CHH's falsely labelled timber in 20,000 houses

Forest products giant Carter Holt Harvey has been fined $900,000 for selling timber that didn't meet grading standards claimed on packaging.

The company pleaded guilty in Auckland District Court today to 20 breaches of the Fair Trading Act.

The Commerce Commission, which brought the case, said it was seeking further prosecutions and compensation regarding the case.

Judge Josephine Bouchier found that during 2000 and 2003 the company sold timber labelled as MGP10 when it knew the timber did not consistently meet that grade.

It is estimated that 20,000 new houses were built with the supposedly high-strength timber supplied by Carter Holt Harvey during the period, adding up to annual sales of about $63 million.

The Commerce Commission investigated after concerns were raised by the New Zealand Timber Industry Federation.

After testing the timber and finding some did not make the grade, the commission searched the company's premises and seized documents proving Carter Holt Harvey had known about the problem since 2001.

Commission chairwoman Paula Rebstock said the breach was one of the most important and serious the department had dealt with.

"It is very concerning that a large corporation like Carter Holt Harvey would choose to deliberately mislead its customers," she said.

"Carter Holt Harvey's own internal report shows that since 2001 the company knew its timber was not consistently meeting the grade, yet they continued to sell it as high-grade MGP10."

Ms Rebstock said internal documents revealed the company had a view that to not act as it did would be "financial suicide".

She said the commission had been advised that houses built with the timber could suffer performance defects such as deflections in the roof and squeaky floors.

The commission is also prosecuting six former or current Carter Holt Harvey employees over the matter and is considering further civil proceedings to seek compensation.

The investigation into the breaches began in October 2002 when the NZTIF contacted the Commerce Commission with its timber test results.

About six months later the commission tested three packets of the Carter Holt Harvey timber and confirmed that, on average, it was not meeting the MGP10 standard.

It then searched the company's mills at Thames, Putaruru and Nelson and seized documents which proved the company had known about the problem since 2001.

On its website Carter Holt Harvey is described as "Australasia's leading forest products company", with significant interests in wood products, pulp, paper and packaging.

A spokeswoman for Carter Holt Harvey said the company did not want to comment.

- NZPA