$272,500 penalty for deceptive claims about Probitas fertiliser
Friday 1 June 2007, 6:15PM
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A fertiliser sold under the brand name Probitas did not offer the benefits claimed. The company Probitas Ltd has been fined $200,000 and man who sold it $60,000, in the Tauranga District Court for misleading the public. They have also been ordered to pay $12,499 in costs.
Ewan Campbell was found guilty of five charges and Probitas Ltd of 11 charges of breaching the Fair Trading Act by misrepresenting the effectiveness of Probitas. The representations were made in brochures, on a promotional CD, and in person.
The Commission is now considering civil action to recover customers' losses.
Ewan Campbell, a farmer from Waihi, formulated and sold the Probitas fertiliser nationwide. Probitas consists of natural ingredients including sea clays, soft shell-based lime, paramagnetic rock and iron sand. Farmers and horticulturists paid $300 - $350 per tonne for Probitas, which Mr Campbell told them would activate the electrical and magnetic processes in the soil.
But an expert witness told the Court there was no scientific basis for the way Probitas was supposed to work.
Commerce Commission Chair Paula Rebstock said the fertiliser industry is a very important part of the New Zealand economy, with farmers spending a billion dollars annually on fertiliser. Fertiliser is generally the most expensive single item in a farmer's budget, costing most farmers between $20,000 and $40,000 a year.
"It is crucial that farmers can trust the claims made about fertiliser. It is a major cost in their business, and they need to know they are getting what they are promised," Ms Rebstock says.
Ms Rebstock says that because Probitas does not work as a fertiliser, farmers using it will have lost productivity.
"The Commission's experts estimate that this productivity loss would have been up to 5% in the first year, and the effects will compound over future years," says Ms Rebstock.
"Farmers will not be able to put their losses right by switching fertilisers. They will need to apply more fertiliser than usual to counteract the effects of using Probitas."
The use of Probitas is estimated to have cost the New Zealand farming industry $5 million in lost productivity in the first year of use alone.
Ms Rebstock says the claims made about Probitas were hard for ordinary farmers to assess.
"Mr Campbell used scientific language and gave customers a CD packed with complicated explanations of how Probitas was supposed to work," says Ms Rebstock.
"It is not reasonable to expect all farmers to have the expertise to assess these claims themselves, so it is crucial that representations of this nature are accurate and can be substantiated."
In his judgement, Judge J.R. Callander concluded: "While no farmer actually complained of deception, the representations and conduct were clearly deceptive and misleading. The real science shows that farmers were clearly taken in and misinformed by the representations and this, ultimately, would have been to their detriment."
Media contact:
Deborah Battell, Director, Fair Trading
(04) 924 3760 mobile 021 225 4402
Commission media releases can be viewed on its web site www.comcom.govt.nz
Background
Commission investigation. In 2003 Mr Campbell approached a dairy farmer, Andrew Sime, wanting to buy lime and papa rock clay from Mr Sime's lime works to use for making Probitas. Mr Sime also worked as soil tester, and when he saw the Probitas brochure, he was suspicious of the claims made. He gave the brochure to his son Dr Richard Sime, who has a PhD in physical chemistry. Dr Sime thought the claims sounded bogus and contacted the Commission. The Commission opened an investigation in July 2003.
In August 2003 a Commission investigator posed as a kiwifruit orchardist interested in buying Probitas, obtaining a sample of the product which was independently tested. When Mr Campbell was then approached by the Commission in relation to its investigation, he refused to be interviewed. A search warrant later executed and documents seized. Mr Campbell and his company were ultimately charged over the claims made to the Commission's investigator in person, and in a promotional CD and brochure.
Analysis of economic detriments. Dr Edmeades estimated the economic detriments as follows: "Assuming a farm (either dairy or sheep/beef) with optimum soil fertility. The science tells us that production will decline by about 5% per annum if the nutrients lost from the farm annually (i.e. in products off the farm, from leaching and runoff of nutrients, and transfer of nutrients to non-productive areas) are not replaced with fertilizer inputs. The important nutrients in this regard are P, K, S and Mg. Probitas when used as recommended contains insignificant amounts of these nutrients and therefore will not maintain the soil nutrient levels against the losses. In other words it is reasonable to assume that the production on a farm using Probitas will result in a decline in pasture and hence animal production of about 5% annually. There are about 15,740 sheep/beef farms in New Zealand and their average (gross revenue from farm activities) is about $300,000. A 5% loss in product
ion will equate to a 5% decline in revenue (is about $15,000 per year). Assuming that Probitas achieved a 1% market share (is 157 farmers used Probitas) then the total loss to the nation equates to about $2.4 m. Similarly, there are 13,600 dairy farms which on average have a revenue of $350,000. Assuming again a 1% market then this equates to a total loss of about $2.3m. Thus with the assumptions given a total loss of $5.0 m per year is reasonable."
Expert witness Dr Douglas Edmeades. Dr Edmeades is a soil scientist with over 30 years experience. Formerly a scientist then Group Leader of Soils and Fertiliser Group at the Ministry of Agriculture and Fisheries, Dr Edmeades went on to be National Science Leader, Soils and Fertiliser at AgResearch. In 1998 he formed his own independent consultancy, AgKnowledge Ltd, and advises clients on fertiliser, soil conditioners and soil additives.
Ewan Campbell was found guilty of five charges and Probitas Ltd of 11 charges of breaching the Fair Trading Act by misrepresenting the effectiveness of Probitas. The representations were made in brochures, on a promotional CD, and in person.
The Commission is now considering civil action to recover customers' losses.
Ewan Campbell, a farmer from Waihi, formulated and sold the Probitas fertiliser nationwide. Probitas consists of natural ingredients including sea clays, soft shell-based lime, paramagnetic rock and iron sand. Farmers and horticulturists paid $300 - $350 per tonne for Probitas, which Mr Campbell told them would activate the electrical and magnetic processes in the soil.
But an expert witness told the Court there was no scientific basis for the way Probitas was supposed to work.
Commerce Commission Chair Paula Rebstock said the fertiliser industry is a very important part of the New Zealand economy, with farmers spending a billion dollars annually on fertiliser. Fertiliser is generally the most expensive single item in a farmer's budget, costing most farmers between $20,000 and $40,000 a year.
"It is crucial that farmers can trust the claims made about fertiliser. It is a major cost in their business, and they need to know they are getting what they are promised," Ms Rebstock says.
Ms Rebstock says that because Probitas does not work as a fertiliser, farmers using it will have lost productivity.
"The Commission's experts estimate that this productivity loss would have been up to 5% in the first year, and the effects will compound over future years," says Ms Rebstock.
"Farmers will not be able to put their losses right by switching fertilisers. They will need to apply more fertiliser than usual to counteract the effects of using Probitas."
The use of Probitas is estimated to have cost the New Zealand farming industry $5 million in lost productivity in the first year of use alone.
Ms Rebstock says the claims made about Probitas were hard for ordinary farmers to assess.
"Mr Campbell used scientific language and gave customers a CD packed with complicated explanations of how Probitas was supposed to work," says Ms Rebstock.
"It is not reasonable to expect all farmers to have the expertise to assess these claims themselves, so it is crucial that representations of this nature are accurate and can be substantiated."
In his judgement, Judge J.R. Callander concluded: "While no farmer actually complained of deception, the representations and conduct were clearly deceptive and misleading. The real science shows that farmers were clearly taken in and misinformed by the representations and this, ultimately, would have been to their detriment."
Media contact:
Deborah Battell, Director, Fair Trading
(04) 924 3760 mobile 021 225 4402
Commission media releases can be viewed on its web site www.comcom.govt.nz
Background
Commission investigation. In 2003 Mr Campbell approached a dairy farmer, Andrew Sime, wanting to buy lime and papa rock clay from Mr Sime's lime works to use for making Probitas. Mr Sime also worked as soil tester, and when he saw the Probitas brochure, he was suspicious of the claims made. He gave the brochure to his son Dr Richard Sime, who has a PhD in physical chemistry. Dr Sime thought the claims sounded bogus and contacted the Commission. The Commission opened an investigation in July 2003.
In August 2003 a Commission investigator posed as a kiwifruit orchardist interested in buying Probitas, obtaining a sample of the product which was independently tested. When Mr Campbell was then approached by the Commission in relation to its investigation, he refused to be interviewed. A search warrant later executed and documents seized. Mr Campbell and his company were ultimately charged over the claims made to the Commission's investigator in person, and in a promotional CD and brochure.
Analysis of economic detriments. Dr Edmeades estimated the economic detriments as follows: "Assuming a farm (either dairy or sheep/beef) with optimum soil fertility. The science tells us that production will decline by about 5% per annum if the nutrients lost from the farm annually (i.e. in products off the farm, from leaching and runoff of nutrients, and transfer of nutrients to non-productive areas) are not replaced with fertilizer inputs. The important nutrients in this regard are P, K, S and Mg. Probitas when used as recommended contains insignificant amounts of these nutrients and therefore will not maintain the soil nutrient levels against the losses. In other words it is reasonable to assume that the production on a farm using Probitas will result in a decline in pasture and hence animal production of about 5% annually. There are about 15,740 sheep/beef farms in New Zealand and their average (gross revenue from farm activities) is about $300,000. A 5% loss in product
ion will equate to a 5% decline in revenue (is about $15,000 per year). Assuming that Probitas achieved a 1% market share (is 157 farmers used Probitas) then the total loss to the nation equates to about $2.4 m. Similarly, there are 13,600 dairy farms which on average have a revenue of $350,000. Assuming again a 1% market then this equates to a total loss of about $2.3m. Thus with the assumptions given a total loss of $5.0 m per year is reasonable."
Expert witness Dr Douglas Edmeades. Dr Edmeades is a soil scientist with over 30 years experience. Formerly a scientist then Group Leader of Soils and Fertiliser Group at the Ministry of Agriculture and Fisheries, Dr Edmeades went on to be National Science Leader, Soils and Fertiliser at AgResearch. In 1998 he formed his own independent consultancy, AgKnowledge Ltd, and advises clients on fertiliser, soil conditioners and soil additives.