In a Scramble Over Free Range Claims? Advertising Update

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Table of Contents

• Why are free range eggs so important?
• The latest bust
• The Australian Consumer Law
• The outcome
• Setting the standard for the future

In April this year, the Federal Court of Australia ordered two companies to pay $300,000 in penalties for breaches of the Australian Consumer Law. The breaches related to misleading advertising claims about “free range” eggs.

Australia’s consumer watchdog, the Australian Competition and Consumer Commission (ACCC), has been extremely active in policing misleading claims in this area. In September 2015, it brought a case against Darling Downs Fresh Eggs, resulting in penalties of $250,000. A year earlier, the ACCC had secured penalties of $300,000 against another business, also for misleading representations about free range eggs. Here at LegalVision, we have also been following this topic with interest – and we have written on the topic previously.

Why are free range eggs so important?

So why does Australia’s consumer regulator care so much about free range eggs? Has the ACCC been taken over by environmentalists fighting for the rights of chickens across the country?

Not quite. In fact, it is possible that the ACCC doesn’t care about chickens at all. It is even possible (although unlikely) that lunch meetings at the ACCC are catered with egg sandwiches made from cage eggs.

The real issue for the ACCC is not animal welfare – it’s consumer transparency. These days, an increasing number of people care about the origins of their eggs and the lifestyle of the chickens that lay them. For these people, the issue affects which carton of eggs they choose to buy at the supermarket.

But, unsurprisingly, most shoppers do not have the time to research conditions at each farm and make an assessment for themselves about the well-being of the chooks. So the average consumer relies on quick indicators to help them make their purchasing decisions. “Free range” is one of these indicators. As the head of the ACCC, Rod Sims, explains: “Consumers are willing to pay a premium for free range eggs on the understanding that they are getting something different to ‘cage’ and ‘barn laid’ eggs.”

But if “free range” doesn’t mean what the average shopper thinks it means, then consumers are making purchases on false information. The result is bad for consumers, who don’t get the product they want – end up paying too much for a lesser product. But it’s also bad for other businesses, who are disadvantaged by the misleading sales practices of other egg suppliers.

The latest bust

The latest targets for the ACCC’s egg bust were two companies, Derodi Pty Ltd and Holland Farms Pty Ltd, who traded together as Free Range Egg Farms (FREF). FREF were responsible for a number of brands, such as Ecoeggs, Port Stephens and Field Fresh. All of the brands were promoted as free range on egg cartons, as well as through social media and other advertising channels.

Conditions varied on the farms from which FREF’s eggs were sourced. But there were generally around 10 laying hens per square metre. As FREF admitted, there were lengthy periods when the hens were completely confined. On one farm, the hens were not able to access the great outdoors until they were 59 weeks old – which is almost 40 weeks after they had started laying eggs.

The Australian Consumer Law

The ACCC’s cases against FREF raised three different provisions of the Australian Consumer Law. These three provisions share a common theme about misleading consumers:

• section 18 prohibits businesses from engaging in misleading or deceptive conduct;
• section 29 deals with false or misleading representations, including representations about the quality or history of goods; and
• section 33 is directed at conduct that could mislead the public about the nature or characteristics of goods.

In this case, FREF admitted that its conduct contravened all three of these provisions.

The outcome

The Federal Court found that FREF had incorrectly represented to consumers that their eggs were laid by hens which were able to – and generally did – move around freely on an ordinary day. The Court observed that the contravening conduct was significant, occurring over three years and concerning a widely-consumed food.

Following initial investigations, FREF cooperated in this matter and consented to the orders proposed by the ACCC. The Federal Court agreed that the proposed penalty of $300,000 was appropriate in the circumstances. The Court also ordered that FREF establish and implement an Australian Consumer Law compliance program, as well as publish corrective advertising – to alert consumers about the misleading conduct and educate the egg industry about consumer law obligations.

Setting the standard for the future

Part of the problem with advertising claims in this area is that there is no agreed national standard for what constitutes “free range”. This may come as a surprise to many shoppers. As the Federal Court pointed out in the FREF case, consumers are “heavily reliant” on free range representations when purchasing eggs.

Thankfully, the Federal, State and Territory governments have recently agreed to the introduction of a national information standard under the Australian Consumer Law. The standard will require that any eggs labelled as “free range” are laid by hens with meaningful access to the outdoors and with a maximum stocking density of 10,000 hens. The Consumer Affairs Ministers of the various governments have indicated their intention for the standard to be in place within one year.

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If you believe that you have been misled or deceived, or are unsure about whether you’ve crossed a legal line with your own advertising, get in touch with LegalVision on 1300 544 755.