Organic, gluten free, low fat, no carb, reduced salt, high in calcium, low cholesterol, no artificial colours, omega-3: our supermarket shelves are stocked with thousands of different products all vying for shoppers' attention. In the battle over consumer spending, product differentiation through labelling and marketing that features compelling claims, celebrity endorsements and attractive imagery can make a significant difference in sales.
However, food labelling and marketing is a minefield of regulation in Australia, and getting it wrong is a recipe for disaster with the potential for significant penalties in addition to negative PR and consumer backlash. Multiple layers of often-complex regulation govern what claims can appear on food labelling and advertising. In 2013 the government and regulators focused heavily on food claims, as they and the food industry got to grips with the new regime for making nutrition and health claims, a crackdown on misleading 'credence' claims and the development of a front of pack labelling system.
On January 18 2013 a new standard was introduced to the Australia New Zealand Food Standards Code – the key regulatory instrument for food labelling, composition and safety requirements. The new Standard 1.2.7 – Nutrition, Health and Related Claims regulates the voluntary nutrition and health content claims that food businesses can make on labels and in advertising. The goal of the standard is to reduce misleading claims and to expand the range of permitted claims that can be made.
A 'nutrition claim' is a claim about the content of certain nutrients or substances in a food (eg, high in calcium or low fat). Conditions about certain properties of foods must first be met before a nutrition content claim can be made about that food property. For example, if a claim is made that a food is 'a good source of protein', the food must contain at least 10 grams of protein per serving.
A 'health claim' refers to a relationship between a food and health. These were largely prohibited before the new standard. Now health claims are divided into two types:
- general-level health claims, which refer to a nutrient or substance in a food and its effect on a health function (eg, 'calcium is good for strong bones'). These claims must meet the requirements of one of the more than 200 pre-approved health claims set out in the standard, unless businesses can self-substantiate a food-health relationship in accordance with the prescribed process; and
- high-level health claims, which refer to a nutrient or substance in a food and its relationship to a serious disease or to a biomarker of a serious disease (eg, 'diets high in calcium may reduce the risk of osteoporosis in people 65 years and over').
Health claims must also include a dietary context statement and meet nutrient profile scoring criteria in the standard. The new standard has not been without controversy, with industry bodies claiming that the rules are flawed and will lead to dairy and honey products being branded as unhealthy. Further studies have suggested that, at least in New South Wales, if the new standard were introduced with immediate effect, 29% of existing products with nutritional claims and 31% with existing health claims would need to be removed from shop shelves for non-compliance.
While businesses have until January 18 2016 to amend their packaging in order to comply with the new standard, given the long lead times to swap out product packaging and the regulator's stated intention to provide no allowance for stock in trade after that date, it is advisable for businesses to start planning now for the transition. Unfortunately, Food Standards Australia New Zealand (FSANZ) has yet to release the user guide for the new standard, which makes it difficult to start making changes.
In addition to the changes relating to nutrition and health claims, the industry has faced a complete rewrite of the Food Standards Code. The aim of the rewrite is to improve the legal efficacy of the code and the changes were not intended to require any modifications to labelling. However, the changes are substantial and the food industry has already invested a large amount of resources in reviewing these changes, with the first round of submissions completed in September 2013.
Apart from the prescriptive requirements of food-specific regulation, food businesses must also make sure that their labelling and marketing complies with the requirements of the Consumer Law, particularly the prohibition on specific false representations and the general requirement not to mislead or deceive. The Australian Competition and Consumer Commission (ACCC) – the regulator of the Consumer Law – has publicly stated that one of its priorities has been to take action against misleading credence claims regarding food.
Credence or premium claims are claims about the attributes or origins of a product. For example, they may suggest that a product is safer (eg, 'non-toxic'), or offers a moral or social benefit (eg, 'free range eggs') or a nutritional benefit (eg, 'fat free'). Consumers are particularly vulnerable to misleading credence claims because they are almost completely reliant on the information provided to them on packaging or in advertising. These types of claim can be very persuasive and, if misleading, not only affect consumers detrimentally, but also have a detrimental effect on competition between businesses for that product.
In a speech to the Victorian Farmers Federation Conference in June 2013, Marcus Bezzi from the ACCC stated that:
"consumers are increasingly placing weight on premium claims and are likely to value the types of claims that directly affect the integrity of the product, such as where something was made, grown or produced and how it was made, grown or produced, claims made by producers that a consumer cannot test or validate."
The level of enforcement action in 2013 was unprecedented and included successful court action against:
- Baiada Poultry Pty Ltd and Bartter Enterprises Pty Ltd – the processers and suppliers of Steggles-branded chicken products – for claims that their chickens were "free to roam";
- Luv-a-Duck Pty Ltd, for claims that its ducks were "grown and grain fed in the spacious Victorian Wimmera Wheatlands"; and
- Kingsland Meatworks & Cellars Pty Ltd – a butcher from Victoria – for false and misleading representations that its meats came from King Island.
The ACCC's action against Coles for misleading conduct in relation to its claims that certain products were "baked today, sold today" and "fresh baked in store" where the products were actually par-baked – that is partially baked and frozen offsite and then shipped to Coles stores for 'finishing' – is yet to be heard. In early December 2013 the ACCC also announced that it had commenced proceedings against egg producers Snowdale Holdings Pty Ltd in Western Australia and Pirovic Enterprises Pty Ltd in New South Wales, alleging that their use of 'free range' was misleading.
The regulator has also taken alternative regulatory action, including:
- issuing MOI International (Australia) Pty Ltd with a total of A$20,400 in infringement notices for misleading labelling where a product was claimed to be 'extra virgin olive oil' when it was actually 93% canola and 7% olive oil; and
- obtaining agreements from seven suppliers of bottled water to remove 'organic' claims from labelling and marketing material. The ACCC had claimed that the labelling and marketing for the water was misleading because 'organic' means an agricultural product that has been farmed according to certain practices and standards, such that it is impossible for water to be organic.
In a climate where premium food claims are increasingly being used, it is likely that the ACCC will continue to be vigilant and prepared to take action.
In June 2013, despite extensive public accusations and debate among consumer lobby groups, the food industry and the government, the Legislative and Governance Forum on Food Regulation approved a new front of pack labelling system. The new system was developed over 18 months and will introduce a star rating system to appear on the front of packaged, manufactured or processed foods. The star system is based on a modified nutrient profiling scoring criterion where foods willbe given a star rating from half a star to five stars. This is in contrast to the traffic light system adopted in the United Kingdom.
The new system will require nutrient information elements for saturated fat, sugars and sodium to be displayed, with the option to include one positive nutrient information element (eg, calcium or fibre). Businesses will also have the option of including the words 'high' with the positive nutrient element and 'low' with saturated fat, sugars and sodium elements, if applicable.
The system will be voluntary at this stage, provided that there is consistent and widespread uptake. The system will be evaluated after two years and, if voluntary implementation is unsuccessful, a mandatory approach will be introduced, requiring FSANZ to develop a standard.
The new system received mixed reactions from the food industry, with some bodies warning that a number of issues remain to be sorted out, including the cost impact of implementing the new requirements and the algorithm to be used to rate products.
The Legislative and Governance Forum on Food Regulation met in December 2013. Although the new federal government has not yet indicated whether it is committed to follow through with implementation of the new system, ministers from the new government were in attendance and raised no objection with plans to continue to work towards implementation, and indeed committed to an assessment to broaden the cost-benefit analysis of the front of pack labelling system to include evidence-based research and extensive industry consultations in the absence of a regulatory impact statement, which the forum did not agree to. Pressure is mounting from consumer organisations such as Choice, the Obesity Policy Coalition and the Heart Foundation to introduce the scheme quickly. However, this additional layer of regulation for food businesses would be contrary to the Abbott government's public mantra of "cutting red tape".
While there is growing confidence in the economy and the prospect of regulatory change, the current reality is that food labelling and marketing is subject to extensive regulatory requirements, with very high penalties for non-compliance. Therefore, food businesses must take care when making food claims to ensure that they meet any prescriptive compositional and disclosure requirements, are accurate and can be substantiated if challenged.
For further information on this topic please contact Melissa Monks at King & Wood Mallesons by telephone (+61 2 9296 2000), fax (+61 2 9296 3999) or email (email@example.com). The King & Wood Mallesons website can be accessed at www.mallesons.com.