By Judith Miller, Principal & Bindu Holavanahalli, Lawyer
The ACCC has appealed the recent Federal Court decision to order that the manufacturer of Nurofen ibuprofen products, Reckitt Benckiser, pay a penalty of $1.7 million in respect of
misleading representations made on the packaging of its Nurofen specific pain products.
According to ACCC Chair Rod Sims:
The ACCC will submit to the Full Court of the Federal Court that $1.7 million in penalties imposed on a company the size of Reckitt Benckiser does not act as an adequate deterrent and might be viewed as simply a cost of doing business.
This follows a ruling in December that Reckitt breached the Australian Consumer Law (ACL) because it advertised its pain relief products as specifically treating or targeting particular types of pain (such as one product for back aches, and another for migraines), where in fact:
- The active ingredient in each product was identical; and
- The products did not specifically target any particular form of pain, but were equally effective for all types.
The ruling has significant consequences for manufacturers and suppliers of all types of goods which are marketed as being for a specific purpose.
Most importantly, the symptom specific pain relief products were sold at almost double the price of other similar products with the same active ingredient.
The ruling has significant consequences for manufacturers and suppliers of all types of goods which are marketed as being for a specific purpose.
The misleading representations
The Reckitt decision is not surprising as it applies the law of misleading and deceptive conduct in a straightforward manner. Nevertheless it is a good example of how advertising of products can contravene the ACL even if the relevant claims are ”technically true”.
The wording on the packaging was not technically incorrect. For example, the migraine specific pain product did treat migraines and the back ache specific pain product did treat back aches. The misleading representation was instead based on the implication the consumer would draw from the way these goods were marketed as a whole.
The court considered that the consumer was likely to make two erroneous assumptions:
- That each product would solely treat the type of pain specified on the packaging and not other types of pain (and therefore that
it would be necessary to purchase more than one product to treat the different types of pain); and - That each product was specifically designed to treat the specified indications (and was therefore more effective than ordinary (less
expensive) ibuprofen).
What this means for manufacturers
Manufacturers should take care when labelling their products, especially when products are being marketed for a specific purpose.For example, products marketed as suitable for one use (but, by implication, not another use) should actually be formulated for the specified purpose.
Otherwise, the consumer may be misled into believing that they need to purchase a separate product for the other, non-specified uses. There is a risk of misleading consumers even if all variations of the product are sold at the same price.
The Reckitt case demonstrates that where a single formulation or composition can be used for multiple purposes, care should be taken to at most, provide examples of how the product can be used, rather than representing that the product is specifically formulated for one rather than another particular use.
Penalties and enforcement
The $1.7 million penalty ordered by the Federal Court was based on the finding that although consumers would have suffered some financial loss due to the premium price paid for the products, the products were still effective in treating the specified indications and didn’t cause any physical harm to consumers. Further the Court also considered that the specific amount of profit made by Reckitt through the use of this marketing strategy was unquantifiable.
However, consistent with its appeal pushing for a higher penalty in this case, the ACCC is advocating for an increase in maximum penalties for breaches of the consumer law on the basis that the current maximum penalty of $1.1 million per contravention is an insufficient deterrent for larger businesses.
Further, the ACCC has stated in its Compliance and Enforcement Policy that it will be targeting truth in advertising as one of its main priorities, and therefore it is imperative that manufacturers obtain proper advice before engaging in marketing activities, and finalising product labels.
Read more from other Wrays thought leaders in our launch edition of The Gatherer.
