Australia’s health rating system

On the 27 June 2014, state and territory governments confirmed that Australia will introduce a voluntary 5 star health rating system on food labels. The system requires manufacturers to display a ranking between 1 and 5 stars to indicate the nutritional quality of the product.

As manufacturers grapple with the decision of whether to adopt the system, it’s clear that companies must understand their legal obligations in relation to any health claims made. Below we outline the obligations that revolve around advertising functional foods.

The opportunities of functional foods

A functional food is one that has demonstrable health benefits beyond nutrition. To achieve a superior health profile, a functional food will typically have a scientific additive that offers greater wellness benefits when consumed (e.g. bioactive substances). One example of this is additives in margarine that act to reduce cholesterol absorption.

The retail price for functional foods is usually 30% to 500% higher than the comparable conventional food.¹ The global market for such foods is estimated to be between US$30 and US$60 billion and increasing exponentially.² This means that functional foods present a lucrative market for Australian manufacturers as they seek to capitalise on consumers looking for a healthy lifestyle and an ageing population within the domestic market.

Challenges associated with advertising functional foods in Australia

Australia has a complex regulatory system in relation to food standards. The key to successfully navigating the system is to recognise that there are two main regulatory regimes governing functional food. These are the Food Standards Australia New Zealand Code (FSANZ Code), which governs products classified as ‘foods’ and the Therapeutic Goods Act 1989 (Cth) that regulates products deemed ‘therapeutic goods’. Enforcement of the FSANZ Code occurs at a state level, with each state having its own Act implementing the Code.³

A ‘food’ is defined as a product that is consumed and includes confectionary, chewing gum, tea and coffee.4 A ‘therapeutic good’ is defined as a product that ‘represents that it prevents, alleviates, influences or cures a physiological process in a person’.5 Importantly however, the FSANZ Code itself doesn’t define a ‘food’, nor does it define what is to be understood as a ‘health claim’.

It may be advantageous to pursue classification as a ‘food’ when seeking to label and advertise products in Australia because a ‘food’ is not subject to the strict requirements of the Therapeutic Goods Act 1989 (Cth). For example, a ‘therapeutic good’ must be registered with the Therapeutic Goods Administration (TGA) and comply with the Therapeutic Goods Advertising Code. Furthermore, the TGA may at any time make an independent declaration that a good does not have therapeutic benefits.

Given that the very purpose of a functional food is to confer health benefits, classification can be complex and will depend heavily on the packaging of the relevant product and any claims made. The courts have demonstrated that the test to be applied in determining if a product is claiming to be therapeutic is whether ‘the words are capable of being read as making a claim for therapeutic action or prophylactic action?’6 Following this, it can be understood that classification will be determined by reference to what the intention of the legislators were in drafting the specific provision or regulation in issue.7

It is therefore vital for companies to proactively consider classification prior to design and marketing of relevant products. Any strategy must take into consideration the various Food Standards that will apply under the FSANZ Code, in addition to the robust requirements of the Australian Consumer Law.

The key takeaway for operating in the Australian market – whether as a company seeking to market a ‘food’ or a ‘therapeutic good’ – will be to ensure the factual and scientific accuracy of any health claims made.