Steel & Tube to be prosecuted for steel mesh labelling

UPDATED: Steel & Tube Holdings, along with two other companies, will be prosecuted by the Commerce Commission following the regulator's investigation into seismic steel mesh, while Fletcher Building's steel division has been given a warning.

The commission didn't name the companies in its statement this morning, giving them the opportunity to seek name suppression, and is still investigating several other companies, it said. Steel & Tube said in a statement to the NZX that it was "disappointed" to learn the commission intends to prosecute, and said its mesh had been externally tested since April and it was confident about it.

The regulator started its investigation in August 2015 after a complaint was laid about the steel mesh, which is used in housing and driveway construction, not meeting the standards required in New Zealand. In March the commission ordered Euro Corp and Brilliance Steel to stop selling their steel mesh products, a ruling that has since been lifted. With NZX-listed Steel & Tube, the commission signed enforceable undertakings in late April that the company would only sell SE62 500E grade steel mesh that passed specific independent testing. Such undertakings were also imposed on Euro and Brilliance.

The commission investigated Steel & Tube for breaches of the Fair Trading Act by producing testing certificates which included the logo of a laboratory which did not undertake the testing or by making misleading or unsubstantiated representations that the steel it supplied complied with the standard.

The commission said it will allege the companies misrepresented that their mesh complied with the standard, when it did not, and aims to file criminal charges under the Fair Trading Act in early 2017, but as its investigations are continuing it won't comment further.

It has previously said that misrepresenting a product as complying with the standard when it doesn't is a breach of the act for which companies can be fined up to $600,000 per offence. Steel mesh used in residential buildings is required to have 10%  ductility under tighter rules brought in after the Canterbury earthquakes.

Steel & Tube admitted selling "many thousands of sheets" of earthquake reinforcing mesh incorrectly labelled as being independently certified after it used the logo of accredited independent testing laboratory Holmes Solutions on its steel mesh for four years despite it not having carried out the tests. Steel & Tube’s in-house laboratory, which is not independently accredited by national accreditation body IANZ, had been used to test the mesh.

The company's shares fell 3% to $2.30, and have gained 5.8%  this year.

Fletcher has been given a warning over 19 batches of its 500E product, as its retesting wasn't conducted in line with the standard's requirements and its quality data had some values lower than required by the standard. However, the commission said it was satisfied the mesh "had the strength and ductility required by the standard and was, therefore, comfortable in restricting its response to a warning letter.

Shares in Fletcher Building fell 1.1% to $10.15.

United Steel has been sent compliance advice after retesting deficiencies in two batches of mesh, the commission said. It closed its enquiry into United Steel in April after the company provided it with information about its testing procedures and long-term quality testing data, showing its mesh complied with the standard. The company didn't need to re-test the mesh as it complied with the standard but re-testing has to be done in line with the standard, the commission said. 

An updated testing regime for steel mesh will come into force on May 30, 2017. The changes include increasing the number of samples that need to be tested, clarifying how testing is done and requiring testing to be done in internationally accredited laboratories.