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29 Feb 12
ACCC win highlights dangers of misleading food claims

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The Australian Competition and Consumer Commission (ACCC) has successfully prosecuted a prominent chicken producer in relation to the false and misleading use of the term ‘free to roam’. 

The ACCC is interested in advertising by all food producers and will ensure their advertising and packaging is accurate and does not convey a misleading impression. An expanded range of investigative and enforcement powers of the ACCC make it far easier to put suppliers to proof when it comes to the claims made in respect of their products, and to pursue suspected infringements.  McCullough Robertson Partner, Paul McLachlan outlines the decision and its impact in practical terms.

Decision

In its recent decision in Australian Competition and Consumer Commission v Turi Foods Pty Ltd (No 2) [2012] FCA 19, the Federal Court found that advertising materials for the ‘La Ionica’ brand of chickens falsely represented the conditions in which the chickens were raised. 

Turi Foods supplies approximately 10% of the chickens produced for consumption in Australia.  Over a period spanning between 2004 and 2010, Turi Foods published various advertising posters, and painted murals on the side of its delivery trucks, both of which represented that the ‘La Ionica’ chickens were raised in barns where they had substantial space to roam around freely. The artworks were attended by statements such as ‘free roaming’ and ‘no cages’.

While the chickens were raised in barns and not cages, the reality of the conditions was very different from what was represented.  The production barns held up to 18 chickens per square metre (reducing to 12 chickens per square metre as they grew in size).

The ACCC argued, and Turi Foods accepted, that the representations of the conditions in its barns were false, misleading or deceptive in breach of various sections of the Competition and Consumer Act (CCA) (and equivalent provisions under the former Trade Practices Act).

The Court ordered that Turi Foods pay a fine of $100,000, publish corrective advertisements and implement a compliance training program.

Implications

The chicken production industry is coming under increasing scrutiny for its use of ‘free range’ claims in relation to both eggs and chickens.  A national newspaper recently published an investigatory story regarding conditions in the chicken production industry, and the ACCC has clearly identified that this is an area of interest, having instituted several prosecutions over the past four years.  For similar reasons as the ACCC has targeted ‘greenwashing’ claims, it is keen to ensure unsuspecting consumers are not misled when they make purchases based on ethical factors.

However, the implications of this case apply across a far broader range of industries.  All food producers must be vigilant to ensure that their advertising and promotional campaigns, as well as their packaging, are factually accurate and not misleading.

ACCC enforcement powers

The ACCC does not need to undertake a detailed investigation and commence legal proceedings in order to pursue suspected breaches of the CCA.

In 2010, the CCA (then known as the Trade Practices Act) was amended to provide the ACCC with additional investigatory and compliance tools.  These tools make it far easier for the ACCC to put suppliers to proof when it comes to the claims made in respect of their products, and to pursue suspected infringements.

The substantiation notice mechanism enables the ACCC to require a person to provide information and documents within 21 days to substantiate a claim or representation regarding the supply or possible supply of goods.

Substantiation notices enable the ACCC to quickly test the veracity of claims which it suspects may be misleading or deceptive.  In a guidance note to businesses, the ACCC has indicated that these notices will likely be used to test two-part advertising claims (‘was/now’ pricing and strike-through advertising), food health claims, environmental claims and product safety claims.  This is particularly relevant for the food industry, which will often use health claims and environmental claims (such as ‘free range’) to distinguish their products in the marketplace.

The new infringement notices are like an ‘on the spot fine’. If the ACCC has reasonable grounds to suspect that a person has breached various consumer protection provisions, then it may issue an infringement notice.  The penalty in an infringement notice is a set amount of $66,000 for listed corporations, $6,600 for corporations and $1,320 for individuals.

If the person pays the infringement notice, then no conviction is recorded, and no further proceedings may be instituted in respect of the same matter.  Alternatively, the person may write to the Commission to seek the withdrawal of the notice.

Public warning notices are the ACCC’s new ‘name and shame’ power.  The ACCC may issue a public written notice warning about particular conduct if it has reasonable grounds to suspect a person has breached the unconscionable conduct provisions, or the consumer protection provisions to the detriment of a person, and there is a public interest in issuing the notice. The reputational damage that would flow from being identified in a public warning notice is obvious.

Conclusion

In an increasingly competitive consumer market, it can be tempting to try to differentiate products on the basis of ethical and environmental factors.  However, suppliers must ensure at all times that their advertising is factually accurate and not misleading or deceptive.

We have extensive experience in advertising and consumer protection issues. Please contact any of our experts to discuss your marketing and advertising strategies and internal compliance processes.

 

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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