The word spreads quickly when you do something wrong
It does not take long for press releases and news, particularly if it is bad, scandalous or involves a famous person or well -known brand, to do the rounds of the mainline press, industry newsletters, blogs and other social media. We saw it last week with the story of Maggie Beer Products Pty Ltd being found by the ACCC to have engaged in misleading conduct and making misleading representations in breach of the Australian Consumer Law.
What actions did the ACCC consider were misleading conduct?
The labels on some of Maggie Beer Products’ products, or rather in the proximity to each other of different aspects of the wording on the labels, in the ACCC’s opinion, amounted to misleading conduct. In particular, the ACCC said that:
- the company’s trade mark, which incorporates the words “A Barossa Tradition”;
- its Tanunda address; and
- the words “Made in Australia”
together gave an overall impression that the products were made in Tanunda, the Barossa and/or South Australia. The products in question, however, were manufactured elsewhere in Australia.
Representations were also made in correspondence with Woolworths and to shoppers at a “local” fair that the products were made in South Australia or were “local”.
The Consequences for Maggie Beer Products’ misleading conduct
As a result, Maggie Beer Products has given a Court enforceable undertaking to the ACCC to:
a) apply amended labelling to “Maggie Beer” branded products that are made outside South Australia to accurately reflect the place of manufacture;
b) publish an educative article in Food Magazine; and
c) undertake a review of its consumer law compliance procedures.
The original press release from the ACCC can be found here.
Why does a company engage in misleading conduct?
To intentionally mislead and take advantage
Unfortunately some companies, or their employees, deliberately choose to mislead consumers to take advantage of their desires including their willingness to pay more for products with qualities they value. This is deceitful and shows a lack of respect for their customers. Businesses with this sort of ethic often don’t get too far. Their customers are not that stupid, their competitors don’t like this uncompetitive behaviour and neither does the ACCC.
Unintentional misleading conduct
The intention behind the conduct is irrelevant and in my experience it is more often the case that honest businesses and their staff sometimes make mistakes. Six ways this can happen are:
The company can fail to realise that the law applies to its business and its impact.
Ignorance of the law is no excuse for breaching it. Keeping on top of laws that relate to the business and knowing how they apply is important. A legal assessment should form part of its risk assessment and ongoing compliance monitoring.
The employees do not understand what conduct breaches the law.
Having clear policies and procedures and including compliance as part of professional development and staff training, helps to help employees understand what they can and can’t do. This helps reduce the risk of the company and their employees misleading customers. A couple of problem areas for employees breaching the Australian Consumer Law are with refunds and returns of faulty products and employees misrepresenting the fitness for purpose of goods.
The company’s interpretation of how they believe the law applies to its business may differ from the ACCC’s or Court’s interpretation.
This often arises in the areas of consumer protection, trade practices and intellectual property infringement requiring a subjective interpretation of an act in particular circumstances. It is often hard to decide what will confuse, deceive or mislead people, particularly when you already have a concept or intention in mind.
Trying to comply with overlapping laws confuses businesses.
For example, Maggie Beer Products have an obligation to comply with the labelling requirements of the Food Standards of Australia and New Zealand which requires labelling on packaged food to:
- identify the country in which the food was made, produced or grown; and
- include the name and street address of the supplier.
In complying with these requirements, as Maggie Beer Products discovered, there is also a need to make sure that the way this information is conveyed will not mislead.
Marketing departments may have failed to keep up with changes in the operational side of the business. Labelling and promotional material needs to be kept up to date as business operations change and expand.
This means that websites, marketing materials, labels, templates and other means of communicating with consumers and other businesses should be reviewed regularly and companies should ensure clear, timely communication throughout the business to make sure that the information conveyed is clear and currently accurate. For example if ingredients have been sourced locally but with seasonal changes or expansion of the business, overseas or non-local sources are used the labels and marketing material needs to be updated to reflect this.
Branding may give a message that’s inconsistent with the facts.
Maggie Beer Products is not the first company who’s trade mark use has been deemed misleading by the ACCC. Several bottled water companies had the word “Organic” as part of their trade marks. The ACCC took action against them for misleading and deceptive conduct and the companies had to cease using these registered trade marks. In choosing and registering a trade mark, the use of the mark needs to be considered to ensure that its use in all circumstances could not be considered misleading or deceptive. Often when a company starts out, the trade mark is appropriate, but as it expands, the meaning attached to the mark may no longer be correct and can mislead.
6 tips for minimising the risk of misleading consumers
- Consider labels, advertising and promotional material from the point of view of consumers. What you intend to convey is irrelevant. What is important is how consumers and others interpret what you say and do, in all the circumstances.
- Representations are not only made in writing. Words, pictures and sounds, for example, can either alone or in combination, add to the message that consumers take away. Representations can also be made by what is not said.
- Regularly review websites, marketing materials, labels, templates and other means of communicating with consumers and other businesses to make sure that the information conveyed is clear and currently accurate.
- Be sure that you can verify representations and claims made. The ACCC can require this and if you cannot verify it the ACCC can issue penalty notices and take other enforcement action.
- When designing a trade mark, whether a word mark or logo, be aware of what message is being conveyed to consumers and how they will interpret it. The message must not be misleading.
- Work with a compliance professional or lawyer to help you to identify the legal risks, keep updated with relevant laws and to develop compliance programs to make it easier for everyone in the business to know what to do, what not to do and why. I am happy to talk to you further about how I could help.