The Federal Court recently found that Pirovic Enterprises misled or deceived consumers by representing eggs as “free range” and with its egg cartons portraying free roaming chickens. Pirovic’s laying hens actually endured a much more confined lifestyle. The Court provided clarification on the meaning of “free range” eggs. The result could mean that businesses currently marketing their eggs as free range will have to change their packaging and the pricing for their goods. Senior Associate, Bill Fragos reviews the decision.
Over the last few years, the ACCC has been proactive and has focussed resources on the accuracy of credence claims made by businesses. Matters have involved examination of wifi and 4G, 3D televisions, Australian made, as well as specific regions including Barossa, King Island and Byron Bay. There have also been a number of matters considering food, including “freshly baked”, “open range”, “free to roam” and “berkshire pigs”. Such representations are made to provide a point of distinction from other similar products and generally at a mark-up on the price. Consequently, if a business provides an inaccurate representation, this may lead to a competitive advantage to that business over competitors which otherwise are compliant and accurate with their respective claims.
Pirovic’s representations conveyed that the eggs were produced by laying hens that were able to move freely in open pasture each day. However, Pirovic admitted in Court that most of its laying hens did not move freely on most days.
The Court considered the following factors as relevant:
- the stocking densities of the barns
- the flock sizes in the barns
- the number, size, placement and operation of the physical openings to the open range reducing the ability and propensity of the laying hens to exit the barns and move about freely.
The Court also indicated that there were a number of farming conditions that impacted on whether the laying hens were able to, and did, move freely on an open range each day. Whilst these farming conditions could be considered relevant to most situations, the Court was clear that conditions and their impact would vary between producers and no single condition of itself was conclusive. In addition to the previously identified factors, further relevant conditions included:
- the conditions of the barns the hens are housed in
- the time of the day and how regularly the openings are opened
- the size and condition of the outdoor area, including any shaded areas, the presence of food, water and different vegetation and ground conditions
- the stocking density of any outdoor area
- whether the hens have been trained or conditioned to remain indoors.
The court imposed a penalty of Pirovic $300,000, equivalent to nearly a full year’s profit of Pirovic’s sales of free range eggs to Woolworths, IGA and others. However, also relevant is the fact that Pirovic’s most recent annual profit on all sales was $4.6 million, on sales of $28.7 million. Approximately 40 percent of eggs sold in supermarkets are sold labelled as “free range”. Generally, compared to caged eggs, a premium of 100 per cent on price applies to free range eggs. Given the decision, many producers may need to change their practices to ensure compliance with the Court’s observations and considerations as to “free range”. The Court noted, for example, that Pirovic’s practices with respect to their “free range” laying hens appeared to be consistent with their competitors’ practices. The decision means that the price of eggs that would have otherwise been labelled as free range would need to be reduced on existing stocks about to be or currently being sold.