judge Robert Ronayne fined Timber King on five charges and NZ Steel Distributor on two charges under the Fair Trading Act. The pair pleaded guilty to making false, misleading and unsubstantiated representations relating to their TS10 steel mesh between June 2015 and February 2016. The two companies are related, with NZSD importing steel from China and Timber King selling it to customers.

The offending involved representations made on batch tags, invoices and receipts, and on a forged test certificate which claimed the steel had been independently tested and complied with the Australia/New Zealand standard for reinforcing steel and was suitable for structural use in an earthquake zone.

In his judgment, Judge Ronayne said: “It is quite obvious in New Zealand, given our history of earthquakes and the consequences of them, that there is a vital need for consumers to rely on representations as to Standard compliance and, in particular, earthquake Standard compliance.”

He concluded that the steps taken by the companies to ensure that the product complied with the Standard were “grossly negligent.”

“The creation of the fake certificate can only have been deliberately carried out in order to provide an additional false assurance of compliance with the Standard," he said.

“The use of non-compliant steel mesh, especially in the context of earthquake compliant mesh, has actual and potentially enormous consequences for consumers, for competitors and for the reputation of the building industry.”

“Very strong specific and general deterrence is required in these circumstances.”

A copy of the judgment is available on our Enforcement Response Register.

Background

The Commission has filed charges against a number of companies relating to false and misleading representations about 500E steel mesh. In 500E the ‘E’ stands for earthquake, and the Standard specifies strength and ductility (elasticity) requirements for steel reinforcing materials. The Standard also specifies the procedures (ie, sampling and testing) that must be followed to comply including:

• manufacturing methods that must be used by steel manufacturers

• chemical, mechanical and dimensional requirements of mesh

• sampling and testing of each batch of mesh

• 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. The Ministry of Business, Innovation and Employment (MBIE) is the building regulator, and sets and enforces the Standards and Building Code. The Commission can investigate misleading or deceptive claims about compliance with the Standard.

The Commission has carried out a series of investigations into steel mesh following a complaint in August 2015. Following its investigations:

• Fletcher Steel Limited was issued with a warning

• United Steel Limited and Pacific Steel (NZ) Limited were issued with compliance advice

• Brilliance Steel Limited pleaded guilty to 20 charges and will be sentenced on 25 May

• Steel and Tube Holdings Limited pleaded guilty to 24 charges and are awaiting sentencing

• The Commission filed 59 charges against Euro Corporation in December 2017.

If you can’t back it up, don’t say it
False and misleading representations about building products are a priority area for the Commission because of the serious harm they can cause consumers. Traders must be able to back up the claims they make and if they cannot, they should not be making them. Guidance for traders on unsubstantiated claims is available on our website.

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