ACCC crackdown on mislabelling going too far?

Posted by James Ferre on 22nd May 2008

Over the past 10 months, Australia’s national consumer protection agency, the Australian Competition and Consumer Commission (ACCC) has taken action for misleading labelling against food products produced by Arnott’s Biscuits, Tasti Products (Weight Watchers), Nudie Foods, Natur-all (Go Natural) and Harvey Fresh. One of Australia’s leading food industry lawyers, Joe Lederman of the law firm FoodLegal, who is also an Adjunct Professor of Law at Deakin University, believes the ACCC’s crackdown may be too stringent. “Although some of the claims made about their products were either incorrect or overstated or potentially misleading and were therefore in actual breach of the Trade Practices Act, the ACCC has recently appeared to be overstepping the mark in its ongoing campaign aimed at food labels that refer to fruit ingredients.”

According to Professor Lederman, the ACCC relied on earlier cases such as its 2004 case against Cadbury Schweppes (the Cottee’s cordial case) and the court-enforceable Undertakings given in 2006 by Uncle Toby’s and in 2007 by GlaxoSmithKline (the Ribena case) as precedents. More recently, however, the ACCC has argued that food companies will be in breach of Sections 52, 53 and 55 of the Trade Practices Act whenever a product mentions one fruit in its name or descriptor but fails to identify another fruit in the product that is more predominant in the composition of the product.

Professor Lederman cites the example that the ACCC would like “apple” to be mentioned in the name of a product whenever apple concentrate has been used – even if only used as a neutral food base and when there is no apple taste in the product. “The problem with the ACCC’s view is that most processed foods use a base such as milk, eggs, fats, sugars or apple which are each not the characterising ingredient of the product,” said Professor Lederman. “Yet, many of these products would need to be renamed if this ACCC approach were to be adopted consistently.”

According to Professor Lederman, a Federal Court decision in the case of Ricegrowers Ltd v Real Foods Pty Ltd handed down on 12 May 2008 “has the potential to moderate the current subjective nature of the approach adopted by the ACCC”, and, he claims, “the decision may give a glimmer of hope to food companies who feel that they are copping the wrong end of the pineapple from the ACCC”.

The case was brought by the ricegrowers’ co-operative who produce SunRice Thin Corn Cakes and Thin Rice Cakes. They argued that the competitor’s product copied their flavours and colour schemes but also breached Sections 52 and 53 of the Trade Practices Act by using the name “Corn Thins” on a product that contained a substantial amount of rice – rather than corn only. The Federal Court was asked to look at the issue of whether or not the product named “Corn Thins” implied that the product contained 99% corn.

“Even though the product contained a substantial percentage of rice, the Federal Court judge found that ‘Corn Thins’ did not need to contain 99% corn and that the name did not imply that the product had any particular composition or proportion of corn,” Professor Lederman stated.

Professor Lederman believes that the Ricegrowers case ameliorates the ACCC’s argument that the name of a product must always refer to the predominant or substantial ingredient by percentage composition. “The Ricegrowers case offers a more practical solution than the ACCC approach,” Professor Lederman said. “The ACCC would be running the risk of pursuing an approach that the Courts will be hesitant to enforce. The illogicality of the ACCC stance is that the corollary would require renaming of products such as Cherry Ripe, cinnamon cake or any other product that is named by reference to a relatively minor but characterising ingredient.”

However, Professor Lederman also pointed out that the Ricegrowers decision does not invalidate the Consent Orders in the Arnott’s case or any of the signed agreements or Undertakings given by food companies to the ACCC. “Although the Ricegrowers decision provides new legal precedent and reasoning for future decisions, it does not overrule the outcomes of earlier cases or have the effect of changing any of the Undertakings that have already been signed in favour of the ACCC,” he concluded.