A recent case in Australia has again highlighted the importance for businesses of accurately informing customers where your goods come from.
Concerns had been raised that United Florists Pty Limited (trading as Lily’s florist) was creating a false or misleading representation that it was a local business rather than an online business. Lily’s florist had used more than 1,500 different web pages and Google ads, all of which were directed towards marketing its flowers to customers in a particular suburb in Australia. Lily’s florist website also provided directions, maps and phone numbers relating to specific suburbs in Australia. This gave the false impression that Lily’s florist was a local business in that area.
However, when a customer ordered flowers from Lily’s florist, it would engage a delivery company named “Petals Network Pty Limited” to relay the flowers to the customer, meaning that a different unrelated florist and not Lily’s florist was responsible for filling the orders. The judgement of the Australian competition and consumer commission noted that the misrepresentations unfairly diverted business away from legitimate local businesses. Lily’s florist was asked by the commission to remove all representations relating to being a local business from its online presence, including its website.
In New Zealand, section 10 of the Fair-Trading Act 1986 prohibits conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for purpose or quality of goods. Fines for breaching this section can be hefty as demonstrated in the 2021 case of Commerce Commission v New Zealand Health Food Company Limited. This case also revolved around a business misleading customers as to the nature of its goods. In this case, the company was selling royal jelly capsules under its “Manuka South” brand labels. The label on various royal jelly products included an outline of a New Zealand map, pictures of a mountain and green pasture which are evocative of New Zealand’s landscape, the tag lines “100% New Zealand” and “The New Zealand Health Food Company is dedicated to bringing you the premium quality products which have been sourced from the pristine environment that is synonymous with NZ”. When considered together, the labels created the impression the ingredients used in the capsules were sourced from New Zealand and it was further concluded that consumers would assume the royal jelly was sourced in New Zealand (and there was no indication that this wouldn’t be the case).
The royal jelly, which was the main ingredient in the capsules, was sourced from China and many other ingredients used in the capsules were also sourced from overseas. However, the ingredients were combined into the finished royal jelly capsules and packed in New Zealand.
The Commerce Commission noted that because these goods are “credence goods” (which essentially are goods with qualities that cannot be observed by the consumer after purchase), any misrepresentations made are difficult or impossible for consumers to evaluable for themselves. The company was fined $377,000 and a decision was made internally by the company to update its product labels to include the wording “made from imported ingredients” to ensure customers would not be mislead by the company’s’ marketing.
We recommend that businesses regularly review their product packaging and marketing materials to ensure that they accurately reflect the nature, manufacturing process, characteristics, suitability for purpose and quality of their goods, and if required they should create appropriate guidance and training materials for their staff which should also be regularly reviewed and updated.
Disclaimer: This information is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
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Disclaimer
The views expressed in this content are those of the author, who is also responsible for any errors and omissions. Family Business Association provides this article for your information only. The content of the article should not be taken as advice. If you wish to explore this topic, please consult an advisor who you consider to have the expertise to provide specific advice in relation to your family business.
