What you need to know
The short case summary below on the recent Osteo Gel case demonstrates that:
- Every single word on packaging when you brand and advertise your products will be critical in determining whether you are creating a misleading impression on consumers;
- Differential pricing for effectively the same product may be acceptable if the higher priced product carries other benefits to consumers including package innovation and minimisation of confusion;
- There can be a very fine line as to whether this conduct constitutes misleading conduct or is legitimate; and
- Given the recent and very significant increase in penalties for breaches of the Australian Consumer Law (ACL), it would be prudent to instruct your marketing teams to adopt a slightly more conservative approach to advertising claims.
The Osteo Gel case
Between January 2012 and March 2017, GlaxoSmithKline (GSK) and Novartis marketed and sold two over-the-counter pharmaceutical products used to treat pain and inflammation. Both products were sold under the name of Voltaren but with different sub-branding - one was called “Emulgel” and the other was called “Osteo Gel”. Both products were marketed in a similar way but Osteo Gel’s marketing focused on treating osteoarthritis. The ingredients in both products were exactly the same but the products were available in different sizes and there were some differences in packaging. For example, Osteo Gel had an easier-to-open cap and a longer recommended duration of use than Emulgel. The price of Osteo Gel was higher than Emulgel.
After March 2017, GSK (sole supplier) inserted the words “Same effective formula as Voltaren Emulgel” onto the Osteo Gel packaging as well as other small changes. The ‘easy to use cap’ also remained from the earlier product. GSK believed that its conduct was a legitimate means to target different consumers whose ailments responded to the same active ingredient but through using the product in different ways. It also considered that the difference in the cap innovation and duration of use for the differing ailments was material.
The ACCC alleged that the different pricing between the two products conveyed representations to customers that there were material differences between Emulgel and Osteo Gel and that Osteo Gel was specifically formulated to treat osteoarthritis. The ACCC claimed this was misleading and false and a contravention of the ACL because the ingredients of both products achieved the same result.
The ACCC also claimed that the change in packaging did not correct the misleading impression as the dominant message was still present and not sufficiently fixed by those changes.
In light of the Nurofen decision (where Reckitt Benckiser were found to have engaged in misleading and deceptive conduct by making representations that its ‘Specific Pain’ products were formulated to treat different kinds of pain, despite containing the same active ingredient in the same amount), GSK and Novartis admitted that between January 2012 and March 2017, they contravened the ACL by marketing Osteo Gel as specifically formulated and more effective than Emulgel for treating osteoarthritis.
In respect of the changes to the packaging, the court stated that it was legitimate for GSK to market both a generalist and specialist product containing the same gel and that ‘duration of use’ information specific to ailments was not prevented by the ACL. The court also said that the easier-to-open cap on Osteo Gel should not be discouraged, even if it increased the product price. Despite these matters, the question remained - were consumers misled by these measures into reasonably believing that a cheaper product with the same ingredients is inferior for treating their condition?
The court found that the conduct was not misleading in the circumstances because it did not involve a ‘flagrant deception’ like in Nurofen where there was no attempt at differential marketing. The court stated that the risk of a misleading impression being conveyed to an osteoarthritis sufferer needed to be balanced against the assistance such a person would receive by being able to locate an appropriate treatment without reading small print (i.e. seeing the name Osteo Gel easily on a shelf). That is, the marketing of a product for a specific condition, even if it could be used for multiple conditions, could be beneficial in some ways. The court accordingly found that an average, sensible customer would have been able to get information about the difference between the two products and information about how it should be used to treat Osteoarthritis (with the extra duration recommended for Osteo Gel), as well as the arthritis-friendly cap.
On that basis the court said that by the narrowest of margins, the product did not create the impression that it was specifically formulated to treat osteoarthritis or was more effective than Emulgel for that purpose. The court said that ‘it undoubtedly would have been better for GSK not to have danced so close to the edge.’
Pecuniary penalties for the admitted conduct are to be decided at a later date.