|Focus:||'Free range' product claims|
|Services:||Competition & Consumer Law|
What's in a claim?
If the claim in question is 'free range', the answer is not always a straightforward one.
The ACCC has recently taken action against yet another egg supplier, as well as several supermarket brands supplying pork products, for marketing their products as 'free range'. It is clear that so-called 'credence claims' are still very much on the ACCC's radar. The Commonwealth Government has also weighed in on the issue, having released and sought submissions on a Consultation Paper on Free Range Egg Labelling.
Food producers must carefully consider labelling or advertising products as organic, free range, or with other specific qualities and proceed with caution before making 'free range' or similar claims about their products.
Recap: what are credence claims?
Credence claims are premium claims made about products. For example, they may include a claim that a product is safer, of a higher quality, organic, has a nutritional or therapeutic benefit, or is green or environmentally friendly, as compared to similar products on the market. They may also include representations that a certain product offers a moral or social benefit.
In the case of food producers and suppliers, the ACCC has focused on representations made by producers and suppliers which suggest that their poultry products and eggs are ethical or animal-friendly (through the use of terms such as 'free range', 'cage free' or 'barn raised'). We have previously written about the ACCC's action in relation to credence claims in this area in April 2014, and again in October 2014, when credence claims were a clear priority enforcement area.
While the ACCC did not expressly indicate that credence claims would continue to be a top enforcement priority for 2015, the developments outlined below indicate that these claims are still in the ACCC's sights.
'Free range' eggs
RL Adams Pty Ltd (trading as Darling Downs Fresh Eggs) supplied eggs to consumers under its own label, and also supplied eggs to other free range producers to supplement their free range egg supply. In both instances of supply, it represented its eggs as being 'free range'. In fact, none of its hens laying eggs were able to leave their barns, or access or use an outdoor range at any time.
In proceedings brought by the ACCC, the Federal Court declared that Darling Downs had engaged in misleading and deceptive conduct and had made misleading representations by labelling and promoting its eggs as 'free range'. The Court ordered Darling Downs to pay a $250,000 penalty, implement a compliance program and publish corrective notices in newspapers and on its website.
Following this decision, two important developments have taken place in relation to the unsettled issue of what is meant by free range egg labelling.
- The ACCC has published a guide containing enforcement guidance on free range hen egg claims. The guide indicates that suppliers will be making free range claims if they use the words 'free range' (or words that mean the same thing as free range) in their packaging or advertising material, or use "pictures of hens ranging freely including in a grassy field". The ACCC proposes that the 'fundamental test' for assessing a free range claim is whether the supplier's farming practices involve most of its hens moving around freely on an open range on most days. However, the guidance notes other factors which are relevant to such an assessment, including indoor and outdoor conditions, flock size, and stocking densities, which should be taken into account by suppliers before making a free range claim.
- The Commonwealth Government released a Free Range Egg Labelling Consultation Paper in October, outlining options for the development of a national standard for consumers and egg producers on requirements for egg labelling. The Commonwealth has proposed several options for a national standard, including the introduction of a "free range" definition for egg labelling purposes, as well as a possible "safe harbour" defence for producers following certain farming practices and making free range egg claims. With submissions having closed just last week, it will be interesting to see what developments emerge from this consultation.
'Free range' pork products
Outside of the egg industry, the ACCC recently concluded investigations into companies in the pork industry in relation to claims that their pork products are from animals that were 'bred free range', 'bred outdoors' or otherwise raised in 'free range' conditions.
The ACCC has accepted court enforceable undertakings from three separate companies: George Weston Foods Limited (trading as KR Castlemaine), Pastoral Pork Company Pty Ltd (trading as Otway Pork) and P&M Quality Smallgoods Pty Ltd (trading as Primo Smallgoods).
KR Castlemaine and Otway Pork had been using the term 'bred free range' to promote and label their pork products. In reality, both companies' products are made from pigs born and initially raised in huts on paddocks, and later moved into straw-based shelters. These living conditions were inconsistent with the impression consumers were likely to get from the term 'free range'. The ACCC considered that the words 'bred free range' would suggest to a consumer that the pigs were farmed according to free range methods, which at least allows the pigs to move about freely in an outdoor paddock on most ordinary days.
In the case of Primo Smallgoods, it sourced its pork products from producers in Denmark, which produced products in accordance with the Friland Code of Conduct. While the Friland Code requires that all pigs have free access to open areas with fresh air, in practicality, these were mostly roofed-in areas due to the cold European climate. Further, the areas had solid or slatted floors, consistent with the Friland Code. As a result, the conditions in which the pigs were bred were inconsistent with the claims made by Primo Smallgoods that its products were 'free range'.
In all three cases, the ACCC considered the suppliers had breached sections 18 and 29(1)(a) of the Australian Consumer Law by making false and misleading representations, and engaging in misleading and deceptive conduct. Each supplier was required to give an undertaking to:
- cease making the relevant free range claims in relation to their products (unless pigs used in the production of their products were actually raised in free range conditions);
- implement a Competition and Consumer Act compliance program; and
- publish a corrective notice on its website.
The ACCC is continuing to investigate and take action against false and misleading credence claims made in relation to agricultural products. While businesses in the agricultural sector should generally think carefully before making any type of credence claim about their products, the following clear lessons can be learned from action taken by the ACCC:
- Egg producers and suppliers must, prior to making free range claims, ensure their farming practices are in accordance with the published ACCC guidance.
- the Commonwealth Government's current consultation process may lead to further regulations for free range egg production.
- Pork producers and suppliers should note that the ACCC considers the words 'free range', when used in relation to pork products, mean that the products are made from pigs that are kept in and able to move freely about an outdoor paddock on most ordinary days.
- Australian suppliers who source products from overseas may not be able to rely on compliance with foreign codes as the basis for making credence claims about the quality of the imported products.
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.