This week the ACCC has taken action against 3 more “free range” egg producers; those selling Ecoeggs,  Field Fresh,  Port Stephens and Darling Downs Fresh Eggs brands. The ACCC is alleging that their claims of free range are misleading and deceptive in breach of the Australian Consumer Law.

These proceedings  follow the recent decision of the Federal Court in September 2014 in respect of Pirovic’s  “free range”  eggs. In that decision, the Court gave some guidance to farmers of the farming conditions that consumers expect a free range hen to live under.

There are direct lessons for all farmers who claim their eggs are “free range”, and I dare say the farmers of other “free range”animals should be more than a bit wary.

Other businesses can also learn from these expensive lessons and general principles.

What is the cost to these free range egg producers likely to be?

To satisfy court orders, if they get the same penalty as Pirovic, Derodi Pty Ltd, Holland Farms Pty Ltd and R.L Adams Pty Ltd will pay  $300,000 and  the ACCC’s fees of around $25,000.

I suspect their legal expenses will be between $50,000 and $100,000 each, or more.

It is likely that they will need to establish a Trade Practices Compliance Program and train relevant staff, which could cost between about $5000 and $10,000, or more.

Their staff will spend  months responding to the ACCC’s requests and providing records and documents.

Their reputations as suppliers of free range eggs will be damaged.

Staff morale and efficiency will suffer.

They will need to cut down flock sizes or enlarge the barns to reduce the density of the hens and modify the barns to allow the hens easy access to the outside.

They may need to make changes to their yards.

They may be required  to relabel their cartons, change their websites and marketing materials.

The court could order corrective advertising.

All in all, the costs could be at least $500,000 for failing to comply with the Australian Consumer Law.

What lessons can free range egg producers (and other businesses) learn from these cases?

Egg producers should be looking carefully at their practices to avoid the expensive  litigation and penalties.

They need to review the conditions that their laying hens live in and if necessary modify their barns and yards. If they aren’t prepared to make changes to these living conditions, they need to review their marketing claims, their labels, websites etc.

All businesses should have a compliance program in place.

As part of their compliance program, businesses should regularly review, or monitor,  their risks. The risks assessment will look at legal and regulatory risks, as well as governance and other business risks.

The compliance program will address and treat the risks identified.

Making these processes a part of doing business can save potentially hundreds of thousands of dollars, reputations and improve efficiencies. An effective compliance program should be a necessary cost of doing business. Companies should  not look at paying penalties for getting caught for non-compliance as an acceptable risk and cost of doing business.