In the case between Commerce Commission v New Zealand Nutritionals  NZHC 832, the Commerce Commission initiated High Court proceedings against New Zealand Nutritionals (NZ Nutritionals) alleging misleading and deceptive conduct in breach of the Fair Trading Act in connection with labelling and marketing of certain NZ Nutritionals goats milk products.
NZ Nutritionals produces, packages, and distributes health products made from raw ingredients sourced from both domestic and international suppliers. Its products included goats milk tablets and goats milk powder, manufactured at its Christchurch factory. The production process includes weighing, sieving, mixing, blending, compressing into tablet form (in the case of the tablets), packaging and labelling the various products. There are quality assurance checks at various stages in the production process. The principal active ingredients in the goats milk products were goats milk powder and dicalcium phosphate; in addition to those two active ingredients there were 10 other ingredients. Of the 12 total ingredients 8 were imported into New Zealand, including the goats milk powder and the dicalcium phosphate. The labelling of the products included statements that the products were "100 % NZ made" or “New Zealand made" (as below).
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The Commission alleged that this labelling and marketing was misleading and deceptive, and in breach of the Fair Trading Act, because it would lead consumers to believe that the goats milk was sourced from goats milked in New Zealand and converted into powder in New Zealand. The Commission therefore argued that this would be in breach of section 9 (misleading and deceptive conduct generally), section 10 (misleading conduct in relation to goods), and section 13(j) (false or misleading representations, concerning the origin of goods or services) of the Fair Trading Act.
NZ Nutritionals argued that the significant steps involved in the production and packaging of the products, within New Zealand, meant that the representations were not misleading or deceptive. There was evidence regarding the extent of the work undertaken in New Zealand, and also expert evidence from a professor of marketing as to the way he thought consumers were likely to understand a representation that a goats milk supplement was made in New Zealand (in his view, that understanding would be that the milk / powder came from goats in New Zealand).
Justice Venning of the High Court found that in this case the milk powder was such a significant feature of the end products (both the powder and tablets) that where the milk powder ingredient was produced was an important part of the nature and/or characteristics of the final products. Accordingly he concluded that the representation that the powder and tablets were made in New Zealand was indeed misleading and deceptive, and in breach of sections 9, 10, and 13(j) of the Fair Trading Act.
This case includes useful commentary by the judge on the leading cases in the area, and their application, with particular reference to food or nutritional products. There is also useful commentary on the types of evidence which are of assistance in a case such as this.
For producers of food and nutritional products there are important lessons here. It will be prudent for such producers to:
- Undertake an audit of the source of ingredients in their products;
- Consider the ingredients with any eye on their importance in relation to the nature and characteristic of the products (as that would be understood by consumers);
- Review representations made in relation to the products including on labels, marketing materials or in advertising, particularly in relation to source / origin such as "NZ made" or the like; and
- Ensure representations are not misleading, deceptive or false in light of the above.
These considerations are particularly important in relation to potential breaches of the Fair Trading Act, but that is not the only piece of legislation that you may need to consider. As of January 2016, food companies also need to be aware that any claims towards nutrients or health effects on product labels (or any promotional material) must meet criteria set out within Standard 1.2.7 of the Food Standards Code. While this is a compliance requirement which MPI is taking very seriously, Standard 1.2.7 also offers significant commercial opportunity to add value to products in the nutritional / health food sector.