Fear tactics reap $550k fine for water filter firm

Businessman Phillip John Smart leaves the Auckland District Court where he is facing charges for misrepresenting customers buying water filters. Photo / NZ Herald

A water filtering company and its director have been fined more than $550,000 after staff made false claims about the dangers of local tap water during door-to-door sales pitches.

Love Springs sold water filters between 2009 and 2010 around the North Island using door-to-door salespeople who falsely claimed local drinking water could cause cancer, birth defects and miscarriages.

The company sold 6000 of these filters, which cost $1600 each, over this time.
The Commerce Commission brought a case against Love Springs and its director Phillip Smart for breaches of the Fair Trading Act.

The regulator argued Love Springs, encouraged by Smart, trained sales staff to use marketing tactics that deliberately took advantage of people's fears about their health.
While Love Springs pleaded guilty to the charges against it, Smart defended the case but was found guilty and convicted in the Auckland District Court last month.

When sentencing the company and Smart yesterday, Justice Russell Collins imposed a fine of $355,000 on Love Springs and $200,000 on Smart.

Judge Collins said Smart was the architect of the approach that used "scare tactics around the fitness of New Zealand tap water".

Judge Collins imposed fines of $355,000 for Love Springs and $200,000 for Mr Smart.
Commerce Commission head of investigations Ritchie Hutton called the offending "nasty and cynical".

"The Commission obtained an injunction to stop the conduct in April 2010, and we are pleased that the Court has now recognised the seriousness and exploitation of the offending by imposing these penalties," he said.

"This offending caused significant harm to the public, " said Hutton.

"The company targeted vulnerable people in their homes by scaring them with false information about the safety of New Zealand's reticulated water network, and then charging them $1,600 for something that comes out of the tap. Scientific evidence shows that the dire health warnings were completely false."

The commission said that Smart has previously been convicted in Australia for similar offending.