No really officer, it’s oregano!

The ACCC has turned up the heat on ALDI Foods Pty Ltd (Aldi) and another supplier in relation to claims on packaging for herbs and spices.

Each business had labelled certain bottled herbs as ‘oregano’, and in the case of Aldi, the ingredients list also stated “100% oregano”. The ACCC considered such claims to represent to consumers that the products contained only oregano, and nothing else. As test results identified the substantial presence of olive leaves, the ACCC therefore considered the labels to be false and misleading under the Australian Consumer Law (ACL), notwithstanding Aldi’s revelation that it had itself been misled by its third party oregano supplier’s claims.

As ACCC chairman Rod Sims said:

“Suppliers of food products have an obligation to ensure ingredients of their products are accurately labelled and should be able to substantiate any representations made on the packaging that they approve.”

What prompted the ACCC’s investigation?

Consumer advocate group, CHOICE, conducted spot tests on 12 different brands of dried oregano products following a UK study which reported that 25% of dried oregano samples were not authentic.

In April 2016, CHOICE revealed that only five of the 12 samples tested were pure oregano while the rest contained other ingredients, including olive and sumac leaves. CHOICE referred the matter to the ACCC, who proceeded to conduct an investigation into potential breaches of the ACL.

Section 87B court enforceable undertakings

In response to the concerns raised by the ACCC, the suppliers took different approaches.

Aldi commissioned its own independent testing of its oregano product, removed its oregano and mixed herb products from its shelves, offered refunds to consumers, put notices in-store and on its website apologising to customers, and offered the ACCC a court enforceable undertaking. Given these proactive steps, the undertaking Aldi provided was relatively narrow, requiring it, for a period of three years, to:

• annually obtain test results from an international accredited testing laboratory, which confirm that its products labelled as ‘oregano’ only contain oregano;
• implement annual random testing of the composition of at least 5 other herb and spice products; and
• retain these test results and provide copies to the ACCC, if requested.

The other supplier was more conservative, focusing on its supply chain rather than consumer notifications – it put a hold on all oregano in its supply chain, and proposed to obtain independent certification that its current oregano was unadulterated. As a result, the section 87B undertaking accepted by the ACCC was more onerous. In addition to the steps required of Aldi, it also undertook to:

• not represent that its product is only oregano unless it contains only oregano;
• not represent any of its herb or spice products are of a certain standard, quality, value, grade or composition without a reasonable basis for making such a representation;
• ACL compliance training for relevant employees; and
• within 21 days, notify retailers and consumers of the alleged conduct, the resolution agreed with the ACCC and that refunds will be available on request, and publish a corrective notice on their website.

Administrative resolutions

Four other smaller suppliers of oregano agreed to “administrative resolutions”, namely to:

• cease supplying adulterated oregano products; and
• take steps to confirm the authenticity of their oregano products going forward.

An interesting result with interesting implications

This is a particularly interesting enforcement matter for a number of reasons:

1. The ACCC takes a strict interpretation – it reveals the regulator’s strict approach to interpretation of consumer related materials. Even in the absence of the “100%” statement on Aldi’s ingredient list, the ACCC still considered the front of pack claim “Oregano” to itself represent that the product was comprised purely of oregano leaves. Such an approach could have far reaching ramifications for food and grocery packaging. It is likely that the ACCC took this view because of the nature of the product and the expectation of consumers (i.e. it is common for herbs to be pure as an input for cooking).
2. No penalties in resolution – the ACCC accepted court enforceable undertakings from the two parties, without any infringement notice being imposed. It may be that the ACCC would have had difficulty in taking formal enforcement action against any suppliers located overseas, however brand and reputational issues will also come into play. The use of undertakings may reflect the willingness of the parties to make admissions and take proactive and quick steps to address the problem and going forward, the lack of intention or recklessness in the conduct and the fact that this seemed to be a wider industry issue.
3. But there could be a bigger ongoing cost – while the parties avoided any penalties, they did agree to annual authenticity testing by an accredited international laboratory of not only oregano products but at least five other herbs and spices. Businesses wanting to avoid a protracted investigation or litigation with the ACCC should recognise that a regulator will often seek commitments as part of an administrative resolution that go beyond those that a court would ever impose.
4. Don’t just take a third party supplier’s word – Aldi says this incident was a supply chain problem. It maintained it had been duped along with consumers. This is no defence for a breach of the ACL. If conduct misleads or is likely to mislead, it will breach the law. If a business will make representations on packaging, in advertising, in prospectuses, etc, it needs to be satisfied that those representations are factually correct. This is a timely reminder that businesses are responsible for the claims made on the packaging or advertising they produce or put their name to and must undertake appropriate enquiries to assure themselves that claims can be substantiated by product testing or otherwise.
5. It’s not about how many but who – four other suppliers with the same product issues resolved the investigation by way of “administrative resolutions” – that is, non-binding and informal promises. This can be frustrating for the business subject to a more onerous enforcement outcome, but with a limited budget it is inevitable that the regulator will target big businesses since it’s assured of broad media coverage and a greater deterrent effect, as well as deeper pockets to fund these investigations and their outcomes.