Federal Court orders $300,000 penalty after finding ‘free range’ egg claims to be misleading
The Federal Court has declared by consent that Pirovic Enterprises Pty Ltd (Pirovic) engaged in misleading conduct and made misleading representations in its labelling and promotion of eggs as ‘free range’, in proceedings brought by the Australian Competition and Consumer Commission.
The Court ordered that Pirovic pay a pecuniary penalty of $300,000 and contribute to the ACCC’s costs.
Australian Food News reported in December 2013 that the Australian Competition and Consumer Commission (ACCC) had filed separate proceedings in the Federal Court against Pirovic, which is based in New South Wales, and another egg producer in Western Australia, alleging that each of the producer’s use of “free-range” was misleading.
From January 2012 until January 2014, Pirovic used egg cartons which included the words ‘Free Range’ and images of hens on open pasture.
The Court found that by labelling and promoting the eggs as ‘free range’, Pirovic represented to consumers that the eggs were produced by hens which were able to move about freely on an open range each day, and that most of the hens did in fact do so on most days. In fact, as Pirovic admitted, most of its hens did not move about freely on an open range on most days.
“Credence claims such as free range claims are powerful tools for businesses to distinguish their products,” said Rod Sims, ACCC Chairman. “However, if they are false or misleading, they serve to mislead consumers, who may pay a premium to purchase such products,” he said.
The Court found that the eggs supplied by Pirovic were produced by hens, most of which did not move about on an open range because of a combination of the following factors:
- the stocking densities inside the barns where the hens were housed;
- the flock sizes inside those barns; and
- the number, size and placement and operation of the physical openings to the open range.
“This decision provides very clear guidance that any free range egg claim must be backed by farming conditions and practices implemented by suppliers under which hens actually move about on an open range each day,” Mr Sims said.
The ACCC and Pirovic had agreed on joint submissions and proposed orders to be put to the Court for consideration.
Broader investigation into ‘free range’ claims
This case forms part of an investigation by the ACCC into free range claims made by a number of egg producers across Australia. This investigation was initiated by the ACCC in response to community concerns.
There are a number of farming conditions that impact on whether hens are able to, and do, move freely on an open range each day. The conditions (and their impact) vary between producers and no single condition of itself is conclusive. The relevant conditions include:
- the internal stocking density of sheds;
- the conditions of the internal areas the hens are housed in;
- the number, size and location of any openings to an outdoor area;
- the time of the day and how regularly the openings are opened;
the size and condition of the outdoor area, including any shaded areas, the presence of food, water and different vegetation and ground conditions;
- the stocking density of any outdoor area; and
- whether the hens have been trained or conditioned to remain indoors.
Australian Food News reported in June 2014 that concerns about the definition of ‘free range’ had also led to the NSW Government’s Department of Fair Trading starting development of a draft National Information Standard on free range eggs and with regard to the current review of the Model Code. The NSW Department of Fair Trading said the developments, which will also examine any improvements in the effectiveness and enforceability of the Code, will “work to enhance consumer confidence and certainty around egg labelling”.
Australian Food News notes that such a definition may be increasingly called for as big retailers and fast food chains such as Coles, Woolworths and McDonald’s have each announced plans to phase out cage eggs in favour of cage-free eggs, which may include both barn-laid and free range eggs.
Credence claims workshop
For food businesses concerned about managing the risks sometimes associated with making credence claims, the upcoming FoodLegal workshop, ‘Credence claims and managing ACCC risks’ will include best practices to identify when and how a non-compliance risk exists in any food marketing campaign under Australian Consumer Law legislation and what options can be considered.
Workshops will run in both Melbourne and Sydney in October 2014 but pre-booking is essential as numbers are limited and are expected to be filled well before each date.
For more information about the workshop, click here.