Tuesday, March 5, 2024

Court doubles NZME fine over dangerous puzzle toy 

The Commerce Commission has successfully argued that a fine imposed on NZME Advisory Limited (NZME) was “manifestly inadequate” and did not appropriately reflect the presence of harm.

The High Court has increased the penalty against NZME to $195,000 – more than double the original fine.  

Commissioner, Anne Callinan says the fine relating to the supply of magnetic puzzle toys sets an important benchmark for cases of this type, where a large company did not have adequate compliance processes in place and supplied a prohibited product that caused serious harm. 

Ms Callinan says the Commission’s view that the original penalty of $87,750 imposed by the District Court was manifestly inadequate was endorsed strongly in the judgment released this week, including that, in the absence of a death caused by a prohibited or non-compliant product, “it is difficult to conceive of a more serious case in terms of the impact of offending on a victim”.

The magnetic puzzle toys, supplied through NZME’s previously owned online store GrabOne.co.nz, were made up of small, high-powered magnetic balls. They were supplied in breach of an unsafe goods notice which prohibits the supply of certain magnets, sold in sets of two or more, that are of a particular size and strength. 

The ban exists because if more than one of the magnets are swallowed, they can attract to each other within the body which is extremely dangerous. In this case, a child swallowed two magnets from one of the magnetic toys supplied by NZME and significant emergency surgery was required to remove them.

In an appeal judgment released by the High Court on Wednesday 29 November, Justice Peter Andrew said product safety compliance is, “not a once and done exercise” and that compliance requires “ongoing assessment for updates on the applicable regulatory regime”.

Justice Andrew said the unique and serious conduct identified, together with the need to send a deterrent message to traders in the product safety context, and taking into account inflation, also supported the approach to increase the penalty. 

Ms Callinan says product safety cases are about protecting our consumers, often young children, from potentially dangerous and harmful products. 

“The fines imposed therefore need to be significant enough to deter businesses’ non-compliance,” she said.

NZME sold 213 of the magnetic toys between October 2020 and September 2021. After being contacted by the Commission, NZME recalled the sets and contacted customers to notify them of the recall. 

The starting point for the fine imposed by the High Court on NZME was $300,000. Following discounts for compliance, remorse and reparation (10%), and 25% for the guilty plea (a total discount of 35%), the end penalty imposed on NZME was $195,000. 

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