LawFuel – NZ Legal Jobs Online – A popular clothing and home goods company has pleaded guilty to breaching the Fair Trading Act and has been fined $8,500 in the Auckland District Court for marketing and selling shawls advertised as silk blend pashmina, when they were not.
Between February 2007 and November 2007 Ezibuy sold the shawls with labels describing the product as a ‘pashmina’ with ‘70% pashmina and 30% silk’. Independent tests undertaken as part of the Commerce Commission’s investigation showed that the shawl was actually made of cotton and polyester, with no pashmina or silk content.
Pashmina is a premium product and shawls made from 100% pashmina can sell for up to NZD$425. Ezibuy retailed their ‘pashmina’ shawls for $19.95 and sold over 11,000 falsely labelled shawls in Australia and New Zealand. Of those 3,870 were sold in New Zealand.
The Commerce Commission’s Director, Fair Trading, Adrian Sparrow said, “The marketing and labelling of the shawls would have led consumers to believe that they were getting a good deal with a quality product at a bargain price, when they were being misled about the true nature of the material.”
Last year the Commission reached an out of court settlement with Ezibuy over mohair throws which Ezibuy advertised as ‘pure mohair’ when they were acrylic/mohair blend.
Mr Sparrow said, “The Commission expects businesses to put into place proper compliance processes to check that the labelling and marketing of their stock is accurate. Consumers rightly rely on the information supplied by business to make their purchasing decisions and the onus is on business to ensure that the information supplied is accurate.”
“It is the responsibility of businesses to ensure that the labelling on their products is accurate and, if necessary, to undertake testing to assure themselves that labels and descriptions supplied by manufacturers are correct.”
“Many consumers buy their goods from Ezibuy either by mail order or via Ezibuy’s website and so do not have the opportunity to inspect products before they are purchased. They are completely reliant on the accuracy of the descriptions in the catalogue and on the website,” said Mr Sparrow.
“Inaccurate labelling also harms other retailers. They are disadvantaged when their products are undercut by traders selling falsely labelled product purporting to be the genuine item.”
Pashmina refers to a type of fine wool and the textiles made from it. The word pashmina comes from the Persian word pashm, or wool. Genuine 100% pashmina shawls can sell for up to NZ$425.
The Fair Trading Act If the Commission decides that the labelling or representations made are likely to have breached the Act, it can take a range of enforcement actions including issuing a warning, entering into a settlement on the basis of undertakings or taking court action either through the criminal or civil jurisdictions.
Section 10 of the Fair Trading Act – misleading conduct in relation to goods – states:
“No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods”.
Section 13(a) of the Fair Trading Act – false or misleading representations – states:
“No person shall, in trade, in trade in connection with the supply or possible supply of goods or services, or with the promotion by any means of the supply or use of goods or services
(a) Make a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use”.
Court penalties for breaching the Fair Trading Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if a representation has breached the Act.
EziBuy retails clothing and home wares throughout New Zealand via the internet, mail catalogues and ten retail outlets. In Australia, EziBuy sells its products via mail catalogues and its website.
Previous Commerce Commission settlement with Ezibuy. In August 2007, in a settlement reached with the Commerce Commission, Ezibuy admitted that it had breached the Fair Trading Act by incorrectly advertising and selling an acrylic/mohair throw as a ‘mohair throw’ with ‘pure mohair pile’.
From October 2005 to September 2006, Ezibuy advertised the throw as a ‘mohair throw’ with ‘pure mohair pile’. In September 2006 the label on the throw was amended to ‘pure mohair pile woven into a wool acrylic nylon base’and the outer packaging still described the product as ‘mohair throw’ with ‘pure mohair pile’.
The Commission had a sample of the throw tested, revealing the throw was 40% acrylic, 30% mohair, 20% nylon and 10% wool.
Between October 2005 and December 2006, over 11,000 throws were sold in New Zealand through Ezibuy stores, its website and via its catalogue. As part of the settlement, Ezibuy agreed to re-label all existing stock, and to ensure that all future stock is accurately labelled and packaged. Ezibuy also placed corrective advertising in two catalogues, in all Ezibuy stores nationwide, and on its website. Any customers who considered that they were misled as to the nature of the throw were entitled to a full refund.
In August 2008, the Australian Competition and Consumer Commission (ACCC) accepted a court enforceable undertaking from EziBuy over labelling and advertising of its items described as ‘Mohair Throws’ and ‘Pashmina Shawls’. As part of the ACCC undertakings Ezibuy agreed to communicate with Australian purchasers of the shawl (for whom they have records) and to make an offer of a full refund to any customer who purchased the shawl and considered they had been misled by the labelling. In New Zealand, Ezibuy has undertaken website, catalogue and press advertising offering full refunds for the shawl, and has contacted consumers who purchased the shawl via the internet or mail order service and offered them full refunds.