November 2013

Chickens not so "free to roam" - $400,000 penalty for misleading claims

Background

Two suppliers of a well-known brand of chickens described on product packaging and in advertising that its chickens were “free to roam in large barns”.

In reaching its decision, the Court considered the natural meaning of “free to roam” means the “largely uninhibited ability of the chickens to move around at will in an aimless manner”.

Justice Tracey noted that the chickens were raised or grown in a shed system where, over the course of a growth cycle, there were periods when they were not free to roam at will and with a sufficient degree of unimpeded movement to justify the assertion that they were “free to roam” in accordance with the natural meaning of the phrase described above.

Accordingly, the Court held that the suppliers had engaged in misleading and deceptive conduct, and had made false representations, in breach of the Australian Consumer Law (and the Trade Practices Act, in respect of conduct engaged in before the Australian Consumer Law was introduced). 

Penalty & other orders

The Australian Consumer Law permits the Court to issue penalties of up to $1.1 million against corporations.

To determine what penalty to impose in this case, the Court took into account the following:

  • the size of each contravening supplier;

  • the deliberateness of the conduct;

  • whether each supplier had a corporate culture conducive to compliance – ie. did it have a compliance program;

  • the level of cooperation with authorities;

  • whether each supplier had engaged in similar conduct in the past; and

  • whether the conduct was systematic, deliberate or covert.

The Court ordered the suppliers pay a total of $400,000 in penalties, as well as undertake corrective advertising and compliance training.

What this means for you

This decision demonstrates the power of advertising.  Consumers were no doubt drawn in by the appeal of “free to roam” chickens.  However, with such power comes greater responsibility.  A greater responsibility to ensure that the overall impression of the message is not misleading or deceptive, or likely to mislead or deceive.

Businesses should ensure that they develop a corporate culture within their organisations which is conducive to compliance with consumer law.  This may require the preparation of a consumer law compliance manual, which can guide each member of the business on basic consumer law obligations, as well as implementing regular training.  The Courts will look for evidence of a ‘compliance culture’ when determining an appropriate penalty.  We can assist you with implementing a compliance program.

 

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