The Commerce Commission let an Auckland company carry on selling steel mesh even after it knew the firm had forged a test certificate.
A worker spreads ready-mix concrete over steel mesh (file) Photo: 123RF
Timber King and a related company, NZ Steel Distributor, were fined $400,000 in the Auckland District Court last week for misrepresenting seismic reinforcing mesh that's used in house concrete slab floors.
The commission is defending its approach.
The ruling by Auckland District Court Judge Robert Ronayne shows that when a customer asked for a test certificate in mid-2015 (they were the first customer to do so) to prove the mesh was up to standard for strength and stretchiness a company employee forged one.
She used the letterhead from an accredited laboratory called SGS, and the names of two SGS employees on the certificate.
The lab found out and told the Commerce Commission in October that "the certificate was a forgery, in that it did not relate to testing carried out by it as stated", the ruling said.
The commission kept investigating - the mesh investigations snowballed the following year to ensare half a dozen other companies, including major construction industry players.
Timber King kept on selling mesh: between November 2015 and February 2016, it sold 1970 sheets, enough for about 100 houses.
Asked by RNZ why it didn't step in, for instance, by asking Timber King to voluntarily and temporarily stop selling mesh, the commission said in a statement that the fake certificate was for an initial batch of mesh imported from China.
This batch was all sold before it found out about the fake certificate, it said.
A second imported batch was different, it added.
However, the court ruling shows that while this second batch was better quality than the first batch, later testing would prove it was still substandard.
The second batch had an authenticate test certificate from an SGS lab in China, the commission said.
However, the court ruling makes clear these certificates did not comply with New Zealand standards either.
The commission went on to say it "cannot order a firm to cease selling a product, but can apply to the court for an injunction to prevent ongoing misleading representations".
Yet, in March 2016, the commission asked - rather than ordered - two other companies, including industry major Euro Corporation, to stop selling mesh while it investigated them. The companies complied; they have since both also been prosecuted.
Asked if by its inaction, the commission had exposed customers unnecessarily to buying substandard mesh, it said: "No. The Commission has prioritised steel mesh cases because of the significant harm they can cause consumers, competitors and the reputation of the building industry."
Timber King sold about 600 sheets of the first batch of mesh in mid-2015. Some of this mesh scored as low as one fifth of the standard in accredited tests.
An Auckland Council inquiry found that 32 houses had this mesh put in their floors. Five homes were considered high risk and referred to an engineer who found one was "of concern"; 24 were medium risk; and three low risk.
"A number of risk factors were considered ... in order to triage the risk," said the judge. "Obviously, this exercise has not been without cost."
RNZ is waiting to hear back from the council what became of the other 1,970 sheets from the second batch.
Timber King - in a business plan - said it had switched from local suppliers to directly importing from China as it was looking for an edge to remain competitive.
The judge said it made "completely inadequate" efforts to meet quake standards.