Lessons from false advertising case

Lessons from false advertising case - Griffith Hack

23 April 2012

The Australian Competition and Consumer Commission (ACCC) and the Federal Court of Australia take a serious stance when it comes to dealing with false and misleading advertising. This article discusses some of the consequences of advertising misconduct and how these can be avoided, using the La Ionica case as an example.

What you need to know

  • Targeting consumer values, for example, by claiming that a product is ‘organic’, ‘environmentally friendly’, or, in the case of meat or eggs, ‘free range’, can effectively influence consumers’ purchasing decisions.
  • All advertising must be truthful and must be capable of being substantiated.
  • The Australian Consumer Law prohibits false advertising, and engaging in misleading or deceptive conduct.
  • Breaches of these prohibitions can result in fines, injunctions to stop advertising activities and the mandatory publication of corrective notices in the media.

The decision

The Federal Court of Australia ordered Turi Foods Pty Ltd, the La Ionica brand owner (La Ionica), to pay an AUD$100,000 fine for having made false and misleading statements that its poultry chickens are ‘free to roam’ and ‘free roaming’, in breach of relevant provisions of the Australian Consumer Law (ACL), which can be found in Schedule 2 to the Competition and Consumer Act 2010 (Cth). Images of the advertisements in question and the Court’s judgment can be viewed here.

La Ionica’s wrongdoing consisted of publishing promotional posters in retail stores and adopting signage on its branded delivery trucks which falsely conveyed the message that its chickens were raised in spacious areas in which they were free to roam around. For example, one of La Ionica’s promotional posters contained the statement that La Ionica chickens are ‘free to roam in large open sheds – NO CAGES’. In fact, it was found that La Ionica chickens were raised exclusively in a shed or barn in which their freedom to move was far more restricted than claimed.

La Ionica conceded that its ‘free to roam’ statements were false, misleading and deceptive. It also accepted that its breaches of the relevant provisions of the ACL were serious.

In addition to the fine, and on the basis of La Ionica’s consent to a number of orders proposed by the ACCC, the Federal
Court ordered La Ionica to:

  • take down the offending posters displayed in retail outlets;
  • not use the statements ‘free to roam’ or ‘free roaming’ for the next three years in advertising or packaging for its chickens;
  • establish a trade practices compliance and education program for its employees, designed to ensure their awareness of La Ionica’s wrongdoing and its wider obligations under the ACL and Competition and Consumer Act 2010 (Cth); and
  • arrange for the publication of a corrective notice in Melbourne’s Herald Sun newspaper to seek to rectify any
    misunderstanding or confusion amongst consumers about the accuracy of La Ionica’s ‘free to roam’ statements.

Lessons learnt

La Ionica could have avoided this enforcement action, and any consequent negative publicity, by carefully considering whether the overall impression conveyed to the average consumer by its advertisements would be considered truthful and accurate in view of its poultry-rearing practices.

Before releasing any consumer-facing marketing material, in any type of medium, anyone marketing a product or service should ensure they:

  • understand what can legitimately be said in light of the ACL (among other relevant laws); and
  • consider what message the average consumer is likely to take away from any marketing material, and if this message differs from the truth, then change this message.

Also of note is the fact the ACCC has the power under the ACL to require the substantiation of any claim or representation. Failing to comply with a request from the ACCC can lead to financial penalties.

If necessary, seek legal advice. Griffith Hack assists a number of clients in ensuring that their marketing materials and broader campaigns are legally robust by providing legal review and feedback, while maximising the intended marketing ‘punch’.

For further information, please contact:

Geraldine Farrell, Special Counsel
Email Geraldine

Su-Ann Burke, Lawyer
Email Su-Ann