Welcome to a Special Edition of ‘Legal Takeaway', our regular, lite, organic, tasty and microwave ready review of developments in the food sector.
In this Special Edition we feature an interview with Mr Paul Zawa, the ACCC’s General Manager of Enforcement in Victoria and Tasmania. The ACCC has had food businesses in its sights over the last few years, with plenty of court wins to prove it. We asked Zawa some pointy questions to find out exactly what the regulator is focusing on in the food sector.
1. The ACCC has looked at a number of food products/sub-sectors – e.g. eggs, ducks, oils, orange juice, honey – and a number of claims like organic, free range, fresh, made in. How does it identify its food related targets and decide which to pursue in enforcement action?
Our food related targets come from a variety of sources: consumer complaints to our Infocentre, concerns raised by industry bodies, other government agencies, ministers, media, industry competitors and our own "eye" on the marketplace. For example, recent matters involving olive oil and honey arose from contact with industry bodies representing Australian producers of those goods. The Coles par-baked bread matter started with Jeff Kennett's complaint about Cuisine Royale being produced in Ireland, but after we examined the matter further, we took it beyond that issue to Coles' overall bread production.
Which matters we choose depends on a number of factors; where it is likely to result in significant consumer detriment, including where made by large businesses, the importance of that food to the consumers, and the egregiousness of the alleged misrepresentation to mention a few.
2. Are there any new food sub-sectors or products the ACCC is/will be turning to?
For the time being, we are focussing on following through with the particular products we have already been working on to ensure that those particular industries have got the message and those producers who honestly promote their goods are not disadvantaged.
3. Do developments and trends overseas influence the ACCC’s domestic food focus? For example, there have been a number of class actions in the US against food manufacturers regarding credence claims and the FDA has also been very proactive in this space – does the ACCC have regard to this?
As suggested above, our purview on the market is very wide, so yes, we do monitor overseas developments. However, their influence on us will vary depending on our own domestic circumstances as well as the relationship that various State agencies and FSANZ have to food regulation.
4. We saw late last year the ACCC commence action in regards to an alleged egg cartel. Is the ACCC’s focus on the food sector shifting from credence claims to competition concerns?
In general, in our food sector credence claim (truth in advertising) matters, we always see a competition concern alongside it. Consumers are enticed into purchasing goods based on faulty information and typically are paying a premium price. On the competition side, competitors who are otherwise honestly promoting their goods miss out on that consumer's purchase. In any given set of circumstances, we pursue the most logical enforcement path to resolve the problem. Cartel, anti-competitive arrangements and misuse of market power are enduring priorities for the Commission, so to the extent any such conduct exists in the food sector, it will receive our attention.
5. The Supermarket Code of Conduct recently became a prescribed voluntary industry code under the CCA. In its recent investigation and action regarding unconscionable conduct, the ACCC expressed concern that suppliers would not come forward to complain for fear of the consequences from supermarkets and therefore the need for the ACCC to issue s155s to facilitate disclosure. Will the Code change supplier reluctance to complain to the ACCC?
Our hope is that the Code will improve industry norms such that complaints will decrease. As the Code contains protections in favour of suppliers, such as an obligation to act in good faith, we are optimistic that the Code will create a more conducive environment for tackling disputes. It is important to also note that under the Code, delisting as a punishment for a complaint, concern or dispute is prohibited. Finally, the Commission has the ability to conduct compliance audits with or without complaints. Complainants remain anonymous, so they can point us in the direction of potential breaches as part of our audit.
6. Chairman Sims made it very clear from his first day in the role that the ACCC needs to be testing the law and to be vigorously enforcing it – we’ve witnessed this, for example, in the ACCC’s free range/roam court actions.
However recently there is a sense that the ACCC is more willing to settle matters by way of infringement notices, undertakings or administrative resolution. Has there been a shift in the ACCC’s appetite for court action? Most definitely not. However, what enforcement path we ultimately take in a particular matter can be very much influenced by the status and range of matters across our enforcement portfolio.
7. There has been criticism of the ACCC’s enforcement action against Maggie Beer, particularly whether the labels were misleading given the use of the word ‘tradition’ and the fact that the products were made in Australia in any event, as well as the argument that there is far worse conduct in the market that remains unchecked. What is the ACCC’s response to this?
The proper functioning of our market economy depends upon information that is not misleading being available to participants, be they consumers or competitors. This is not a trivial point. The Commission does consider, in these cases in particular, whether such conduct, if unchecked, has the potential to become widespread. I think Chief Justice Allsop put it best in a recent judgment:
"Advertising should not be parsed and analysed in the fashion of a 19th Century equity draftsperson. Nevertheless, the courts should be astute and careful not to permit consumers to be misled on available meanings or connotations of phrases deliberately chosen to sell products on the basis that everyone takes advertising with a pinch of salt. To place emphasis on advertising licence that bends the truth will not only degrade the language, but lead to a culture of deception in the market. These matters do not elevate this case to a question of principle, but they should be borne in mind when broad laudatory language, intended to affect the buying decisions of members of the public, is such as to lead consumers into error and so to mislead or deceive, and the justification for such involves an intellectual shrug and a knowing nod to the effect that the public is cynical enough to look after itself.”
8 .The ACCC’s recent action against Woolworths is very interesting – in being the first enforcement proceedings for failing to comply with the s131 mandatory reporting obligation but notably in alleging that Woolworth’s act of continuing to sell products that it had knowledge were unsafe, was false or misleading. Is this a new approach for the ACCC and a sign of things to come?
The Woolworths case is still before the court, so I won't comment on that matter specifically.
Generally speaking, product safety is a long-term priority for the Commission. There is always pressure to bring to the market finished goods sourced from countries with lower production costs, but as the Chairman has said in his recent speech announcing our current priorities, suppliers must not abandon their obligation to ensure quality assurance. But back to the question – yes, we do think that the prohibitions on misleading conduct can have a role to play in certain product safety matters including where a business continues to supply unsafe products in certain circumstances.
9. There are a range of regulators and bodies responsible for food regulation in Australia. Does the ACCC work with and interact with these, including state and territory food authorities and FSANZ, and how? Are there any referrals or co-ordination on matters?
Definitely, yes. The recent activity surrounding the sale of raw milk is a good example of referral and co-ordination, where in this case the State bodies are carrying the matter forward. In each case, we discuss with the various agencies which is best placed to deal with the matter in all the circumstances.
10. The ACCC’s Food Descriptor Guidelines were released in 2006. Does the Commission intend to update these to provide more current guidance?
The Government has announced plans to change the country of origin legislation. Also, there have been a number of recent cases involving the food industry. These developments do point to us revisiting those guidelines, but probably only after seeing where country of origin descriptors land.
The ACCC is clearly continuing its scrutiny of all aspects of the food sector, although misleading credence claims and product safety are particular hotspots. Food businesses need to ensure their claims are truthful and can be substantiated for the period they are in market. They need robust policies and procedures in place for checking product quality and acting quickly on product complaints. This includes investigating reports of injury or illness immediately to determine whether to conduct a recall as well as determine whether to report under the mandatory reporting regime (at least until proposed changes are implemented). Decisions on recalls should be made early and actioned quickly.
The ACCC’s 2015 priorities is a must read for food businesses – it’s the clearest harbinger of enforcement action by the regulator each year, and an early steer on the conduct, practices or sectors that are worrying the ACCC. It provides a timely reminder to check that everything is in order, and address things fast if it's not. Read our review on the ACCC’s priorities here.
Food business can also benefit in keeping across the enforcement action the ACCC does take – there are lessons to be learnt, trends to watch for and good insights into the regulator’s concerns. Examples include action relating to (not quite) honey, free range eggs, organic water and meat.