Auckland souvenir company BGV International Ltd has been fined $22,000 in the Auckland District Court for misleading Asian tour groups about the country of origin of expensive alpaca rugs.

Tourists from China, Korea and Taiwan, who were part of organised tour groups ferried to BGV's premises, were told that the rugs were "New Zealand made". The rugs in fact came from Peru. The tourists paid as much as $4,000 per rug - up to four times more than they would have paid elsewhere for properly labelled rugs.

Commission Chairman Dr Mark Berry said New Zealand's reputation is damaged when tourists are treated in this way.

"This was nothing short of a rip-off. In this case tourists, who represent a valuable segment of the country's economy, have been harmed and New Zealand's reputation as a tourist destination suffers as a result. The behaviour also harms other law-abiding tourism businesses because tourists may not know who they can trust."

This prosecution followed an extensive investigation by the Commerce Commission that involved Police, Customs, Immigration Service and the Wildlife Enforcement Group. In total, eight companies and seven individuals have been prosecuted. Fines imposed in these cases exceed $880,000, with one company and one individual still to be sentenced.

“The most concerning aspect of these cases for us is the way in which a number of companies have systematically fleeced visitors to New Zealand. This gives us real cause for concern about parts of New Zealand's organised Asian tour group industry. We will continue to take the steps necessary to put things right," said Dr Berry.

The Commission is currently investigating other companies for similar conduct.

Background

BGV International Limited was convicted for 10 breaches of the Fair Trading Act. It sold alpaca rugs imported from Peru that had been re-labelled New Zealand made, in Auckland and Rotorua.

The alpaca rugs sold for between $2,000 and $4,000 per rug, when Peruvian alpaca rugs sold for between $1,000 and $1,600 each in Rotorua retail outlets. BGV also exported a significant quantity of the falsely labelled alpaca rugs to its parent company in Australia. The directors of BGV International are based in Australia.

The six companies sentenced earlier in similar cases have incurred the following fines:

Hyeon Company Limited (Hyeon) $105,000
Premium Alpaca New Zealand Limited (Premium Alpaca) $56,000
Duvet 2000 Limited (Duvet 2000) $200,000
JM Wool Limited (JM Wool) $182,000
Top Sky Holdings Limited (Top Sky $140,000
Kiwi Wool International Limited (Kiwi Wool) $84,000

The six individuals already sentenced have incurred the following fines:

Han Young Chae, director of Hyeon and Duvet 2000 $24,500
Yun Duk Jung, director of Premium Alpaca $6,700
Bo Sun Yoo, director of Premium Alpaca $6,700
Jong Myung Lee (Mr Lee), director of JM Wool $21,000
Haidong Chen, managing consultant of Top Sky and shareholder of Kiwi Wool $24,500
Jinming Chen, director of Kiwi Wool $10,500

Two remaining cases for sentencing involve Wild Nature Limited and its director Mr Sung Ho Park. Sentencing will occur in the Auckland District Court on 12 December 2014.

The Fair Trading Act

The Fair Trading Act 1986 is designed to protect consumers and make competition more effective. If competition is to be effective, consumers need to be able to rely on the information provided by companies about the goods and services they offer.

False or misleading representations can distort competition and a competitive advantage can be gained by using unfair methods. The Commission is responsible for enforcing the Fair Trading Act. You can read more about the Fair Trading Act and Country of Origin claims. http://www.comcom.govt.nz/fair-trading/fair-trading-act-fact-sheets/place-of-origin-representations/