Latest Federal Court decision offers more practical solution than ACCC approach to fruit-based representations

by Joe Lederman and John Gao © Lawmedia Pty Ltd, May 2008
Australian Food Lawyers and Consultants

Over the past 10 months, Australia’s national consumer protection agency, the Australian Competition and Consumer Commission (ACCC) has taken action for misleading labelling against some food products produced by Arnott’s Biscuits, Tasti Products (Weight Watchers), Nudie Foods, Natur-all (Go Natural) and Harvey Fresh. However, a more recent decision of the Federal Court seems to offer a more practical solution than the ACCC approach to fruit-based food representations. Although some of the claims made by the abovementioned food companies in relation to some of the products were either incorrect or overstated or potentially misleading and were therefore in actual breach of the Trade Practices Act, the ACCC had recently appeared to be overstepping the mark in its ongoing campaign aimed at food labels that refer to fruit ingredients.

On 12 May 2008, the Federal Court of Australia handed down its decision in the Ricegrowers Ltd v Real Foods Pty Ltd case. Although the case was mainly dealing with whether or not copying the flavours and colour schemes of a competitor’s product would breach the Trade Practices Act, the Federal Court was asked to look at the issue of whether or not a product named “Corn Thins” implied that the product contains 99% corn. The ACCC was not a party to the proceedings, but the issues were very similar to the issues that are being addressed by the ACCC in its unrelenting campaign against food misrepresentations.

The ACCC, in its recent actions against food manufacturers, has been relying on earlier cases such as its 2004 case against Cadbury Schweppes (the Cottee’s cordial case) and the court-enforceable Undertakings given in 2006 by Uncle Toby’s and in 2007 by GlaxoSmithKline (the Ribena case). However, the ACCC more recently has asserted that food companies will be in breach of Sections 52, 53 and 55 of the Trade Practices Act whenever a product mentions one fruit in its name or descriptor but fails to identify another fruit in the product that is more predominant in the composition of the product. An example is that the ACCC would like “apple” to be mentioned in the name of a product whenever apple concentrate has been used – even if only used as a neutral food base and when there is no apple taste in the product.

The problem with the ACCC’s view is that most processed foods use a base such as milk, eggs, fats, sugars or apple which are each not the characterising ingredient of the product. There is a risk that many of these products may need to be renamed if the ACCC approach were to be adopted consistently for all products currently on supermarket shelves.

The Federal Court’s 12 May 2008 decision in Ricegrowers Ltd v Real Foods Pty Ltd seems to offer a more practical solution than the ACCC approach to fruit-based representations.

The case was brought by the ricegrowers’ co-operative who produce SunRice Thin Corn Cakes and Thin Rice Cakes. They argued that the competitor’s product copied their flavours and colour schemes but also breached Sections 52 and 53 of the Trade Practices Act by using the name “Corn Thins” on a product that contained a substantial amount of rice. The Federal Court was asked to look at the issue of whether or not the product named “Corn Thins” implied that the product contained 99% corn.

Even though the product contained a substantial percentage of rice, the Federal Court judge found that “Corn Thins” did not need to contain 99% corn and that the name did not imply that the product had any particular composition or proportion of corn.

The judgment stated:

“There is no evidence that the words ‘Corn Thins’ have some secondary meaning conveying that they consist of 99% maize or corn.” (paragraph 112)

“The name was given to an artificial product. The ordinary reasonable consumer would know it was a manufactured product not a pure vegetable. The ordinary reasonable consumer would understand that many artificial food products are not pure composites of a descriptive term in a name such as "Corn Thins". The name did not mislead or deceive the ordinary reasonable consumer. Nor did it falsely assert a composition which was misleading or deceptive or otherwise inaccurate. An ordinary reasonable consumer would have appreciated that the product marketed as a new corn thins was both new and had flavouring.” (paragraph 113)

The ingredients were listed on the new product’s packaging just as they were on the other product’s. There was no evidence that the "Corn Thins – original" name had acquired a secondary or other meaning known to the public, let alone that the name conveyed that a "Corn Thin" was 99% maize, or had any other particular composition.” (paragraph 114)

FoodLegal believes that the outcome of this case indicates that the ACCC might be running the risk of pursuing an approach that the Federal Court will be hesitant to enforce. The illogicality of the ACCC stance is that the corollary may require renaming of products such as Cherry Ripe, cinnamon cake or any other product that is named by reference to a relatively minor but characterising ingredient.

However, we note that the Ricegrowers decision does not invalidate the Consent Orders in the Arnott’s case or any of the signed agreements or Undertakings given by food companies to the ACCC because although the Ricegrowers decision provides new legal precedent and reasoning for future decisions, it does not overrule the outcomes of earlier cases or have the effect of changing any of the Undertakings that have already been signed in favour of the ACCC.

For further advice, please contact Joe Lederman or John Gao at FoodLegal on (03) 9606 0022.

This is general information rather than legal advice and is current as of 12 Dec 2015. We therefore recommend you seek legal advice for your particular circumstances if you want to rely on advice or information to be a basis for any commercial decision-making by you or your business.