Misleading Advertising Claims: A Million Dollar Lesson
The Federal Court has ordered an egg producer to pay penalties for making claims its eggs were “free-range”.
After a successful action brought by the Australian Competition and Consumer Commission, Snowdale Holdings Pty Ltd (Snowdale) was ordered by the Federal Court to pay $750,000 in penalties and another $300,000 in court costs, which is the highest penalty a court has ordered in relation to misleading ‘free-range’ egg claims.
In 2013, Snowdale supplied cartons labelled as “free-range” in Western Australia under six brands such as Eggs by Ellah, Swan Valley Range and Wanneroo Free Range. It was also reported during this time Snowdale advertised its eggs as ‘free-range’ on its website. The West Australian egg producer was left in troubled waters when the ACCC uncovered evidence in 2014 of dead chickens and poor farming conditions. According to this evidence, hens were not able to move freely or exit their barns, and they were housed in four industrial-sized “barns” or “sheds”. This discovery led the consumer watchdog to pursue legal action against the egg producer for its misleading and deceptive statements between April 2011 and December 2013. While making these claims, the egg producer has doubled the price of its eggs, and charged a free-range premium.
In 2016 a Federal Court proceeding was entered into. The presiding judge Antony Siopsis said the sheds of one of the properties had the capacity to house about 18,000 laying hens whereas another property could house 12,740. Snowdale’s owner Barry Cocking tried to make justifications of these amounts by claiming both farms were no longer used by the company for free-range egg farming. In the end, the Federal Court sided with the ACCC and found the company guilty. However, a penalty was not issued.
Finally a judgment was entered into today. In a media release, the ACCC revealed the Court found most of the hens from the sheds did not go outside and the conditions, such as the number of pop holes and birds per metre of pop hole, the flock size inside the shed and the shed size itself, did not qualify the company as a free-range egg producer. The Court made an order preventing Snowdale from using the words ‘free-range’ unless its eggs were produced by hens who are able to go outside. Moreover, the Court ordered Snowdale to implement a consumer law compliance program and pay a contribution towards the ACCC’s costs.
The Court’s decision illustrates what can potentially happen if an egg producer falsely claims free-range status. Typically, this is not the first time the Federal Court has made orders in the thousands. Previously, the Court has imposed penalties worth over $250,000 on egg suppliers and producers who could not back up their free-range egg claim with farming conditions.
Further, the Commonwealth, State and Territory Consumer Affairs Ministers introduced last year a national information standards under the Australian Consumer Law. Under these standards, chickens must have “meaningful and regular” access to outdoors and their outdoor stocking density cannot be more than one hen per square metre (or maximum 10,000 hens per hectare) if they intend to claim free-range status.
Consumers pay a higher price for free-range eggs so it is expected when a ‘free-range’ claim is made the eggs are actually laid by chickens in free range conditions. If an egg supplier or producer’s farming practices come under fire, they must make sure their farming conditions comply with the national information standards. Otherwise, the ACCC view the claim as a false or misleading representation, and bring an action that will run in the thousands.
If you own a business and would like to know more about how to get on top of your obligations under the Australian Consumer Law, LawPath recommends getting in touch with a business lawyer.
Let us know your thoughts on egg producers making false or misleading statements about their free-range egg status by tagging us at #lawpath or @lawpath.
Fiona is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in information, media, consumer and employment law, her primary focus is on how technology will affect the future of the legal industry.