Sage approved Chinese bottler despite arsenic allegations

Documents reveal the Conservation Minister sought advice on Nongfu Spring’s “good character” before approving the sale of Otakiri Springs to the Chinese company, Thomas Coughlan reports.

Conservation Minister Eugenie Sage decided against pursuing a stringent examination of Chinese water bottling firm Nongfu Springs’ “good character” before approving the expansion of its New Zealand operations, official documents reveal.

When officials could not find the outcome of a key court decision on Nongfu Spring’s application of Chinese water quality standards, Sage decided against demanding further information and let the deal go through.

Nongfu Spring was at the centre of a bottled water scandal in China after The Beijing Times published several reports in 2013 alleging the company followed a quality standard much lower than the national Chinese standard.

One of the differing standards related to the amount of arsenic contamination allowed in water. The Chinese national standard allows no more than 0.01 milligrams per litre, but the Zhejiang regional standard allegedly used by Nongfu Springs allowed five times that amount.

Sage approved the expansion of the company’s Otakiri Springs plant in June – a decision which attracted controversy given Green Party opposition to allowing further bottled water consents.

The February report – a test of “good character”

Sage received information about the questions over Nongfu Spring’s water quality on the grounds of vetting Nongfu’s “good character”. Overseas investors can be denied the right to purchase land if they fail to demonstrate “good character”.

A report given to Sage on February 1 noted the company had brought a defamation suit against The Beijing Times over its coverage, and was still awaiting the outcome of the legal action.

After requesting more information on the allegations and the lawsuit, Sage received another memorandum a month later.

However, little new information could be found – and what was discovered only served to cast doubt on the earlier report she received, with the memorandum stating it was “unclear” whether Nongfu Spring had filed a lawsuit at all.

The fact that The Beijing Times had filed a countersuit against Nongfu Spring alleging defamation was not included in either document. Sage told Newsroom she was not aware of the countersuit.

The extra information given to Sage amounted to just nine lines of background on the defamation action, six of which detailed a lengthy denial of the claims from Nongfu Spring’s chairperson, who claimed the company’s water had passed quality tests.

The memorandum said there was “no further information available” on the defamation lawsuit.

However, both the Chinese-language edition of the BBC and the state-owned China Daily reported on the lawsuit, while Nongfu Spring itself confirmed the action to Newsroom .

According to one lawyer, Sage could have asked officials to gather further information from Nongfu Spring on the status of the legal action.

Lawyer Graeme Todd, who acted for American anchorman Matt Lauer in his own “good character” battle, said it was normal for the Overseas Investment Office (OIO) to go back and forth several times with a buyer requesting more information about a case.

Sage said she had accepted officials’ advice there was no further information available.

“The Overseas Investment Office said it was satisfied and I was satisfied with them being satisfied,” she said.

Sage said there was protection in the statutory declaration made by Nongfu Spring that all the information it provided was true and correct.

When asked whether the OIO should have proactively sought the status of the legal action, Sage responded: “If you want to sit in this seat than perhaps you should stand for election.”

An end to litigation

Newsroom has confirmed that Nongfu Spring eventually withdrew the suit.

Chinese media reported that the company withdrew the suit in June 2017, citing its disappointment with the legal process.

This was confirmed to Newsroom by a representative for Nongfu Spring in New Zealand.

The allegations and the defamation suit

The allegations reported by The Beijing Times were made by The Drinking Water Committee at the China National Health Association – a Beijing NGO supervised by the National Health and Family Planning Commission, a Chinese Government entity.

China Daily reported Nongfu Spring’s packaging showed it had adopted the regional standard known as DB33/383, less stringent than the GB5749-2006 standard adopted by the Chinese central government in late 2006.

The newspapers did not allege the bottled water was itself unhealthy, but questioned why the company, which at the time had more than 20 percent market share in China, had chosen to adopt the weaker measure.

Nongfu Spring’s defamation lawsuit alleged The Beijing Times had run 76 “fake” stories over two months, and the company was demanding 60 million yuan (NZ$9.7 million) as compensation.

The company’s reputation was parodied by Chinese artist Brother Nut in an exhibition in Beijing earlier this month.

The exhibition, titled Nongfu Spring Market, contained 9000 bottles identical to those used by the company, filled with murky groundwater from Chinese villages.

The New York Times reported that police confiscated 7000 of the 9000 bottles after Nongfu Spring appealed to the Beijing Bureau of Industry and Commerce over copyright infringement.