Author: Tom Griffith, Partner
Following a finding on 19 March 2018 that Heinz had engaged in misleading and deceptive conduct, the Federal Court of Australia last week hit the food giant with a $2.25 million penalty. The decision marks a fresh approach to the regulation of the marketing of food products to address concerns that health benefits not be overstated, especially when targeted at children and their parents or carers, who are the purchasers of the products. It is a reminder for companies that the Australian Competition and Consumer Commission (ACCC) has power to request the imposition of significant penalties, and is not afraid to do so.
Partner, Tom Griffith and Lawyer, Millie Byrnes Howe discuss the implications of the case.
The misleading or deceptive conduct case
The ACCC’s case against Heinz concerned three products in its “Little Kids – SHREDZ” range, which were marketed as a healthy snack for children between the ages of 1 and 3. The ACCC alleged that the packaging of the products contravened the Australian Consumer Law (ACL) in that the packaging conveyed various representations about the product being healthy, nutritious and otherwise encouraged healthy eating habits in children.
The ACCC did not succeed on every aspect of its claim; however it did succeed in proving that the packaging conveyed the representation that the product was a nutritious food that was beneficial to the health of children. Justice White held that this representation was false and misleading, and despite the fact that the product could be considered nutritious, found that the high sugar level and sticky consistency of the product could not be said to be beneficial to the health of toddlers.
His Honour dismissed the ACCC’s claim that Heinz had actual knowledge that it had made the false or misleading representation, however, he concluded that Heinz ought to have been aware that such a representation was made.
The penalty
The ACCC sought a staggering $10 million fine, arguing that Heinz’s conduct was “egregious” and involved “wilful blindness or recklessness”. Justice White did not consider that to be an appropriate characterisation of Heinz’s state of mind, holding that the evidence from the Heinz employees was “inconsistent with Heinz having engaged in a form of advertent or subjective recklessness or with wilful blindness” and that it did not “support a conclusion that Heinz acted with the high degree of carelessness associated with the notion of objective recklessness”.
