What are credence claims?

One of the priority areas for the ACCC’s enforcement actions is credence claims.  The ACCC has told us this, and we can see it from the cases they have taken action against lately.

Credence claims are claims and representations made about products or services that they are somehow better, of a premium or have certain benefits. They can be made in writing or by pictures and images.

They are a useful marketing tool, distinguish genuine premium products from the rest and serve to inform consumer choice.  There is nothing wrong with making such claims; provided they are true and accurate.

Where are credence claims used?

Credence claims can be made by pretty much any industry in their advertising, on labelling and in trade marks.  However it seems, that the ACCC has currently chosen credence claims made by food industries to target for their veracity.  This means that any statements or representations about the “who, what, where and how” of the food we are being sold must be accurate and verifiable.

Some of the ACCC’s recent food cases are about:

Eggs – claims of being free range

Poultry – explicit claims and other representations about the animals’ well being

Pork -free range and premium breeds

Beef -claims that beef is the premium Wagyu breed

Honey– one company suggested their product was made in Victoria and that it was made by bees!

Place of origin claims representing  producers are local and/or boutique

Organic products -suggesting the goods are premium quality or have benefits

What does the consumer believe about your products?

Whether a claim is misleading or deceptive under the Australian Consumer Law depends on the impression that the consumer takes from what you say or do. What you intend isn’t relevant.

Furthermore, the recent Federal Court case involving the marketing of free range eggs (ACCC v Pirovic Enterprises  Pty Ltd) has shown  that complying with industry standard practices, industry guidelines and even seeking industry body approval may not always be enough to keep a company out of trouble.

In this case, Pirovic promoted and sold eggs it called “Free Range Eggs” accompanied by pictures of hens on grassy fields.  On labelling and promotional material it said, among other things, that “our hens are fed on wholesome natural grains, roam freely on green pastures during the day and return to the safety of barns at night”. In doing so, consumers were led to believe that the laying hens were able to move about freely on an open range on most ordinary days, and that most of the hens did this.

In reality, when the ACCC brought the action, on most days, the majority of hens did not leave the barn because:

(a)   the flock sizes were too large and they were too densely stocked in the barns for most hens to access the outdoors; and

(b)   the openings in the barn were too small or were not located to allow the hens to easily exit the barns to move about freely.

In the Court’s opinion consumers were, or it was likely that they would be, misled and deceived about the quality, history and nature or characteristics of the eggs.

Pirovic said that it did not intend to mislead anyone and believed it was doing the right thing because:

(a)   The conditions under which the hens lived at the time were consistent with those of most of Pirovic’s competitors;

(b)   The Australian Egg Corporation Ltd, the peak industry body had reviewed Pirovic’s labelling and considered them compliant with its “Egg Labelling Guide”;

(c)    Pirovic met the standards of the Egg Corporation to use its Egg Corporation Assured National Egg Quality Assurance Program Trade Mark and Pirovic’s free range farms had a “level A” accreditation for free rang egg production; and

(d)   The Egg Corporation Assured Egg Scheme was deemed by the NSW Food Authority  to comply with the Primary Industries Standing Committee’s “Model Code of Practice for the Welfare of Animals- Domestic Poultry”.

The Court acknowledged the particular farming conditions that allows for “free range” eggs will vary from farm to farm. However, it also shows that the industry, its representative body and the Department of Primary industry are out of touch with consumer expectations of what it is to be “free range”.  Merely having access to outdoors is not what the consumers expect when they choose and pay for free range products.

In the future when investigating other claims of free rage eggs the ACCC will be looking at conditions such as:

• the internal stocking densities of hens in the sheds
• the size, location and number of openings in the sheds
• the times that the openings are open
• the size and conditions  of outdoor areas the hens have access to
• access to food, water, shelter
• outdoor stocking densities
• whether the hens are conditioned to remaining inside

What does this mean for producers and suppliers?

Although this case applies to eggs, it will be relevant to other producers and suppliers making claims about the benefits and qualities of their products, notwithstanding that their claims are common practice or approved by industry bodies. It shows that the final test before going to print with labels and advertisements is the consumer comprehension test. What do consumers expect when they see and read claims you make about your products: how they were made, where they were made, what they are made from?