Australia: Food Industry Beware - ACCC drawn to misleading and deceptive conduct like a bee to honey

Competition and Consumer Quarterly
Last Updated: 18 October 2011
Article by Laura Hartley

It is well recognised that consumers are prepared to pay more for food products that have rare or artisan qualities which are treated in an ethically humane manner. Three recent actions in relation to "Just Organic" honey alleged to be from Kangaroo Island, meat alleged to be from King Island and "free to roam" chickens indicate that the ACCC is quick to take action if such claims cannot be substantiated.

Honey from Kangaroo Island - home of the Ligurian honeybee

In late July 2011, the ACCC accepted court enforceable undertakings from Aldi Foods Pty Ltd and manufacturer of condiments and spreads, Spring Gully Foods Pty Ltd, for making misleading claims on labels about the composition of "Just Organic" honey. Spring Gully manufactures the "Just Organic" honey brand and supplies it exclusively for sale through Aldi supermarkets. Whilst Spring Gully controls the composition of the product and was involved in developing the content of the labels, Aldi approved the labels' contents.

The labels

The action involved three different labels:

  • a label stating the honey "is produced on Kangaroo Island by the world's only remaining pure strain of the Ligurian honeybee", and yet the honey contained between 1.18% and 42.53% Kangaroo Island honey;
  • a label stating the honey "is made with honey produced on Kangaroo Island, home to the world's only remaining pure strain of the Ligurian honeybee", and yet the honey contained between 0.84% and 50.07% Kangaroo Island honey (with one batch containing 100%);
  • a label stating the honey "is made with a blend of Australian organic certified honey and organic honey produced on Kangaroo Island, home to the world's only remaining pure strain of the Ligurian honeybee" and yet the honey contained between 0.076% and 10.13% Kangaroo Island honey.

The ACCC considered the first two statements represented that "Just Organic" honey contained 100% Kangaroo Island honey and that the third statement indicated it contained a not insignificant amount of Kangaroo Island honey. The ACCC therefore considered that Aldi and Spring Gully engaged in misleading and deceptive conduct, falsely represented that the goods were of a particular composition when they were not and engaged in conduct that was liable to mislead the public as to the manufacturing process or characteristics of the goods.

The undertakings

Aldi and Spring Gully both undertook to publish corrective advertising notices. Aldi was required to publish them on its website and in each Aldi store and Spring Gully was required to publish them on its website and in certain newspapers. Additionally both parties undertook to implement compliance programs.

Meat from King Island

In late August 2011, the ACCC instituted proceedings in the Federal Court against meat retailers Hooker Meats Pty Ltd trading as "Peninsula Bulk Meats" and Kingisland Meatworks & Cellars Pty Ltd and its director.

The ACCC has alleged Hooker Meats misrepresented in newspaper advertisements and on its website that its meat was grown On King Island. The ACCC has also alleged that Kingisland Meatworks & Cellars and its director made similar claims that a significant portion of its meat was grown On King Island. The case is yet to be heard.

"Free to roam" chickens

The ACCC is also cracking down on the use by chicken suppliers of the term "free to roam". The ACCC instituted proceedings in September 2011 in the Federal Court against several chicken suppliers for misleading customers about the conditions in which their meat chickens are reared.

The ACCC has alleged that Baiada Poultry Pty Ltd and Bartter Enterprises Pty Ltd (which sell under the Steggles brand) and Turi Foods (which sells under the La Ionica brand) made false or misleading representations in advertising that their chickens were raised in barns and are able to roam freely. The ACCC has also alleged the Australian Chicken Meat Federation Inc engaged in misleading and deceptive conduct and made misleading representations to the same effect.

The ACCC considers that the representations made by these bodies indicate the chickens had substantial space to roam freely. However the ACCC considers that the number of chickens packed into the barns (claimed to be around 20 chickens per square metre) is not enough space for chickens to "roam freely".

Interestingly, fast food chain KFC, which purchased chickens from Baiada and Bartter, removed "free to roam" claims from its website shortly after this action was taken.

Recap of relevant provisions in the Competition and Consumer Act 2010 (Cth)

Under section 18 of the ACL companies must not engage in conduct that is misleading or deceptive. This covers a wide range of conduct and can include where products are presented as having distinct qualities, as being sourced from particular locations or as being manufactured in a certain way that is not true or misleads consumers.

The ACL also contains specific prohibitions on unfair practices including prohibitions on:

  • making false or misleading representations that goods are of a particular standard, quality or composition or concerning the place of origin of goods (section 29).
  • engaging in conduct that is liable to mislead the public as to the nature or manufacturing process of goods (section 33).

The penalties

A range of remedies can be sought for breaching section 18 of the ACL, including damages, compensatory orders, injunctions, corrective advertising, the implementation of compliance programs and public warning notices. These sanctions can be expensive and time consuming but the damage to a brand brought about by claims of misleading and deceptive conduct can be much more costly.

Monetary penalties can also be imposed on companies and individuals for breaches of the unfair practices provisions (which include sections 29 and 33 of the ACL). These penalties can be up to $1.1 million for a company and up to $220,000 for an individual.

Lessons to be learned

Whilst these cases do not present any new law, they send out a warning to the food industry that the ACCC still has this industry in its sights and is not impressed with false claims that boast specialty locations or exploit consumers' ethical conscience.

If you are making a representation about the composition of a product or its place of origin, be sure that you can back it up.

Also beware that not only can the brand owner be liable for misleading or deceptive and false claims, but a contract manufacturer for that brand owner can also be liable for composition claims.

Published: 17 October 2011

The assistance of Erin McGushin, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Laura Hartley
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