Euro Corporation Limited (Euro) has been fined $361,000 for making false or misleading and unsubstantiated representations relating to its earthquake grade steel mesh products, known as SE615.
Auckland District Court Judge M-E Sharp sentenced Euro on 14 charges brought by the Commerce Commission under the Fair Trading Act. Euro pleaded guilty to making false or misleading and unsubstantiated representations for its SE615 steel mesh products which it marketed and sold as being earthquake grade steel mesh (known in the industry as 500E grade) between January 2012 and August 2015.
Euro is the final company to be sentenced as a result of a series of investigations into steel mesh the Commission carried out in 2015 and 2016.
Euro both manufactured SE615 steel mesh in New Zealand and imported it from overseas. The company failed to comply with the testing procedures set out in the Australian/New Zealand Standard (AS/NZS 4671:2001) for reinforcing steel when testing locally made steel. This meant that the product could not be described as being 500E. Euro also did not have reasonable grounds to make representations that SE615 mesh it imported was 500E grade. In addition, Euro represented that all of its batches of SE615 mesh had been independently tested and certified when that was not the case. The charges relate to approximately 137,900 sheets of locally manufactured SE615 mesh and 104,900 sheets of imported SE615 mesh.
Commission Chair, Anna Rawlings said, "Standards are in place to give public confidence that buildings in New Zealand are constructed with materials that meet prescribed requirements. Consumers have no choice but to trust and rely on representations that companies make about compliance with Standards, at least in part because they cannot verify the performance characteristics of building materials themselves. It is critical that applicable Standards are adhered to and properly described to consumers."
In her judgment, Judge Sharp said "Standards are solutions that are promulgated in order to make buildings, inter alia, safe. Failure to comply with them, can lead to significant prejudice to the consumer public especially where the departure has been such as to render unsafe the use of a product. The Commission is correct therefore in suggesting, given that we are dealing here with a product related to earthquake safety, compliance is critical and a deterrent response is appropriate."
In February 2016, the Commission issued a Stop Now Letter requesting that Euro stop representing its SE615 mesh as 500E grade steel mesh complying with the Standard. Euro complied with that request. The Commission's request was withdrawn in May 2016 after Euro agreed to court enforceable undertakings requiring specific independent testing for each batch of SE615 mesh.
The finalised written judgment of Judge M-E Sharp was released in April 2021 and a copy is available on our case register.
Background
Penalty
The maximum penalty for the charges increased during the charge period. Six charges related to conduct prior to June 2014 and have a maximum fine of $200,000 per charge. The remaining eight charges relate to conduct after June 2014 and have a maximum penalty of $600,000 per charge.
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 produce steel of the specified standard, 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. "E" grade mesh is required in certain applications, including to demonstrate compliance with parts of Acceptable Solution B1/AS1 which were introduced following the Canterbury Earthquakes. The Ministry of Business, Innovation and Employment (MBIE) is the building regulator and sets the Standards and Building Code. The Commission can investigate misleading or deceptive claims about compliance with Standards.
Steel mesh cases
The Commission filed charges against a number of companies relating to false and misleading representations about 500E steel mesh. The outcome of these cases are detailed below with links to the relevant information on the Commission's case register:
- Steel and Tube Limited – fine reduced on appeal to $1,560,000 in November 2020
- Brilliance Steel Limited – fined $540,000 in August 2018
- Timber King Limited and NZ Steel Distributor Limited – fined $400,950 in April 2018
- Fletcher Steel Limited – issued with a warning in 2016
- United Steel Limited – issued with compliance advice in 2016
