2013 marks a year when the ACCC has demonstrated its willingness to take decisive action against those in the food industry whom it thinks are breaching the Australian Consumer Law (ACL).
In a speech given in February this year, the ACCC Chairman outlined that consumers are increasingly placing weight on credence claims1 such as "free range", "organic" or "Product of Australia" that consumers typically cannot verify for themselves but that often command a premium price or provide a competitive edge.
In the 2013 edition of the ACCC Compliance and Enforcement Policy,2 the ACCC highlighted that it would focus on the food industry.
Some recent headline cases relating to food claims include the ACCC:
- in June, instituting proceedings in the Federal Court against Coles Supermarkets for promoting bread as "Baked Today, Sold Today" and/or "Freshly Baked In-Store" when the bread was partially baked and frozen off site, transported to Coles stores and "finished" in-store;3
- in October, obtaining an order for $400,000 in penalties against the suppliers of Steggles chickens when packaging and advertising stated that chickens were "free to roam in large barns" when that was not the case;4 and
- in November, obtaining $360,000 in penalties against Luv-a-Duck for representing that their ducks spent a substantial amount of their time outdoors, were raised in a spacious outdoor environment, and were of a different quality than duck meat products processed from barn-raised ducks, when that was not the case.5
The focus on the food industry was further highlighted when the ACCC and other state-based ACL regulators teamed up earlier this year conducting a joint national operation to test claims made on olive oil packaging, buying over 350 olive oil products nationwide.6
Despite a number of high profile successes, the ACCC's focus on the food and grocery sector is unlikely to wane anytime soon.
ACCC statistics show that complaints and inquiries in relation to the supermarket and grocery industry are steadily increasing. This industry now attracts the third highest level of all complaints and inquiries, which almost doubled (to 641) when comparing the 3 month period to 30 September and the three month period to 31 March (from 325).7
Prosecuting businesses through the courts is just the tip of the iceberg. The ACCC's enforcement and compliance toolbox includes:
- infringement notices – in July, Coles Supermarkets agreed to pay six infringement notices totalling $61,200 for alleged misleading representations about the country of origin of imported navel oranges and kiwi fruit;8
- formal court-enforceable undertakings; and
- administrative resolutions – in July, seven manufacturers of bottled water avoided further ACCC action by voluntarily agreeing not to use "organic" on their labels and marketing and to remove such labels from sale.
As demonstrated by the above examples, a number of businesses have avoided the cost, embarrassment and distraction of full blown litigation in the Federal Court. However, the ACCC Chairman has warned businesses not to assume litigation can be avoided in all circumstances. In August, the ACCC Chairman stated:
The ACCC sometimes finds that when companies realise we are serious about following through with litigation they offer to change their behaviour and introduce or enhance a compliance program, as long as we do not litigate ...
There are numerous times when we judge it appropriate to cease our investigation when the offending behaviour ceases. However, it is a mistake for companies to expect this. Where, for example, we see the behaviour as calculated, or where it includes conduct that has previously been the subject of warnings, litigation will often follow.9
So what is the outlook? Despite the official hard line position, the ACCC will often work with businesses and the food industry more widely when it considers they try to engender a "culture of compliance". For instance, food businesses are likely to face a much less aggressive ACCC where they can demonstrate a tangible and ongoing commitment to compliance with the ACL. So if you haven't done it in 2013, make sure 2014 sees you focus on your compliance program and training within your organisations to minimise your risk of an ACL breach.
1 Sims, R., The ACCC's 2013 priorities, Speech to Committee for Economic Development of Australia, 21 February 2013, Sydney, at page 8. http://www.accc.gov.au/system/files/Speech%20-%20Sims%20-%20CEDA%20-%2021%20February%202013%20-%20Final%20%283%29.pdf
2 ACCC, ACCC Compliance and Enforcement Policy, February 2013. http://www.accc.gov.au/system/files/ACCC%20Compliance%20and%20Enforcement%20Policy.pdf
6 ACCC, ACCC and AER Annual Report 2012-13, at page 184. http://www.accc.gov.au/system/files/ACCC%20Annual%20Report%202012-13.pdf
7 ACCC, ACCCount Report 1 July to 30 September 2013, at page 50, and ACCC, ACCCount Report 1 January to 31 March 2013, at page 48.
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