Souvenir companies fined for scamming tourists

Last updated 12:46 02/04/2013

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Two companies run by a father and son have been hit with big fines after selling tourists mis-labelled goods for up to thousands of dollars more than they were worth.

Top Sky Holdings was charged with 12 breaches of the Fair Trading Act, and was fined $140,000 in the Auckland District Court for selling high-priced souvenirs under false claims.

The Rotorua retail outlet sold Peruvian-made alpaca rugs as made in New Zealand from local alpaca. The rugs were priced between $4000 and $8000 each, when Peruvian alpaca rugs typically retail for between $1000 and $1600.

The company's managing consultant, Haidong Chen, was charged with 28 breaches of the Fair Trading Act, and fined $24,500 for his conduct relating to both Top Sky and a second company, Kiwi Wool.

His father, Jinming Chen, also faced 18 charges and was fined $10,500 in relation to Kiwi Wool.

That company was charged with 18 breaches of the Fair Trading Act, and fined $84,000.

The father and son made their admissions together, the Commerce Commission said.

The court was told that Kiwi Wool makes and sells wool duvets to retail outlets and tour groups. These were labelled as being 100 per cent alpaca when in fact the alpaca wool content was only 20 per cent.

Kiwi Wool also manufactured and sold duvets labelled as 100 per cent New Zealand merino lamb wool, when the wool content was not merino.

The cost of making the duvets was about $70, but they were sold to tourists for between $400 and $1000.

Commerce Commission chairman Mark Berry said tourists were willing to pay significantly more for New Zealand premium wool products. Selling items as New Zealand-made when they were not, was deliberately misleading buyers, he said.

Tourists from China, Korea and Taiwan were taken to several premises and paid significantly more for items such as alpaca rugs and merino or alpaca duvets than they were worth, as a result of misleading representations, the Commerce Commission said.

Tourists represented a valuable segment of New Zealand's economy, Berry said.

"The Commission's role is to protect the interest of consumers," he said.

The charges brought by the Commerce Commission under the Fair Trading Act followed search warrants executed on 10 premises in Rotorua and one in Auckland in August 2011.

The multi-agency searches, aided by Tourism New Zealand, involved the Commerce Commission, police, customs, immigration, the Wildlife Enforcement Group.

In sentencing on Thursday, Judge Nevin Dawson said the defendants demonstrated a large degree of wilfulness and carelessness in the misrepresentations.

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The defendants' conduct undermined fair competition in the market and unfairly disadvantaged other traders, he said.

The Commerce Commission said there are six further companies and five individuals facing charges as a result of the investigation who are still to be dealt with by the Rotorua courts.


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