An Invercargill health supplement firm has been fined almost $200,000 for selling $5 million worth of mislabelled deer velvet supplements endorsed by New Zealand golfer Bob Charles.
Gateway Solutions, which formerly traded as Silberhorn, was fined $194,400 in the Dunedin District Court earlier this month for deliberately selling a range of health supplements with less deer velvet than described on the product labels, replacing it with manufacturing aid, carob.
The firm's director and majority shareholder Ian Carline will pay an additional $6,885 for failing to supply documents to the Commerce Commission during an investigation, which dates back to a complaint received in February 2014, that the firm's health supplements - sold from March 2011 - contained less deer velvet than described on its label.
The products, which included a range of the company's 'Sir Bob Charles SPORTSVEL' capsules, retailed for between $40 and $52 at that time.
Commission chair Anna Rawlings said the retail value of affected products was about $5m across 22 batches of product containing reduced quantities of deer velvet through about 120,000 bottles and packs of the products, or more than 11 million capsules.
The commission said it had not followed up with Charles, considered one of the country's best golfers, as to whether he was aware of his product endorsement.
A serious deficiency
In November 2017 the firm pleaded guilty to 26 charges under the Fair Trading Act for conduct that was "liable to mislead the public as to the nature or characteristics of the products," including four charges for claims made on its website.
However, sentencing was delayed to allow for a disputed facts hearing in August 2018 and subsequent appeal in November of that year.
In a written judgment issued on June 8 of this year, Judge Kevin Phillips said the under-filling of capsules were deliberate acts representing "a serious deficiency in the actual amount of product being supplied to the consumer."
Judge Phillips found Carline "believed his deer velvet product was a superior powder because of a change in the production process.
"His belief, albeit not supported by scientific research or by any objective analysis, was a belief that he had through his own use of the deer velvet powder."
However, Judge Phillips found that, although Carline held that belief, it was not supported or established by other evidence that the judge accepted.
The mislabeling of the products was "deliberate ... on the part of the defendant company and that hidden from consumers was that the capsules contained a lesser amount of powder than what was stated to be in each capsule as was detailed on the labels, attached to the container they were in. Similar representations were made in the marketing and selling of deer velvet products through the company's website," the judge said.
A right to know
Rawlings said Silberhorn had instructed its manufacturers to produce products containing less deer velvet than its consumers were promised on the product labeling and marketing.
She said products that were marketed as 'premium' and as containing '100 per cent deer velvet' or 'traces of carob' actually contained up to a third carob.
"This was liable to mislead its consumers about the true composition of the products."
She said consumers therefore had no way to determine whether the promised quantities of active ingredient were included in the capsules.
"Consumers have a right to know what they are ingesting and are entitled to trust that product labels are accurate. This is especially the case when the products claim to support health and consumers are unable to independently verify the truth of the claims made."
Deer velvet is derived from growing bone and cartilage that develops into deer antlers, and is purported to aid a variety of health conditions and support joint mobility. It generally retails at about $95 per kilogram compared to carob which costs about $7 per kg.