By Rosannah Healy, Molly Snaith, Jessica Jane, Andrew Robertson and April Reid
Key takeaways
The spotlight continues on the food and beverage sector as it has been identified as one of the sectors with the greatest proportion of concerning environmental claims. Regulators continue to combat greenwashing and businesses should stay vigilant and ensure that all greenwashing claims and initiatives are properly reviewed.
Reforms to the unfair contract terms (UCT) will apply to standard form contracts entered into or renewed following 9 November 2023 (and to terms of standard contracts varied after this date). Ahead of 9 November 2023, businesses are encouraged to review standard form contracts entered into on or renewed following this date (and terms of standard contracts varied after this date).
Cost of living concerns as a driver for ACCC's enforcement priorities
Recent cost of living pressures have informed the ACCC's enforcement priorities. In particular, ACCC Chair Gina Cass-Gottlieb stated in her speech at the Committee for Economic Development of Australia in March 2023 that:
The present key issues of cost of living pressures, the price of essential services including energy and telecommunications, the integrity of environmental and sustainability claims, ever increasing losses to scams, consumer and fair trading harms from manipulative marketing practices in the digital economy and the always high risk to markets, business rivals and consumers from anti-competitive conduct, strongly feature in our priorities.1
Even though the food and beverage sector has not been in the spotlight, there are a number of enforcement priorities that market participants should be mindful of, namely the ACCC's focus on unfair contract terms, concerns in relation to environmental claims and sustainability as well as the regulator's efforts to ensure that small businesses receive the protections of the competition and consumer laws.2
Sustainability in food and beverage
The ACCC undertook a sweep of the internet between 4 October and 14 October 2022 through which 247 businesses from various industries fell under scrutiny. The aim of the sweep was to identify industries or sectors which commonly use environmental and sustainability claims, and to assess whether these claims have the potential to mislead consumers. The ACCC found concerns with 57% of the businesses that were assessed.
The food and beverage sector was identified as one of the sectors with the greatest proportion of concerning environmental claims. The ACCC raised concerns with regard to the claims of 65% of the food and beverage companies examined in the sweep.
It is also worth noting that the ACCC examined certain businesses in the takeaway packaging industry. While the proportion of businesses that raised concern was slightly lower at 55%, it remains a considerable proportion of the businesses examined by the ACCC in this sector.
The internet sweep was the first move in the ACCC's broader initiative to combat greenwashing. While the ACCC did not intend to identify specific breaches of the Australian Consumer Law (ACL) in this exercise, it certainly foreshadowed that further work will be done to determine whether individual environmental claims may be a breach of the ACL. In July, the ACCC published a draft guidance for businesses setting out eight best practice principles when making environmental and sustainability claims.
This should serve as a reminder to businesses to stay vigilant and ensure that all greenwashing claims and initiatives are properly reviewed.
Unfair contract terms
The new regime for UCT is coming into effect later this year. The reforms, which will apply to standard form contracts entered into or renewed following 9 November 2023 (and to terms of standard contracts varied after this date), will empower Courts to impose substantial penalties on businesses and individuals who include unfair terms in their standard form contracts. Currently, a term that is declared by the Court to be unfair is simply void and unenforceable.
The reforms also significantly expand the definition of 'small business' to include someone who employs 100 people or less (increased from 20) or any business with an annual turnover of less than $10 million. Under the incoming changes, there will no longer be any 'contract value' thresholds applied to small business contracts to which the ACL applies.
Some risk areas for market participants in the food and beverage sector may include terms that allow businesses to unilaterally determine wastage, terms requiring payments within a short period of time, broad indemnity or limitation of liability clauses and unreasonable return policies.
Ahead of 9 November 2023 businesses are encouraged to review their contracts for unfair terms. In conducting such a review, businesses should consider both points of view, include counterbalancing terms where commercially possible, avoid broad terms, and ensure that terms are clear and transparent.