The Warehouse could face court action if an investigation found pyjamas it sold were to blame for a five-year-old boy's burns.
Callum Williams-Legg has spent the past two weeks in Christchurch Hospital being treated for burns to his chest, stomach, arm and thigh after his pyjamas caught fire shortly after he sat next to a gas heater.
The Commerce Commission launched an investigation on Tuesday after it received a complaint and sample of the pyjamas, which was now being tested, communications manager Jackie Maitland told NZPA today.
The Warehouse has denied its Pjays pyjamas caused the horrific burns and declined to pull the range from shelves.
The commission, which polices standards set by the Commerce Ministry, could issue warnings, make settlements, and ultimately launch court action if it appeared standards had been breached, Ms Maitland said.
The Fair Trading Act also provides for fines up to $100,000 for companies to be imposed by the courts.
The safety standard for children's nightwear says garments must be labelled Low Fire Danger, which the Pjays range was.
The Warehouse group performance improvement manager Phil Jamieson said the fabric used in the pyjamas had passed several independent safety tests and 190,000 had been sold without incident.
The Warehouse may be prepared to help the family, Mr Jamieson told National Radio today without specifying what form that might take.
Callum's father, Ken Legg, said the Dunedin family was considering pursuing compensation.
Mr Legg and his wife Stacy wanted to raise awareness about the dangers of the Chinese-made Pjays pyjamas, and to have them recalled.
"Low fire danger should not have caused our son such severe burns. I don't want this to happen to any other child," Ms Williams said yesterday.
The pyjamas "combusted" as he walked away from a gas heater even though he sat about a metre away from it.
Mr Jamieson said yesterday he remained confident about the performance of the pyjamas, and they would stay on shelves, pending the outcome of the commission investigation.
Several independent international testing agencies, including one in Australia and one in China, had tested the flannelette fabric and it had passed all necessary safety requirements.
"The garment and fabric is made in China but the fabric is a common type used by multiple retailers and in locally manufactured products," Mr Jamieson said.
"The important thing is to reinforce that people must be vigilant with children with heaters," he said.
But Ms Williams said Callum was not too close to the heater.
The pyjamas had been washed before Callum had worn them, as recommended.
Callum had his bandages changed yesterday. He had developed an infection in his leg and although it was under control, it was something else for him to put up with, she said.