Consumables #3: Misleading Snacks & Baby Formula Advertising

Consumables is LegalVision’s weekly update on all things competition and consumer law. The update follows the activities of the national regulator, the Australian Competition and Consumer Commission (ACCC) – and keeps you informed about key developments relating to the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL).

This week’s highlights:

• the ACCC has issued infringement notices to Unilever and Smith’s for misleading representations about kids’ snacks;
• the ACCC has given the all clear for an agreement restricting advertising for baby formula; and
• scammers pretending to be the regulator have been sending emails to businesses.

ACCC Sees Red About Amber Claims for Canteen Snacks

The biggest consumer law news this week was the ACCC’s infringement notices against Unilever and Smith’s for misrepresentations about healthy food in the school canteen.

First, let’s introduce the snacks at the centre of this story. In Unilever’s corner was a ten-pack of Rainbow Paddle Pops – a classic kids’ ice-cream favourite, but by no means a healthy schoolyard snack. Unilever packaged up these icy treats with a tick logo and the slogan “School Canteen Approved”.

For Smith’s, we have Sakata Rice Snacks. Like the Paddle Pops, these Pizza Supreme snacks are probably not your average parent’s pick for little lunch. On the Sakata packaging, Smith’s opted for a logo showing an open lunchbox brimming with a healthy-looking sandwich, apple and juice combination, along with the words “Meets School Canteen Guidelines”.

Both logos referred to the National Healthy School Canteen Guidelines. These Guidelines were development by the Australian Government’s Department of Health in 2010 to help school canteens make better menu choices for their young patrons.

There are three categories of food and drink under the Guidelines:

• Green – food and drink that should always feature on the canteen menu.
• Amber – food and drink that should be selected carefully. These picks have some nutritional value, but contain too many other bad things to be classified as Green.
• Red – food and drink that school canteens should not put on the menu.

The Unilever Paddle Pops and Smith’s Rice Snacks both fell within the Amber classification of the Guidelines. In other words, the products were okay for the school canteen – but they need to be selected carefully, sold in smaller sizes and feature less prominently on the menu. As the Guidelines make clear, too many Amber treats can be bad for kids.

The packaging for each of the products contained a disclaimer pointing out their Amber classification. But the ACCC’s view was that the disclaimers didn’t do enough to outweigh the message conveyed by the logos and slogans that these foods were healthy choices for school canteens.

Under section 134A of the CCA, the ACCC can issue an infringement notice if it believes, on reasonable grounds, that a company has contravened protections in the ACL.

By paying the infringement notices, Unilever and Smith’s have not admitted to any contravention of the ACL. But both companies have told the ACCC that they’ll pull the offending logos from their product packaging.

The ACCC’s action in this matter followed a tip off from the consumer defender, CHOICE.

As a result of the infringement notices, Unilever and Smith’s have each paid a penalty of $10,800. The outcome shows that the ACCC won’t tolerate misleading representations about food – particularly when targeted at young consumers. But you wouldn’t be blamed for wondering whether this punishment is enough to stop similar conduct in the future. It is unlikely that these two multi-nationals will feel any pinch from the ACCC docking their lunch money.

A Tested Formula

To continue the theme of protecting the food choices of young consumers, this week the ACCC also turned its attention to baby formula. The regulator decided to authorise an agreement (Marketing in Australia of Infant Formula: Manufacturers and Importers Agreement (MAIF)) between manufacturers and importers of infant formula, preventing these companies from advertising products intended for babies younger than one year.

The Australian agreement flows from the World Health Organisation’s International Code of Marketing of Breast-Milk Substitutes (the Code), which recognises that breastfeeding can improve the health and nutritional outcomes of infants and young children. The Code therefore aims to promote breastfeeding by restricting the marketing and promotion of alternatives such as formula.

Now you might be thinking that an agreement between suppliers of baby formula not to advertise their wares breaches the golden rule of competition law: that competitors must always act independently in their business dealings. That is why the baby formula agreement needs the ACCC’s stamp of approval. The regulator can authorise conduct that would otherwise breach the CCA, so long as there is a net public benefit. In other words, the public benefit of the conduct must outweigh the harm caused to the competitive process.

The regulator has signed off on the baby formula agreement since 1992. But it was once again time to review the arrangement. Most parties involved in the review process accepted that continuing the authorisation was a good idea. But there were varying views on how long the authorisation should be granted for, because apparently the World Health Organisation is rethinking its advice on this topic. In the end, the ACCC settled on a further five-year authorisation.

Scam Emails from the Regulator

Finally this week, the ACCC has featured in scam emails targeting Australian businesses. The offending emails claim to be correspondence from the regulator, notifying businesses about a complaint or an infringement notice. Perhaps this is retaliation for all the excellent work that the ACCC’s Scamwatch does to protect Australian consumers from scammers.

The fake ACCC emails encourage the recipient to click a link, which can prompt malware to be downloaded onto the recipient’s computer. Malware, or “malicious software”, is an umbrella term that refers to a range of software programs that are designed to disrupt or damage a computer system.

The regulator offers some simple wisdom for spotting scam emails:

• scan emails often use web-based email platforms like Outlook, which are never used by the ACCC;
• scam emails will rarely be addressed to the actual recipient, instead preferring general greetings like “Dear Business Owner”; and
• more generally, scam emails often just look a bit cheap and nasty – for example, the formatting is off or the email contains spelling and typographical errors.

LegalVision has recently seen some similar emails claiming to come from Australia Post. But the scammers may be picking the wrong fight this time, by masquerading as the ACCC. If you come across a scam, report it to Scamwatch.

Tune in next week for more Consumables. Read our previous updates:

• Warnings about misleading representations relating to government grants, international guidelines for online reviews, and the Australian Competition Tribunal waving through an acquisition that the ACCC previously opposed.
• Public inquiry into ADSL, Metcash offering up draft undertakings in an attempt to allay fears about its acquisition of a hardware wholesale business, a proposed acquisition potentially reducing competition for fibreboard products, and a collective bargaining guide for small businesses and farmers.