The recent case of ACCC v Kimberly-Clark Australia Pty Ltd (No 2) [2021] FCA 102 (ACCC v KCA) highlights the need for businesses to carefully review their marketing materials to ensure that they comply with the Australian Consumer Law (ACL).1 Businesses must not only check that their advertising and packaging comply with the ACL, but that all of their public facing materials, including website content, banners and logos, are ACL compliant.
ACCC v KCA
In February of this year, the Federal Court found in favour of the ACCC in its proceedings against Kimberly-Clark Australia Pty Ltd (KCA), the makers of Kleenex Cottonelle toilet paper products (Products). The ACCC had brought action over claims that KCA made a false or misleading representation about certain Products on its website (Website), specifically through the use of a ‘Made in Australia’ logo (Logo). The Logo had been published on the Website for a period of approximately four months, appearing as part of a static banner at the bottom of each web page, including on pages that advertised KCA’s Kleenex Cottonelle Flushable Cleansing Cloths (Kleenex Wipes).
The ACCC regarded the Logo as false or misleading because, while the majority of the Products sold by KCA were made in Australia, the Kleenex Wipes were not. In fact, the Kleenex Wipes were made in Germany, South Korea and the UK, and were imported by KCA into Australia. While the packaging of the Kleenex Wipes accurately stated that the wipes were manufactured overseas, this was not stated to be the case on the Website. Once the ACCC brought this inaccuracy to the attention of KCA, the Logo was changed to state ‘Kleenex toilet roll made in Australia’.
The ACCC commenced proceedings in the Federal Court, claiming that KCA had made a false or misleading representation that the Kleenex Wipes were made in Australia, when they were not, in contravention of section 29 (1)(k) of the ACL. The Federal Court agreed that KCA had contravened this section (though accepting that the contravention was an oversight) and ordered KCA to pay a pecuniary penalty of $200,000.00.2
False or misleading representations about the place of origin of goods
Section 29 (1)(k) of the ACL specifically provides:
a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services, or in connection with the promotion by any means of the supply or use of goods or services, make a false or misleading representation as to the place of origin of goods.
The court noted the principles behind section 29 (1)(k) in referring to the joint submissions that were tendered by the parties, which stated that “claims that goods are made in Australia may play on a consumer’s desire to purchase goods that are manufactured in Australia to support local business” and noted the importance of “consumers [having] accurate information from businesses, particularly those the size and presence of KCA as to the place of origin of particular goods given the difficulty of verifying such information and to prevent businesses from wrongly benefiting from the perception that they manufacture the relevant products locally at the expense of compliant businesses.”3
The court ultimately accepted the points raised in these joint submissions, noting that representations as to place of origin of particular goods “may be a significant influence to some customers on their choice of product”.4
Other false or misleading representations
In addition to the prohibition in section 29 (1)(k) relating to the place of origin of goods, the ACL lists a number of other situations in which a supplier must not make false or misleading representations while supplying or promoting goods or services, including, among other things, representations made about the standard, quality, value and grade of the goods or services, testimonials made in relation to the goods or services, or the existence of any conditions, warranties, guarantees, rights or remedies that accompany the goods or services.5 In a previous article, we examined proceedings brought against KCA by the ACCC in 2020, where the ACCC alleged that KCA had made false or misleading claims that the Kleenex Wipes were ‘flushable’ in contravention of sections 29 (1)(a) and 33 of the ACL (claims which were ultimately dismissed in KCA’s favour on appeal).6
The importance of cooperation and promptness
In ACCC v KCA, the court noted favourably that KCA had cooperated with the regulator and had acted quickly in taking remedial action, ultimately imposing a penalty of $200,000.00 out of a maximum possible penalty (at that time) of $1.1 million.7
On this point, the court stated that “cooperation with authorities in the course of investigations and subsequent proceedings can… reduce the penalty that might otherwise be imposed. The reduction reflects the fact that such cooperation: increases the likelihood of cooperation in future cases in a way that furthers the object of the legislation [and] releases and relieves the regulator’s resources, thereby increasing the likelihood that other contraveners will be detected and brought to justice”.8
The maximum penalty that would apply since changes were made to the ACL in 2018 is the greater of $10 million, three times the value of the benefit received, and 10% of a business’s annual turnover in the preceding year (see our previous article on the current penalty regime here).
Key lessons
Businesses should carefully consider all marketing materials they publish, including their website layout and design, to ensure that every representation they make is accurate and does not fall foul of any of the prohibitions set out in Part 3-1 of the ACL, particularly those contained in sections 29 (a) – (n), 33 and 34.
Any representation that may be viewed and relied on by a consumer may amount to a false or misleading representation if it is inaccurate, and this will not be cured by other representations made about the goods or services that are accurate. In ACCC v KCA, while the packaging of the Kleenex Wipes accurately stated that the product was made overseas, the inaccurate representations made on the Website were still found to have misled consumers.
This article was written by Teresa Torcasio, Partner, Caitlyn White, Senior Associate, and Zoe Vise, Law Graduate.
1.Competition and Consumer Act 2010 (Cth) Sch 2 (“Australian Consumer Law” or “ACL”).
2. ACCC v KCA at [2] and [51].
3. ACCC v KCA at [33].
4. ACCC v KCA at [52].
5. ACL, ss 29(1), s33 and s34.
6. ACCC v Kimberly-Clark Australia Pty Ltd [2020] FCAFC 107.
7. ACCC v KCA at [24] and [28]; citing Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [45]. ACCC v KCA at [28]; the court noted that a maximum penalty for contraventions by a company of a provision in Part 3-1 of the ACL was, at the relevant time, $1.1 million per item 2 of s 224(3).
8.ACCC v Kimberly-Clark Australia Pty Ltd [2020] at [24].
