"Never let the truth get in the way of a good story" – or selling a product

Companies and businesses need to be wary of incurring the wrath of the Australian Competition and Consumer Commission (ACCC) if they advertise and market their products with claims that are potentially misleading to consumers.

The ACCC is a Commonwealth statutory body whose role is to, amongst other things, enforce the Competition and Consumer Act 2010 (Cth) (CCA) and in particular, the Australian Consumer Law (ACL).¹

The ACCC will bring proceedings against companies and businesses where it believes that statements, claims or other representations made by them about their products mislead or deceive consumers or have the potential to do so.

Australian companies and businesses have an obligation under the ACL to ensure that claims about their products do not mislead consumers. ²

The food and health sectors have become the subject of particular scrutiny from the ACCC in recent months, with several proceedings currently underway:

• The ACCC commenced proceedings against Heinz Australia (Heinz) in the Federal Court alleging that the statements on the packaging of Heinz “Little Kids Shredz” products are misleading and deceptive.  
  • The ACCC contends that Heinz is marketing the Little Kids Shredz product as being healthy for young children when it in fact contains over 60% sugar and according to ACCC Chairman, Rod Sims, is “likely to inhibit the development of a child’s taste for natural fruit and vegetables and encourage a child to become accustomed to, and develop a preference for, sweet tastes.”
• The ACCC also took action against Social-Lites Pty Ltd and Elusion New Zealand Limited for making representations that their e-cigarette product did not contain toxic chemicals. 
  • According to independent testing commissioned by the ACCC, the e-cigarette product in fact contains recognised toxic and hazardous chemicals including carcinogens, formaldehyde, acetaldehyde and acrolein.
• Private health insurer, Medibank has also been under investigation, with the ACCC alleging it did not notify members in advance about the decision to limit benefits paid for in-hospital pathology and radiology services despite having previously represented that they would do so.  Such conduct is considered to be misleading.

It is important to note that these matters have not yet been determined by the courts and whether these companies have contravened the ACL is yet to be seen. 

These court actions serve as a warning to businesses operating in those sectors, and others, to carefully consider the claims and statements they make in, on, or in relation to, their products and services. Failing to do so could mean a costly fight with the ACCC, regardless of the outcome.³

^{1. The Australian Consumer Law is part of the Competition and Consumer Act 2010, at Schedule 2}

^{2. Can also apply to claims and statements made in relation to services. See section 18 of the ACL - misleading and deceptive conduct, section 29 of the ACL - false and misleading representations.}

^{3. For more information visit www.accc.gov.au}