INSIGHT

Heinz Shredz: ACCC takes it first swing against the sweet stuff

Food & Beverage Patents & Trade Marks

In brief 7 min read

Associate Adrian Chang and Lawyer Nick Boyd‑Caine report on the proceedings launched by the ACCC against Heinz in relation to their Shredz products, and what that action says about today’s food regulatory environment.

How does it affect you?

  • In June 2016, the ACCC fired the first shot in what will undoubtedly be a protracted battle to define the edges of acceptable advertising of high‑sugar foods. We see this action as the thin end of the wedge for the anti‑sugar movement (and indeed shows the influence of that movement on the ACCC's thinking) and appears to be a calculated warning to manufacturers to keep the sweet stuff separate from products marketed as healthy, nutritious or appealing to children.
  • We will have to wait to see how this particular case plays out. But in the meantime, it is clear that the consumer watchdog is willing to reinforce its position that the objective truth of a claim will not necessarily stop a claim from being misleading to consumers.

Background

In June, the ACCC commenced proceedings in the Federal Court in South Australia against H.J. Heinz Company Australia Ltd (Heinz), alleging Heinz made misleading representations in relation to its 'Little Kids Shredz' product line. Shredz is a children’s food, intended for ages 1 – 3. The ACCC's complaint highlights the prominent depictions of fresh fruit and vegetables on the Shredz packaging, along with statements such as '99% fruit and veg', and '[o]ur range of snacks and meals encourages your toddler to independently discover the delicious taste of nutritious food'. The ACCC alleges that the images and statements represent that the products 'are of equivalent nutritional value to fruit and vegetables and are a healthy and nutritious food for children aged one to three years, when this is not the case.

Little Kids Shredz

In its media statement, the ACCC further alleged that the high sugar content in Shredz is likely to inhibit the development of a child's taste for natural fruit and vegetables.

The ACCC is seeking declarations, injunctions, pecuniary penalties, corrective notices and costs against Heinz.

 

 

A sign of things to come?

In our view, one of the striking features of this action is that none of the claims made on the packaging of Heinz's product, when taken individually, appear to be misleading or inaccurate. The key claim, that the product is made with or from 99 per cent fruit and vegetable purees, can be seen to be accurate when examining the ingredients list. The packaging also does not make any express claim to the effect that the product is healthy – certainly nothing that would be caught by Food Standards Code 1.2.7. The written statements instead make allusions to nutrition. Putting aside any qualms one might have about the effect of high‑sugar products on health, there can be no doubt that sugar is a nutrient.

There appear to be two fundamental propositions being relied on by the ACCC in their action against Heinz.

First, that the overall effect conveyed by the packaging (including the emphasis that the ingredients of the product are derived from fruits and vegetables and the allusions to nutrition), is a representation that Heinz's products are nutritious, healthy or 'good for you'.

Second, that those sorts of representations are not compatible (are misleading or deceptive) with products that have a high sugar content.

As to the first proposition, the ACCC and the courts have long (and in our view, appropriately) taken the view that a literally correct statement can convey a misleading impression. Further, the ACCC and the courts have also taken the view that a misleading representation can be conveyed through the combined effect of several elements of a piece of advertising. The first proposition is therefore a reasonably orthodox position for the regulator to take.

The second proposition is a novel, but not surprising, position for the ACCC to take. It is novel because we are not aware of another high‑profile case in which the ACCC has challenged the marketing of products as healthy based solely on relative sugar content. However, it is not surprising considering the rising profile of the anti‑sugar movement.

We have previously warned that sugar has emerged over the past decade to become the leading nutrient of concern in many jurisdictions. Indeed, Heinz's Shredz products were brought to the attention of the ACCC through a complaint made by the Obesity Policy Coalition. The Coalition is a lobby group comprised of the Cancer Council Victoria, Diabetes Victoria and Deakin University, which seeks to influence food labelling and advertising rules. The Obesity Policy Coalition is on the forefront of the movement to regulate sugar in diets (particularly sugary drinks) and, we suspect, their policies have had a strong influence on the ACCC's allegations against Heinz.

Heinz's product therefore makes an excellent test case for the regulator, as it involves food products intended for consumption by young children, who are normally considered a particularly vulnerable class of consumer. The express representations made on the product's packaging also make a connection between the product and the development of good nutritional habits in children, which lends some weight to the allegation that the product promotes itself as being nutritious, or being nutritionally equivalent to actual fruit and vegetables. However, whether this factor will ultimately influence a judge is unclear – after all, children aged 1 to 3 might be the intended consumer, but they are not the ones being allegedly misled.

'Goodness' in the cross‑hairs

The Heinz action, of course, is only one front in the regulator's ongoing drive to police the boundaries of what we have come to call 'goodness' claims on foods.

In July 2016, the regulator announced that Unilever Australia Limited and The Smith's Snackfood Company Pty Ltd, had each agreed to pay a penalty of $10,800, stemming from infringement notices issued by the ACCC concerning food products that contained misleading representations. Both products were brought to the attention of the ACCC by the consumer advocacy group CHOICE.

Unilver's Paddle Pop Rainbow (10 pack) packaging included the claim that the product was 'School Canteen Approved', surrounding a 'tick' symbol. Smith's Sakata Paws Pizza Supreme Rice Snacks included a logo with the words 'Meets School Canteen Guidelines' and an image of a sandwich and an apple. The products had been assessed under the National Healthy School Canteens Guidelines (Guidelines), but rated 'Amber' (foods that should be selected carefully) under the traffic light system used by those Guidelines.

Meets School Canteen GuidelinesIn taking action against Unilever and Smith's, the ACCC identified a specific factual issue that it claimed amounted to a false or misleading representation. While each product included that 'Amber' assessment on its packaging, the warning was on the reverse side of the packaging and in a small font, when compared to the School Canteen claims.

While the context for the ACCC's actions may well be a concern with health claims on food packaging, the infringement notice only relates to the factual question of whether the products are canteen ready or approved, according to the Guidelines. The responses from Unilever and Smith's support the conclusion that their products do meet the Guidelines. However, both chose to pay a $10,800 fine. While the payment of a penalty under an infringement notice is not an admission of a contravention, both companies informed the ACCC that they would stop using the logos displayed on their respective product packaging.

The effects of the ACCC’s actions

The comments made by the ACCC in relation to the Heinz and Unilever/Smiths matters show that there is an increased focus on the health claims of food packaging generally, and potentially on the sugar content of foods in particular. Considering the substantial interest in 'goodness' claims by food manufacturers, claims of this sort often will'be contentious. If the Heinz action goes to trial, whatever the outcome, it could define the regulatory environment for the next decade or more. A win for Heinz would be detrimental to the anti‑sugar movement in Australia, as it would undermine the proposition that health claims and high sugar content are necessarily incompatible. On the other hand, a loss for Heinz will force producers to question'how to define 'goodness' in substance. We will have to wait to see who will be left with a sour taste in their mouths, and who will taste the sweetness of victory.