High Court flushes out unfair practices in toilet tissue case

New Zealand

In Carter Holt Harvey Limited v Cottonsoft Limited (Case HC AK CIV-2003-404-4809), the New Zealand High Court has ruled that the defendant's claim that its toilet tissue was made in New Zealand when in fact it was produced from timber grown, pulped and formed into tissue in Southeast Asia infringed the Fair Trading Act 1986.

The act is concerned with consumer protection and specifically provides that no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive (Section 9), and more particularly no person shall, in trade, in connection with the promotion by any means of the supply or use of goods make a false or misleading representation concerning the place of origin of the goods (Section 13).

Both Carter Holt Harvey Limited (CHH) and Cottonsoft Limited compete for shares in the New Zealand toilet tissue and paper towels market, and both claim that their product is New Zealand made. CHH grows and pulps the original wood in New Zealand and its tissue is machined and converted into its final product in New Zealand. Cottonsoft's tissue on the other hand is produced from timber grown and harvested in Indonesia or elsewhere in Southeast Asia, where it is also pulped and formed into tissue. This tissue is then converted into its consumer products at its plant in New Zealand. CHH filed proceedings against Cottonsoft, arguing that the claim on its products contravened the Fair Trading Act.

The central question in the case was whether Cottonsoft's products were made in New Zealand. The High Court noted that the test was whether the average New Zealand consumer would be misled by Cottonsoft's representation as to the origin of its tissue products. It considered a number of cases, including some from Australia (Australia has an equivalent Trade Practices Act 1974) and a New Zealand Court of Appeal decision that held that 'manufacture' involved a significant change in form or function.

The High Court stated that a representation on packaging that a product is made in New Zealand is an indication not so much as to the source and origin of its raw materials but of the place where it was produced or manufactured. In the case at hand, the final product originated from Indonesia and a large proportion of the manufacturing process occurred in that country. Only a relatively small part of the whole manufacturing process occurred in New Zealand. The court said that the average consumer would assume from a manufacturer's representation that its tissues are 'New Zealand made' that the entire conversion process occurred in New Zealand, not just the last or a specific stage. Thus, Cottonsoft's claim on its products contravened the Fair Trading Act.

Ewin Hamilton, Baldwin Shelston Waters, Wellington

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