The recent decision of Australian Competition & Consumer Commission v Kimberly-Clark Australia Pty Ltd (No 2) [2021] FCA 102 (16 February 2021) (Abraham J) examines the important role that a Made in Australia logo plays in a consumer’s decision to buy a product, and the hefty penalty that a business will pay if it uses the logo for goods not manufactured in Australia.

The misuse of the Made in Australia logo by Kimberly-Clark

Kimberly-Clark Australia (RCA) published the Made in Australia logo (an image of the map of Australia along with the words ‘Made in Australia’) at the bottom of its Kleenex Cottonelle website (www.kleenex-cottonelle.com.au) for 4 months from 28 October 2015 to 24 February 2016 (when it removed the logo after receiving a letter from the ACCC). The logo was:

The website predominantly advertised RCA’s Kleenex Cottonelle toilet paper products which were made in Australia, along with the Kleenex Cottonelle Flushable Cleansing Cloths (KCFC Wipes) which were not. The products were not sold online.

The misrepresentation was confined to the website. The Court noted: “The packaging of the KCFC Wipes did not contain the ‘Made in Australia’ logo or any other statement to this effect. At all relevant times, the packaging for the KCFC Wipes accurately stated the country in which the product was made.”

As could be expected of a global personal care company with manufacturing operations in 39 countries and approximately 43,000 employees, headquartered in Dallas, Texas, its senior management team had approved of the publication of the ‘Made in Australia’ logo on the website.

As the Federal Court noted in the joint submissions: “The basic falsity of the representations were readily avoidable and a corporation of the size, status and resources of KCA ought to have prevented the wrongdoing at the outset” (judgment, paragraph 53).

The Court accepted that the publication was an oversight and not deliberate.

KCA admitted that it had contravened s 29(1)(k) of the Australian Consumer Law. That is, it had made a false or misleading representation concerning the place of origin of goods

The harm to the consumer

The Court stated that consumers were harmed in these ways:

  1. “Consumers could not purchase the KCFC Wipes through the Kleenex Cottonelle website. However, consumers who did view the website were only able to determine that the representations were false by viewing the physical products [in a retail store] and reading the packaging (which provided accurate information about the country in which the product was made).” (judgment, paragraph 40)
  2. “The claims play on consumers’ desire to purchase goods that are manufactured in Australia to support local businesses and in a context where it is difficult for consumers to independently verify the claims.” (judgment, paragraph 33)
  3. “It is important that consumers have accurate information from businesses, particularly those the size and presence of KCA as to the place of origin of particular goods. This is particularly so where, as in this case, the representations were on a website, where there is a difficulty for a consumer to verify the information. Such representations can be a significant influence to some consumers on their choice of product.” (judgment, paragraph 52)

The pecuniary penalty

The Court was satisfied that it was appropriate to make these orders in accordance with the submissions of the ACCC and KCA:

  1. The respondent pay the Commonwealth of Australia a pecuniary penalty of $200,000 in total in respect of the contraventions of section 29(1)(k) of the Australian Consumer Law declared by the Court pursuant to Order 1, within 14 days of the Court’s order.
  2. The respondent is to pay the applicant’s costs of and incidental to the penalty hearing, to be taxed if not agreed.

The Court took into account these circumstances in considering the penalty:

  • The place the representations were made was on a website, accessed by an estimated many hundreds of consumers.
  • The penalty must be higher than the cost of an effective compliance program so as not to tempt businesses to consider non-copliance as a ‘cost of doing business’.
  • The penalty must be an appropriate deterrent penalty which “will validate the behavior and efforts of compliant businesses and send a warning to non-compliant ones”.
  • ”KCA took immediate steps to remove the misleading statement once the ACCC brought it to its attention; admitted the statement was misleading; and cooperated with the ACCC including to agree to the penalty amount to recommend to the Court.”
  • It was appropriate to “group the contravening representations into one to reflect the significantly overlapping nature of the contraventions”.
  • KCA uses “a marketing approval system” to review and approve marketing claims. This contravention occurred despite the system because it paid “insufficient care to the need for compliance with the Australian Consumer Law”.
  • “While the contraventions were relatively minor, the prominent position and apparent financial strength of KCA, require that a material penalty be imposed”.
  • The amount of loss the consumers suffered by purchasing “the KCFC Wipes based on the mistaken belief that those products were made in Australia” was “not readily quantifiable but it is unlikely to be substantial”.
  • KCA has not previously been found to contravene the Australian Consumer Law.
  • The penalty was set by reference to the maximum penalty applicable at the time of $1.1 million per offence. Today the penalty would be much higher given that the maximum for corporations is the greater of $10 million or three times the value of the benefit received, or 10% of annual turnover in preceding 12 months, if court cannot determine benefit obtained from the offence.

 

ACCC Wipes KCA’s Previously Clean Record

Marketing Commentary by Michael Field from EvettField Partners

Although the offence occurred for a limited time (between 28 October 2015 and 24 February 2016), the timing of the penalty announcement by the ACCC is important.

Since COVID-19, consumer interest in transparency regarding country of origin for the products they purchase has escalated, including growing concerns about product availability and supply chain issues, resulting in a groundswell movement towards supporting Australian manufacturing. The impact on the market is that the value of the ‘Made in Australia’ logo has increased exponentially and manufacturers and marketers are moving swiftly to capitalise on the changing consumer sentiment.

The offending ‘Made in Australia’ logo was only published on the website and did not appear on packaging, promotions or point-of-sale. It is noteworthy that KCA had not previously been found to contravene the Australian Consumer Law. I expect that afforded them some leniency by the ACCC in the application of the penalty. The penalty is appropriate for the offence because the impact of the offence was likely limited and was remedied as soon as the ACCC advised KCA.

This is an example of the regulator doing its job and the company behaving responsibly as soon as they were made aware of the problem. The penalty has slightly blemished KCA’s previously clean record with the ACCC and acts as a warning to international and local companies and their marketers to properly review and understand the Australian Consumer Law and to have appropriate approval processes in place.