A Rotorua business and its sole director have been fined more than $70,000 for falsely claiming their alpaca wool duvets contained predominantly pure alpaca wool.
Budge Collection Limited (Budge) and sole director, Sun Dong Kim, have been convicted and fined a total of $71,250 after each pleading guilty to four charges of misrepresenting how much alpaca fibre was in their duvets.
Budge imported duvets from China and sold them to two Auckland retailers that largely cater for the tourist shopping market.
Mr Kim and Budge admitted to falsely claiming the alpaca wool duvets contained predominantly pure alpaca wool. The claims were made on labelling, packaging and on invoices to two retailers.
Three of the Budge duvets which the Commerce Commission had tested contained less than 4 per cent alpaca fibre.
In sentencing yesterday Judge Rob Ronayne in the Auckland District Court acknowledged that Parliament had increased penalties under the Fair Trading Act threefold, and that a "substantial increase" in penalty levels was required to reflect Parliament's intention to denounce and deter these breaches of the law.
Judge Ronayne noted the misrepresentations were "virtually impossible" for retailers or consumers to detect.
"Consumers were plainly not in a position to check the composition of goods. In these circumstances, as with retail purchase, consumers place trust in the accuracy of representations. Here there was a breach of trust," he said.
Commissioner Anna Rawlings said the Commission would continue to take action against companies that misled consumers about the quality and origin of their goods.
"The tourism market in New Zealand is significant and offending of this type can reflect negatively on our country's reputation. Customers should be able to rely on accurate labelling so they can choose products of the quality they want at a price that reflects this quality."
"In this case, the price that Budge charged for duvets claimed to be predominantly "alpaca" was almost double the price charged for sheep wool duvets, when they contained just a small amount of alpaca wool."
Ms Rawlings said this was the third case taken by the Commission in recent months against companies making inaccurate claims about the composition and origin of cashmere and alpaca products.
"Alpaca duvets are marketed as being superior to wool duvets and we expect businesses to provide clear information about the products they are selling. This kind of misleading conduct is not only harmful to consumers but also to businesses who are competing in the same market," she said.
Budge's misleading claims were made in several places on the duvet packaging and labelling. The claims included wording such as 'Premium alpaca fibre and wool' and 'Natural alpaca fibre,' along with alpaca pictures.
A label in small print said that a moderate amount of premium wool and polyester was blended with alpaca wool, but this was hidden at the base of the packaging.
Budge sold its queen size "alpaca" duvets to a retailer for $185, whereas it sold a standard sheep wool or wool blend duvet for around $95.