Lorna Jane hyped up a simple fabric protecting spray as a shield against deadly viruses in a recent marketing campaign - without having any science-based evidence to back up the hype.
It was inevitable that Lorna Jane felt the full force of the law from the medical devices regulator and the Australian Consumer Law regulator for making this claim, as this article describes.
What did Lorna Jane do?
Lorna Jane sells activewear, such as gym clothes, tights, leggings and sports bras, sold in retail stores and online. Activewear is casual, comfortable clothing suitable for sport or exercise.
On 2 July 2020, Lorna Jane commenced a marketing campaign to promote its “LJ Shield Activewear” range, which were activewear products treated with a protective spray. The campaign commenced shortly after the COVID-19 pandemic became a public health emergency.
Lorna Jane tapped into the COVID-19 hysteria by hyping the anti-bacterial benefits of its products treated with the protective spray. Instead of making a low-key claim such as the spray protects against germs, Lorna Jane hyped it up and claimed that the spray completely eliminated any deadly virus. These were the claims:
- Lorna Jane Shield, a bacteria and virus-killing non-toxic mist that permanently adheres to our fabrics to give you activewear that stops harmful pathogens in their tracks … completely eliminating the possibility of spreading any deadly virus.
- LJ Shield Activewear protects wearers against lethal viruses, including COVID-19.
- LJSHIELD is a groundbreaking technology that makes transferal of all pathogens to your Activewear (and let’s face it, the one we’re all thinking about is Covid-19) impossible by eliminating the virus on contact with the fabric.
- On its websites, it displayed this logo:
Had these claims been supported by reasonable scientific and technical evidence, then well and good. But they were not. There were no scientific tests to support the claims.
The marketing attracted the attention of the regulators, the Therapeutic Goods Administration (TGA) and the Australian Competition and Consumer Commission (ACCC).
The TGA acted quickly – On 17 July 2020, the TGA issued three infringement notices totalling $39,960 for alleged unlawful advertising in relation to COVID-19.
Under the Therapeutic Goods Act 1989, any advertising containing references to COVID-19 (and other serious forms of disease) in the promotion of goods needs to have the permission of the TGA. Permission is granted only after scientific evidence has been accepted and the goods are registered as therapeutic goods. For more, see my article False claims of virus protection result in a fine for Lorna Jane
Lorna Jane withdrew the marketing campaign six days later, on 23 July 2020.
The ACCC instituted Federal Court proceedings on 21 December 2020 for breaches of the Australian Consumer Law. For more, see my article ACCC takes Lorna Jane to court over 'Anti-virus Activewear' claims.
On 23 July 2021, the Federal Court of Australia made final orders against Lorna Jane. The decision is Australian Competition and Consumer Commission v Lorna Jane Pty Ltd  FCA 852 (Rangiah, J)
The Court said: “The marketing campaign was conducted in July 2020 in the midst of the COVID-19 pandemic. The campaign was conducted through Instagram stories, media releases, advertising on Lorna Jane’s website, direct emailing of customers, and in-store advertising.”
The Court examined 4 categories of false claims (misrepresentations) made by Lorna Jane in the marketing campaign:
- Viruses, including COVID-19, would be unable to adhere or transfer to or would otherwise be eliminated on contact with LJ Shield Activewear
- LJ Shield Activewear protected wearers against viruses, including COVID-19
- Wearing LJ Shield Activewear would eliminate, render impossible or otherwise stop the spread or transfer of viruses, including in gyms and upon returning home from the gym
- There was a reasonable scientific or technological basis for these claims at the time they were made.
The claims were misleading or deceptive conduct under s 18 of the Australian Consumer Law (ACL), false or misleading representations as to performance characteristics, uses and benefits under s 29(1)(g) of the ACL and misleading conduct as to the nature, characteristics and suitability for purpose under s 33 of the ACL, because there was no scientific evidence to support the claims.
The Court’s considerations in setting the penalty
The Court said:
“The most significant factors in the present case are the nature and seriousness of the contraventions, the need for deterrence of such conduct, and the admissions of the contraventions and agreement to the orders by Lorna Jane.
The advertising campaign was conducted in July 2020 at a time of considerable uncertainty, fear, and concern amongst the public about the consequences and spread of COVID-19. At that time, there had been at least 8,000 reported cases and 104 deaths in Australia. On 16 July 2020, there were 315 new cases of COVID-19 reported in Australia.
Lorna Jane sought to exploit the fear and concern of the public through the use of misleading, deceptive, and untrue representations about the properties of LJ Shield Activewear. The behaviour of Lorna Jane can only be described as exploitative, predatory, and potentially dangerous.
Lorna Jane’s contraventions of ss 29(1)(g) and 33 of the ACL must be regarded as very serious. There is a need to impose a substantial penalty to reflect the seriousness of the conduct and to demonstrate that exploitative conduct of this kind will not pay.
It is appropriate to note, however, that the applicant [ACCC] does not allege that Lorna Jane actually knew that the representations it was making were false. It is also relevant that Lorna Jane has not been shown to have actually profited from its conduct, nor that the contraventions actually caused harm to consumers.
It must be taken into account that the making of the representations was directed by Ms [Lorna Jane] Clarkson [CEO of Lorna Jane], so that the conduct emanated from a very high managerial level within the company.
An appropriate allowance should be made for the fact that Lorna Jane admitted the contraventions, although only a short time prior to the commencement of the trial. It should also be taken into account that Lorna Jane has agreed to the orders proposed by the applicant.
Taking into account all the circumstances, I am satisfied that the penalty of $5 million proposed by the parties is appropriate.”
[paragraphs 17 to 23, judgment]
The Court made these orders:
1. Lorna Jane pay a penalty of $5 million, payable as to $2 million within 30 days and then by 12 equal instalments of $250,000 per month.
2. Lorna Jane is not to use the words “anti-virus” in its marketing materials for three years, including words such as its “activewear eliminates viruses and pathogens, including COVID-19” unless it has a reasonable basis for doing so.
3. Lorna Jane is to place a corrective notice on the home pages of its websites, email the notice to all consumers on its electronic direct mailing list, place it on its Facebook page and its Instagram page, and on an A4 poster in each store.
4. Lorna Jane is to establish an Australian Consumer Law compliance program to operate for three years.
5. Lorna Jane is to pay the ACCC’s legal costs in the proceedings of $370,000 within 14 days.
In the ACCC Media Release ACCC Chair Mr Sims said: “This type of conduct is particularly harmful where, as here, consumers cannot easily check or monitor the claims made.”
Wake up and smell the penalties!
In a press release dated 23 August 2018, Australian Competition and Consumer Commission (ACCC) Chair Rod Sims warned:
“Companies will now face more serious financial consequences for breaching consumer law that align with competition law breaches. We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties.
Penalties need to hit the bottom line, so they are not simply seen as the cost of doing business (and) need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority. Increased penalties will help to deter large companies from breaching consumer laws”.
The ACCC has followed through with increased penalties as evidenced by the recent $5 million penalty issued to Lorna Jane for breaches of Australian Consumer Law (ACL). The speed of the prosecution and the size of the penalty should be ringing alarm bells in boardrooms across Australia.
What are the lessons, and how can businesses ensure compliance with Australian Consumer Law (ACL)?
- Businesses can no longer afford to ‘sail close to the wind’ with their marketing claims, or they risk being caught by the regulators, and forced to pay a heavy penalty, in financial and reputational terms
- Misconduct will not go unnoticed or unpunished.
- The ACCC has increased their monitoring and surveillance to ensure businesses comply with Australian Consumer Law (ACL), including working with other agencies and regulatory bodies such as the Therapeutic Goods Administration (TGA)
- The ACCC has increased penalties to deter companies from breaching Australian Consumer Law (ACL)
- You cannot simply hope that the penalties will be small, and potentially so insignificant that they could be considered a ‘cost of doing business’ or factored into the overall marketing costs of a campaign
- This is no longer a marketing or brand issue, but rather a compliance, governance and legal issue that demands the attention of the board and their legal advisers
- Don’t just leave the marketing to the marketers – management needs to pass it by a consumer law compliance expert before approving the marketing
For further information on the ACCC 2021 Compliance and Enforcement Policy and Priorities (February 2021) see: https://www.accc.gov.au/publications/compliance-and-enforcement-policy