Souvenir-label cheats lose alpaca rug appeal

A group of souvenir shop owners and businesses, fined for selling fake alpaca products to Asian visitors, have had their appeals to the High Court thrown out.

Rotorua-based Hyeon Company, JM Wool, Duvet 2000 and Auckland-registered Premium Alpaca New Zealand, along with their directors, had falsely claimed imported alpaca goods were "Made in New Zealand", and duvets were 100 per cent alpaca, or merino wool - when they were not.

Organised tour groups from China, Korea and Taiwan were taken to several premises where they were sold items such as alpaca rugs, alpaca and merino duvets. The tourists were misled about the origin of alpaca rugs, labelled as being made in New Zealand when in fact they were imported from Peru.

Last September in the Rotorua District Court Judge Ian Thomas convicted and fined the four companies and four directors a total of $601,900 after they pleaded guilty to breaches of the Fair Trading Act. They appealed the sentences to the High Court.

The High Court this week upheld Judge Thomas' finding that there was a significant loss suffered by affected consumers because they had no opportunity to shop elsewhere.

If the products were labelled correctly they would have paid a fraction of the prices they did.

Justice Ailsa Duffy dismissed claims the defendants did not realise the mislabelling was false or misleading because they were naive and because English was not their first language.

"This argument is not tenable, given the circumstances of the offending," she said.

"The magnitude of this fraud required a stern sentence.

"The products were knowingly sold to customers who, because they were mainly overseas visitors and English was their second language had little, if any, means of discovering this fraud."

Commerce Commission chairman Dr Mark Berry said he was pleased the sentences had been confirmed on appeal.

Dr Berry said it was important that New Zealanders and visitors to New Zealand could trust that what they were being told was true.

"Labelling and representing products in this manner not only misleads buyers but also has the potential to discredit the New Zealand tourism industry."

In April 2013 Rotorua tourism company Top Sky, and Kiwi Wool, of Auckland, and two individuals were convicted and fined a total of $259,000 for similar breaches.

Two more companies are due to be sentenced in the Auckland District Court later this year for similar conduct.