Companies “Sitting Ducks” for ACCC

Following October’s article, “Counting One’s Chickens? The Free Range Debate,” the poultry industry has come under the spotlight once again with the decision of Australian Competition and Consumer Commission v Luv-a-Duck Pty Ltd [2013] FCA 1136 on 1 November 2013.

Luv-a-Duck was in breach of sections 52, 53(a) and 55 of the former Trade Practices Act 1974 and sections 18, 29(1)(a) and 33 of theAustralian Consumer Law (ACL) by participating in misleading or deceptive conduct.

Phrases such as “Grown and grain fed in the spacious Victorian Wimmera Wheatlands” and using a logo with the phrase “Range Reared & Grain Fed” formed a significant plank of the company’s marketing campaign. The court found that these phrases were misleading or deceptive and the Company was fined a total of $375,000 including costs.

The case is just one in a long line of food labelling cases that have beset the poultry industry in the last 12 months. In June 2013, Australia’s largest duck meat producer, Pepe’s Ducks, was fined $400,000 including legal costs for its credence claims in the period 2004-2012.

Pepe’s Ducks used phrases such as “Open Range”, “Grown Nature’s Way” and a logo on its packaging of a duck outdoors and surrounded by hills, grass and a lake.  This was found to be misleading by suggesting that the ducks spent a substantial amount of their time outdoors, were permitted to spend significant periods foraging for food outdoors and had substantial access to an outdoor water supply.

The misleading statements implied that the duck meat products offered for sale by Pepe’s Ducks were of a different and superior quality than duck meat products processed from barn-raised ducks.

The Federal Court of Australia specifically referred to Pepe’s Ducks’ “sophisticated and deliberate approach to the marketing of its duck meat products” and said “that the Company will clearly have been aware of increasing concern amongst consumers regarding sources of food and the treatment of animals used to produce food products” and that the marketing claim was likely to have led to a substantial increase in the market share of Pepe’s Ducks at the expense of law-abiding competitors.

With 40% of the Australian duck meat market (around 80,000 ducks sold each week), the potential impact of this false marketing campaign is significant..

The history of credence claims in the poultry industry over the last 12 months begs the question whether harsher penalties are needed to deter such behaviour, not only by the culprits but by other industry players.

Section 224(3) of the ACL permits a $1.1 million maximum penalty for each act or omission that constitutes misleading or deceptive conduct by a body corporate.

The Federal Court did not set out to determine exactly how many breaches occurred in either case, but rather imposed an overall fine. The fines imposed on Luv-A-Duck and Pepe’s Ducks were considered moderate but within the acceptable range.

Bromberg J, in the Pepe’s Ducks case, considered that the combination of (1) a fine together with (2) the company’s requirement to implement an ACL compliance programme and (3) publish mandatory notices on their website put the smaller fine in context and within an acceptable range of penalties.

The free-range debate is not new in Australia and these recent cases illustrate not only the importance to consumers of animal welfare but also the temptation on the part of primary producers to manipulate that concern from a marketing perspective and the potential for abuse. The ACCC clearly recognises this risk and is taking it seriously.

With consumers calling for a complete overhaul of food-labelling laws, it is anyone’s guess which direction the debate will take. What remains to be seen is whether a total overhaul of current legislation in relation to food product labelling is really necessary or whether a strict implementation of the current provisions is sufficient for the consumer law watchdog to eradicate the breaches that so offend the public interest.

Companies seeking advice about product-labelling requirements and  the provisions of the Australian Consumer Law should contact us (08) 9321 3755.

The information published on this website is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.