Credence claims in the food and beverage sector were the subject of keen interest by the ACCC throughout 2014 – and this interest is expected to continue unabated in 2015.
ACCC Chairman Rod Sims told a CEDA Conference early in 2014 that misleading credence claims ‘tilt the playing field away from suppliers who are innovating and doing the right thing’.
The Federal Court views breaches of the Australian Consumer Law (ACL) very seriously. As at September 2014, 14 cases brought by the ACCC under the ACL have seen penalties awarded in excess of $1 million each.
So, what are credence claims?
They are promotional claims made by manufacturers, sellers and providers about a consumer product, which consumers are not able to readily verify for themselves. In brief, they involve claims about:
- who made a product
- what is in it
- where it is from
- how it is made.
These claims are powerful marketing tools that can easily mislead if not used properly. You need to take care to ensure that these claims (and every reasonable interpretation of these claims) are accurate and capable of substantiation or the ACCC may come knocking.
Key risk areas with credence claims
When deciding on the marketing campaign for your food product, here are some important claims that you need to get right.
1. Be clear about who made your product. If you are a large manufacturer, don’t think you can massage the truth and portray yourself as a niche, boutique player without incurring the wrath of the ACCC.
Case study – Carlton & United Breweries (CUB)
In April 2014, CUB paid 2 infringement notices totalling $20,400 and provided a court enforceable undertaking in relation to the Byron Bay Pale Lager it supplied.
CUB was licensed the right to manufacture, market and distribute the beer from the Byron Bay Brewing Company. The label on the beer incorporated the name ‘Byron Bay Pale Lager’, a pictorial representation of a lighthouse, text regarding Byron Bay and a map of the Byron Bay region showing the location of the Byron Bay Brewing Company.
The ACCC considered the labelling to be misleading as CUB brewed the beer some 630km away from Byron Bay.
CUB undertook to cease distribution of the beer with that label, provided a corrective notice on various websites and in a trade journal and was required to implement a supplementary compliance program.
2. Be up-front about what your product actually is. Whilst a certain amount of puffery is acceptable, don’t try to make your product appear more luxe than it really is.
Case study – Barossa Farm Produce
In June 2014, this company’s ‘The Black Pig’ small goods were viewed by the ACCC as likely to have breached the ACL. Representations had been made that the pork used in these products was from heritage Berkshire pigs or other black pig breeds and that the pigs were free range, when this was not the case.
The pork actually came from the less flavoursome white pigs, while representations were also made that the origin of every animal used in these products was known, when this wasn’t the case.
The ACCC received a complaint about this as a result of ‘industry intelligence’.
The company gave a court enforceable undertaking not to mislead customers in this way and was required to publish a corrective notice on its website. The sole director was also required to attend compliance training.
Case study – Coles Supermarkets
In June 2014, the Federal Court found Coles to have contravened the ACL by making false, misleading and 1392341_1 2 deceptive representations about some of its baked bread products being ‘Freshly Baked’ or ‘Baked Fresh’.
In September 2014, the Court made various orders including:
- restraining Coles from engaging in similar conduct for 3 years.
- requiring Coles to publish a corrective notice at each Coles Bakery Store in Australia and on its website homepage for 90 days.
The question of pecuniary penalties is still to be decided by the Court.
3. Be honest about where your product is really from.
If a key marketing claim for your product focuses on where it is made, you’ll be in trouble if you are not being truthful about the actual location of manufacture or if you switch locations and don’t make this clear.
Case study – Maggie Beer Products In August 2014, the company gave a court enforceable undertaking in relation to misleading representations on certain ‘Maggie Beer’ branded products between at least January 2011 and January 2014.
The representations arose through:
- use of the Maggie Beer logo.
- the words ‘Maggie Beer A Barossa Food Tradition’.
- the words ‘Maggie Beer Products, 2 Keith Street Tanunda South Australia 5352’ on products.
These representations gave the overall impression that those products were made in Tanunda, the Barossa Valley and/or South Australia. In fact, they were manufactured elsewhere, in States other than South Australia.
Maggie Beer Products acknowledged that this conduct was likely to have contravened certain sections of the ACL.
The company undertook to do the following:
- apply amended labelling to those products made outside of South Australia.
- publish an educative article in Food Magazine.
- undertake a review of its ACL compliance procedures.
4. Be truthful about how your product is actually made. The long list of ‘free-range’ egg suppliers who have been found to have been dishonest about how their eggs are produced should provide fair warning that care needs to be taken with these sorts of claims.
Case study – Pirovic Enterprises
In September 2014, the Federal Court declared that the company had engaged in misleading conduct and made misleading representations in its labelling and promotion of its eggs as ‘free range’. The representations included use of the words ‘free range’ and images of hens on open pasture.
The Court ordered that the company pay a pecuniary penalty of $300,000 and contribute to the ACCC’s costs.
What have we learned about credence claims in 2014?
The ACCC’s high level of enforcement activity across 2014 in relation to credence claims in the food and beverage sector is fair warning to players in this space to comply with the requirements of the ACL.
The ACCC’s interest in this area appears unlikely to wane any time soon. Food and beverage manufacturers, sellers and providers beware – you must take care with your marketing claims to ensure they are truthful and capable of adequate substantiation otherwise you can expect the attention of the ACCC.