Sales & Marketing

07 Aug 2009

Made In New Zealand? Yeah Right!

If a product is marketed as 'made in New Zealand' or has its country of origin recorded as 'New Zealand' there is no doubt that this attracts consumers who in many instances are prepared to pay a premium for New Zealand made products. These consumers are often influenced by the belief that 'New Zealand made' is of a better quality or, are making a conscious decision to support local industry. The last year has seen a string of investigations by the Commerce Commission (Commission) under The Fair Trading Act 1986 (Act) for falsely claiming products were "New Zealand made". This FYI will consider the importance of the decisions and also discuss practical ways businesses can avoid the wrath of the Commission and breaches of the Act.

The Law

Section 13(j) of the Act specifically addresses origin of goods and sets out that "No person shall, 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, make a false or misleading representation concerning the place of origin of goods." The Act also prohibits behaviour that is either misleading or deceptive, likely to mislead or deceive, and/or makes a false or misleading representation. Whether consumers were actually misled or whether there was an intent to mislead is irrelevant.

'Made in New Zealand' Furniture

Following the conviction in 2007 of Knights Business Furniture Limited the Commission has continued its pursuit of manufacturers who falsely claim or imply a product is made in New Zealand. The facts in Knights were that a furniture company who manufactured chairs had a brochure distributed to retailers which advertised the chairs as being 'NZ made' with a stylised silver fern appearing underneath. However, in reality, a large proportion of the components of the chairs were manufactured overseas.

In determining whether the chairs were New Zealand made the Court heard that the base, castors, gas lift, chair adjustment levers and seat and back assemblies were imported. Whilst only some incidental parts and foam and upholstery for the seat and back support were actually manufactured in New Zealand. The Judge held that whether a product was New Zealand made was a question of fact and degree. In this case, there had been insufficient input into manufacturing the chairs to call them NZ made. Simply assembling in New Zealand parts manufactured overseas was not sufficient and it was not possible to describe products as New Zealand made in such circumstances without creating a misleading impression.

The Judge held s13(j) of the Act had been breached and that representations concerning the place of origin of goods were misleading. The Judge noted the impact of the misrepresentation had been limited as it was only distributed to retailers and not used in media or general advertising and fined the manufacturer $5,000.

More recently office chairs manufactured by Dawell Furniture Co Limited came under the spotlight. An office chair is comprised of four separate sub-assemblies:

• the five-star base and castor wheels;
• the gas lift;
• the chair mechanism and gas lift; and
• the seat and back.

As the only significant input occurring in New Zealand related to the manufacture of the seat and back, Dawell pleaded guilty to 23 charges of breaching the Act. 

Similar cases involved Damba Furniture and Eden Office Seating. Dawell and Damba were each fined $5,000 and court costs. 

Practical ways to decide if a product is actually made in New Zealand

Earlier this year the Commission released draft guidelines Country of Origin Representations (Guidelines). As stated earlier, whether a product is actually made in New Zealand is a question of fact and degree. Both the cases discussed above and the Guidelines offer some practical pointers to help you determine whether or not you can make such a claim. These include asking yourself the following questions:

• How many components of the product are produced in New Zealand?
• Where are the critical components manufactured?
• Are there any significant stages of manufacture that occur overseas?
• If clothing - where does the transition from fabric into garment occur?
• Are the raw materials far enough away from the finished product?
• Food is a little more difficult - and the origin of raw ingredients will still be important. Where is the essential character of the food created?
• What overall impression will the consumer have and is that impression correct?

The use of logos or symbols

If you have determined that you are not able to claim your product as 'made in New Zealand' or 'New Zealand made' then consider also the ramifications of placing a silver fern, or kiwi, or worse still, the made in New Zealand logo on your product. Remember the test is whether consumers have been, or are likely to have been, misled. Placing national icons or symbols on your packaging is likely to mislead consumers into believing the products are made locally when they are not. The Act expressly prohibits the false use of endorsements and in addition you may well be infringing another party's trade mark rights.  If you do not have permission to use a logo - don't use it.

Note, that use of a brand name or logo on garments that imply New Zealand is the country of origin must have a qualifying statement such as 'made in China' sufficiently close to correct any misleading representation about the product's origin. For example, directly below the garment tag.

So what can you say?

If you think that your product does not qualify as made in New Zealand then here are some examples of ways you may be able to highlight at least some New Zealand input:

• Made in New Zealand from local and imported ingredients/components
• Assembled in New Zealand
• Designed in New Zealand
• Packaged in New Zealand
• Blended in New Zealand

The Risk of Complaint

You may well ask yourself what the chances are of the Commission launching an investigation or receiving a complaint about your product. Typically, the main risk of complaint comes from competitors. Given the global product recalls of dangerous Chinese-manufactured children's toys and clothing in recent years, the Sanlu issue, topped with the current economy, we consider that there is heightened sensitivity around country of origin claims. In such a climate, there is an increased risk that consumers will also complain to Buy New Zealand Made or the Commission if they believe that a manufacturer has falsely claimed that their product(s) originate in New Zealand.

The Future

This FYI has highlighted the Commission's recent focus on furniture manufacturers. Don't think because you are in another industry you are safe. We believe the Commission is just warming up. They have focused on one area and yours could be next.

As discussed, while for some products it may be obvious that a product is made in New Zealand (for example a primary sector product) and can therefore support such a claim, for others an analysis of the product is required and generally, there is no simple yes or no answer as to whether or not the ‘made in New Zealand’ claim can be made. As this FYI highlights, it requires a case by case analysis of each product. This FYI is not exhaustive of all matters that need considering in country of origin claims. There are many other organisations and regulations that deal with such claims such as The Consumer Information Standard (Country of Origin) Regulations, the Customs Act, The New Zealand Food Standards Authority and Buy New Zealand Made. If you are unsure whether you can make such a claim, pick up the phone and contact your legal advisers.

Authors

Peter Stubbs

Partner - Corporate & Commercial

DDI: +64 9 977 5010

Mobile: +64 21 955 230

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Gwendoline Keel

Senior Associate - Corporate & Commercial

DDI: +64 9 977 5201

Mobile: +64 21 242 6639

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Craig Nelson

Senior Associate - Corporate & Commercial

DDI: +64 9 977 5185

Mobile: +64 21 918 309

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