Paying the price for grape claims: ACCC pursues misleading representations

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This article was written by Scott Bouvier and Shareen Dhillon

The ACCC has recently been active in challenging businesses in the food and agribusiness sector for making misleading representations, for non-compliance with the Horicultural Code of Conduct and for unfair terms issues in standard form contracts.

Last month the ACCC issued infringement notices to Victorian table grape traders Grape Co for making false or misleading representations about the origins of their grapes and failure to comply with the Horticulture Code of Conduct. 

This alert explains the watch-outs for food and agribusiness companies. Importantly, you need to carefully substantiate your claims on websites and make sure you follow the mandatory Codes applying to the Horticulture and Dairy industries.

Grape Co is located in the Sunraysia region in Victoria that supplies grapes to domestic and international markets (including selected supermarkets in Australia) under the Grape Co label.

Misleading and deceptive conduct

Under Section 29 of the Australian Consumer Law, companies cannot make false or misleading representations about the place of origin of their goods. The ACCC can issue an infringement notice to a company when it has reasonable grounds to believe it has contravened certain consumer protection provisions in the Australian Consumer Law or a civil penalty provision of an industry code (for example, the Horticultural Code discussed below).

The Grape Co claim challenged by the ACCC was published on Grape Co Australia's website, and stated that 'Every single one of our grapes is personally hand-selected from the finest fruit on our family's estate in Sunraysia Australia'. The ACCC considered that this claim represented that all Grape Co Australia branded grapes are grown on the Grape Co Australia family estate, when in fact some of those grapes are grown on third party growers' properties.

Following its investigation, the ACCC issued an infringement notice to Grape Co Australia for allegedly making false and misleading representations on its website in relation to the origin of the grapes sold. Grape Co Australia paid a penalty of $13,320 and has since amended its website to more accurately reflect the origin of grapes marketed to consumers.

The ACCC's Deputy Chair Mick Keogh emphasised that food producers must ensure they do not mislead consumers with marketing statements about the place of origin of goods or produce. These statements not only impact consumers, but can also prevent other businesses who are careful about being accurate in their marketing from competing on a level playing field. Importantly, consumers looking to support small businesses may make their decision to buy produce based on representations that the produce is sourced from a family farm, and it is vital that consumers are not misled so they get what they pay for.

Horticulture Code breaches

The Horticulture Code is a mandatory industry code under the Competition and Consumer Act which aims to improve the clarity and transparency of trading arrangements between growers and traders in the horticulture sector. The Code sets out the minimum requirements for agents and traders to comply with in their dealings with fruit and vegetable growers. The ACCC has set the enforcement of the Horticulture Code as one of its priorities for 2021.

Under the Horticulture Code, traders are required to prepare and publish their terms of trade and make these terms publicly available. The Horticulture Code also requires growers and wholesalers to have a written agreement that complies with the requirements of the Horticulture Code in place in order to trade in horticulture produce, which includes unprocessed fruit, vegetables (including mushrooms and other edible fungi), nuts, herbs and other edible plants, but excludes nursery products.

The ACCC alleged that Grape Co Farms traded without written Horticulture Produce Agreements in place when acting as an agent for grape growers, and did not prepare, publish and make publicly available a document that set out its terms of trade.

Grape Co Farms paid $21,600 in penalties under the two infringement notices issued to it by the ACCC. In addition to paying these penalties, Grape Co Farms agreed to amend a number of terms in its standard form agreements considered by the ACCC to likely be unfair contract terms (which is a regime that protects small businesses from unfair terms in "take it or leave it" style contracts). These included terms which gave Grape Co Farms the ability to unilaterally vary the agreement or unilaterally terminate the agreement with a short notice period, and the ability to withhold part payments.

Key takeaways

  • Review your website: A common issue with consumer-facing food and grocery companies is that packaging claims are carefully reviewed with appropriate approvals in place, but website claims are often less controlled. "Romance copy" claims may be made and added to websites or other social media platforms on behalf of the company by marketing teams or external agencies who may not be aware of their obligations under the Australian Consumer Law in relation to misleading and deceptive conduct and false or misleading claims in relation to goods or services. The ACCC's recent Kimberly Clark Federal Court case on "made in Australia" claims made on its website further reinforces that website claims are important, and that companies need to pay just as much attention to the claims they make on their websites and online content as their on-pack claims.

  • Check the Code: Traders should ensure they have written agreements in place with growers which include the matters set out in the Horticultural Code of Conduct (for example, how price is calculated, and when growers will be paid). The ACCC has emphasised that it is important that both parties clearly understand their rights and obligations under these agreements, as well as the services and aspects of trading provided by different traders. This allows growers to make an informed decision about who they wish to supply their produce to. The Code applies to growers and traders (who can be either a merchant or an agent) and does not apply to purchasers of horticulture produce who sell directly to consumers.

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