FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Nudie Foods Australia Pty Ltd [2008] FCA 943 TRADE PRACTICES –misleading or deceptive conduct – sale of fruit juices – labels and promotional materials – representations as to content – representations that drinks comprise cranberry juice and cranberry juice with blueberries – drinks largely comprised of apple juice – contraventions admitted – declarations, injunctive relief and other orders by consent Trade Practices Act 1974 (Cth) Australian Competition and Consumer Commission v Real Estate Institute of WA Inc (1999) 161 ALR 79 cited AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v NUDIE FOODS AUSTRALIA PTY LTD WAD 32 of 2008 FRENCH J 19 JUNE 2008 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 32 of 2008 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: NUDIE FOODS AUSTRALIA PTY LTD Respondent JUDGE: FRENCH J DATE OF ORDER: 19 JUNE 2008 WHERE MADE: PERTH THE COURT DECLARES THAT: 1. Between 1 July 2007 and 30 January 2008, by supplying to retailers for sale to consumers fruit juice called "Rosie Ruby": 1.1 in a transparent plastic screw top bottle of 1.25 litre capacity, approximately 28cm high, with packaging which included the following characteristics: (i) a wrap-around label with the name "Rosie Ruby" in large and prominent font on the front and rear of the label; (ii) the front and rear of the label describingthe product as "cranberry cloudy juice"; (iii) on the front of the label,below the name described in paragraph 1.1(i) and adjacent to the description in paragraph 1.1(ii), a prominent picture of a cranberry on a white background; (v) nopictorial representation on the labelof any other type of fruit; (vi) the visible contents of the bottle being ofsubstantially the same colour as the fruit pictured on the label and referred to in paragraph1.1(iii), the Respondent ("Nudie") represented to consumers that: 1.2 the juice in Rosie Ruby consisted solely of cranberry juice; 1.3 any constituent fruit juice in Rosie Ruby other than cranberry juice was insubstantial, which representations were misleading and deceptive by reason of the fact that: 1.4 the proportion of cranberry juice in Rosie Ruby is 20%; 1.5 the proportion of apple juice in Rosie Ruby is 80%, and thereby, in trade and commerce: 1.6 engaged in conduct that was likely to mislead and deceive those members of the public who purchase fruit juice in contravention of section 52(1) of the Trade Practices Act 1974 (the Act); and 1.7 engaged in conduct that was liable to mislead those members of the public who purchase fruit juice as to the nature or characteristics of the product in contravention of section 55 of the Act. 2. Between 1 July 2007 and 30 January 2008, by supplying to retailers for sale to consumers, fruit juice called "Rosie Blue": 2.1 in a transparent plastic screw top bottle of 1.25 litre capacity approximately 28cm high with packaging which included the following characteristics: (i) a wrap-around label with the name "Rosie Blue" in large and prominent font on the front and rear of the label; (ii) the front and rear of the label describing the product as "cranberry blueberry juice"; (iii) on the front of the label,below the name described in paragraph 2.1(i) and adjacent to the description in paragraph 2.1(ii), a prominent picture of a cranberry and a blueberry on a white background; (iv) nopictorial representation on the labelof any other fruit on the label; (v) on the front of the label,beneath the picture referred to in paragraph 2.1(iiii) above, at the bottom and rear of the label, the words, "no preservatives, additives, added sugar or guilt", Nudie represented to consumers that: 2.2 the juice in Rosie Blue consisted solely of cranberry juice and blueberry juice; 2.3 any constituent fruit juice in Rosie Blue other than cranberry and blueberry juice was insubstantial, which representations were misleading and deceptive by reason of the fact that: 2.4 the proportion of apple juice in Rosie Ruby is 78%; 2.5 the proportion of cranberry juice is 15%; and 2.6 the proportion of blueberry juice is 7%, and thereby, in trade and commerce: 2.7 engaged in conduct that was likely to mislead and deceive those members of the public who purchase fruit juice in contravention of section 52(1) of the Act; and 2.8 engaged in conduct that was liable to mislead those members of the public who purchase fruit juice as to the nature or characteristics of the product in contravention of section 55 of the Act. 3. Between 20 August 2007 and 16 September 2007, by procuring placement of signboards on buses, and trams, and street posterswhich: 3.1 describedRosie Ruby as "cranberry cloudy juice"; 3.2 describedRosie Blue as "cranberry blueberry juice"; 3.3 stated "NOTHING ADDED, NOTHING GAINED (PHEW)" in conjunction with describing the product as being "Chilled cranberry juice with no added sugar. And no guilt", Nudie represented to consumers that: 3.4 Rosie Ruby consisted solely of cranberry juice; 3.5 Rosie Blue consisted solely of cranberry juice and blueberry juice, which representations were false, misleading and deceptive to those members of the public who buy fruit juice by reason of the fact that: 3.6 the proportion of apple juice in Rosie Ruby is 80%; 3.7 the proportion of cranberry juice in Rosie Ruby is 20%; 3.8 the proportion of apple juice in Rosie Blue is 78%; 3.9 the proportion of cranberry juice in Rosie Blue is 15%; 3.10 the proportion of blueberry juice in Rosie Blue is 7%, and thereby: 3.11 engaged in conduct that was likely to mislead and deceive those members of the public that purchase fruit juice in contravention of section 52(1) of the Act; 3.12 in connection with the supply or promotion of Rosie Ruby and Rosie Blue, falsely represented that the products were of a particular composition in contravention of section 53(a) of the Act; and 3.13 engaged in conduct that was liable to mislead those members of the public that purchase fruit juice as to the nature or characteristics of the product in contravention of section 55 of the Act. 4. Between 3 September 2007 and 16 September 2007 by procuring placement ofsignboards on buses, and trams, which: 4.1 describedRosie Ruby as "cranberry cloudy juice"; 4.2 described Rosie Blue as "cranberry blueberry juice"; 4.3 stated "IT'S WHAT WE DON'T PUT IN THAT YOU DON'T PUT ON" in conjunction with use of the words "Chilled cranberry juice with no added sugar. And no guilt", Nudie represented to consumers that: 4.4 Rosie Ruby consisted solely of cranberry juice; 4.5 Rosie Blue consisted solely of cranberry juice and blueberry juice, which representations were false, misleading and deceptive by reason of the fact that: 4.6 the proportion of apple juice in Rosie Ruby is 80%; 4.7 the proportion of cranberry juice in Rosie Ruby is 20%; 4.8 the proportion of apple juice in Rosie Blue is 78%; 4.9 the proportion of cranberry juice in Rosie Blue is 15%; 4.10 the proportion of blueberry juice in Rosie Blue is 7%, and thereby: 4.11 engaged in conduct that was likely to mislead and deceive those members of the public that purchase fruit juice in contravention of section 52(1) of the Act; 4.12 in connection with the supply or promotion of Rosie Ruby and Rosie Blue, falsely represented that the products were of a particular composition in contravention of section 53(a) of the Act; and 4.13 engaged in conduct that was liable to mislead those members of the public that purchase fruit juice as to the nature or characteristics of the product in contravention of section 55 of the Act. 5. Between 3 September 2007 and 16 September 2007 by procuring placement of street posters which: 5.1 described Rosie Ruby as "cranberry cloudy juice"'; 5.2 described Rosie Blue as "cranberry blueberry juice"; 5.3 stated "NOTHING ADDED NOTHING GAINED (PHEW)" in conjunction with use of the words "Chilled cranberry juice with no added sugar. And no guilt", Nudie represented to consumers that: 5.4 Rosie Ruby consisted solely of cranberry juice; 5.5 Rosie Blue consisted solely of cranberry juice and blueberry juice, which representations were false, misleading and deceptive by reason of the fact that: 5.6 the proportion of apple juice in Rosie Ruby is 80%; 5.7 the proportion of apple juice in Rosie Blue is 78%; 5.8 the proportion of cranberry juice in Rosie Ruby is 20%; 5.9 the proportion of cranberry juice in Rosie Blue is 15%; 5.10 the proportion of blueberry juice in Rosie Blue is 7% of the product, and thereby: 5.11 engaged in conduct that was likely to mislead and deceive those members of the public that purchase fruit juice in contravention of section 52(1) of the Act; 5.12 in connection with the supply or promotion of Rosie Ruby and Rosie Blue, falsely represented that the products were of a particular composition in contravention of section 53(a) of the Act; and 5.13 engaged in conduct that was liable to mislead those members of the public that purchase fruit juice as to the nature or characteristics of the Rosie Ruby product and the Rosie Blue product in contravention of section 55 of the Act. 6. Between 16 January 2008 and 30 January 2008 by circulatingpostcard promotional flyers which: 6.1 described Rosie Ruby as "cranberry cloudy juice"; 6.2 described Rosie Blue as "cranberry blueberry juice"; 6.3 stated on one side that, "At Rosie we can't help but look at the fun side of life. With no added sugar or preservatives, you can enjoy the refreshing taste of real cranberries whenever (or however) you like and feel great about it" together with a pictorial representation of the packing and labelling of Rosie Ruby and Rosie Blue; and 6.4 on their reverse side featured a pictorial representation of a single cranberry and blueberry together with the words "Chilled cranberry juice with no added sugar. And no guilt", Nudie represented to consumers that the products: 6.5 Rosie Ruby consisted solely of cranberry juice; 6.6 Rosie Blue consisted solely of cranberry juice and blueberry juice, which representations were false, misleading and deceptive by reason of the fact that: 6.7 the proportion of apple juice in Rosie Ruby is 80%; 6.8 the proportion of apple juice in Rosie Blue is 78%; 6.9 the proportion of cranberry juice in Rosie Ruby is 20%; 6.10 the proportion of cranberry juice in Rosie Blue is 15%; 6.11 the proportion of blueberry juice in Rosie Blue is 7%, and thereby: 6.12 engaged in conduct that was likely to mislead and deceive those members of the public that purchase fruit juice in contravention of section 52(1) of the Act; 6.13 in connection with the supply or promotion of the Rosie Ruby and Rosie Blue fruit juice falsely represented that the products were of a particular composition in contravention of section 53(a) of the Act; and 6.14 engaged in conduct that was liable to mislead those members of the public that purchase fruit juice as to the nature or characteristics of the product in contravention of section 55 of the Act. THE COURT ORDERS THAT: Injunction 7. Nudie is restrained, for a period of 3 years from the date of these Orders, in relation to the Nudie Products (as defined in paragraph 8 below) whether by its directors, employees or otherwise from: 7.1 supplying or marketing or causing to be supplied or marketed, any Nudie Products bearing labels or packaging that use a product name or description that includes the name of a fruit but does not in the product name or description either: (i) identify all of the fruits used in making the Nudie Product; or (ii) alert the consumer to the fact that fruit or fruits other than those identified in the product name or description were used in making the Nudie Product; 7.2 supplying or marketing or causing to be supplied or marketed, any Nudie Products bearing labels or packaging that display a picture or graphic representation of one or more of the fruits used in making the Nudie Product without including a picture or graphic representation of every fruit, which contributes (by way of liquids and suspended solids) used in making the Nudie Product that comprises more than 5% of the Nudie Product by volume; and 7.3 publishing or otherwise disseminating, or causing to be published or otherwise disseminated, any advertising or promotional material that represents that the juice in a Nudie Product consists solely of the juice of a particular fruit or particular fruits when the Nudie Product contains the juice of other fruits. 8. For the purpose of paragraph 7, "Nudie Products" means any juice product produced, manufactured or marketed by Nudie where Nudie has control over the form and content of the labels and packaging in relation to the product name or description used for the product including, for example, the Rosie Ruby and Rosie Blue products and the following Nudie branded products; "nudie squishies"; "nudie smoothies"; "nudie crushies"; "nudie juicies"; and "fire fighter nudies". For the avoidance of doubt, Nudie shall not be taken to have control over the form and content of the labels and packaging where its control goes only to the treatment of Nudie's brand and logo. Corrective Advertisement 9. Within 7 days of the date of this order Nudie, at its own expense, is to cause to be published a corrective notice in the form of Annexure A to these orders on its website www.nudie.com.au and www.lifeisrosie.com.au which shall be: 9.1 viewable immediately on-screen after the www.lifeisrosie.com.au website is opened; and 9.2 viewable by clicking a link on the www.nudie.com.au website. That link is to be no smaller than 10cm wide by 3cm high, as viewed on a standard 21" computer monitor, and titled "Important Corrective Information about Rosie Products", and 9.3 displayed on the www.nudie.com.au and www.lifeisrosie.com.au websites for a period of not less than 60 days from first publication. 10. Within 7 days of the date of this order Nudie is to send by prepaid post to each and every retailer to whom it supplied Rosie Ruby or Rosie Blue products during the relevant period a letter in the form of Annexure B to these orders. Trade Practices compliance program 11. Nudie: 11.1 within two months of the date of this order, is to establish an education training and trade practices compliance program designed: (i) to minimise its risk of future breaches of Part V of the Act and to ensure that all directors, officers and employees of Nudie, whose direct duties could result in them being concerned with the conduct of Nudie that may contravene Part V of the Act, have an awareness of their responsibilities and obligations in relation to the requirements of sections 52, 53(a) and 55 of the Act ("Compliance Program"); (ii) to provide for regular (at least once a year) and practical trade practices training for the persons referred to in paragraph 11.1(i) above. The training is to be conducted by either the Compliance Officer (as defined in paragraph 11.3 below), or by a suitably qualified compliance professional or legal practitioner with expertise in trade practices law; (iii) to ensure that the Compliance Officer approves the content of labels and promotional material relating to juice products prior to use of that material by Nudie; (iv) to include a Trade Practices Complaint Handling system to record, store and respond to trade practices complaints; and (v) subject to the Compliance Program being tailored to Nudie's circumstances, to be consistent with Australian Standard on Compliance Programs AS3806. 11.2 is to administer and maintain the Compliance Program for a period of three years from the date it is established; 11.3 within one month of the date of these Orders is to appoint a Director or a Senior Manager with suitable qualifications, training or experience in corporate compliance as Compliance Officer (the Compliance Officer) with responsibility for ensuring the Compliance Program is effectively designed, implemented and maintained; 11.4 within three months of the date of this Order is to provide a written report to the Applicant on the implementation and content of the Compliance Program; and 11.5 is to provide a further report to the Applicant on the implementation and administration of the Compliance Program at the conclusion of each period of 12 months during which the program is being implemented and administered. Costs 12. Nudie pay the Applicant's costs to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. ANNEXURE A Corrective Notice BY ORDER OF THE FEDERAL COURT OF AUSTRALIA Following legal action by the Australian Competition and Consumer Commission the Federal Court has declared that Nudie Foods Australia Pty Ltd engaged in misleading conduct and made false representations about the contents of its Rosie Range of fruit juices in contravention of sections 52, 53(a) and 55 of the Trade Practices Act 1974. By consent the Court also made an order restraining Nudie from engaging in similar conduct in the future. Nudie represented that its Rosie Range of fruit juices were solely "Cranberry Cloudy juice" and "Cranberry Blueberry juice" when in fact the juices contained either 78% or 80% reconstituted apple juice. Misleading representations that the Rosie Range of fruit juices were solely "Cranberry Cloudy juice" and "Cranberry Blueberry juice"appeared on the Rosie Range bottle labelling supplied to retailers between 1 July 2007 and 30 January 2008, poster advertisements on buses and trams between 20 August 2007 and 16 September 2007, street billboards between 3 September 2007 and 16 September 2007 and postcard promotional flyers between 16 January 2008 and 30 January 2008. By consent, the Court also ordered Nudie to establish a Trade Practices Compliance Program. For further information, please contact Nudie on Freecall 1800-46-68-343 or visit Nudie's website www.lifeisrosie.com.au. ANNEXURE B Dear Retailer, A correction from Nudie Following legal action by the Australian Competition and Consumer Commission (the ACCC) the Federal Court has made declarations by consent that Nudie Food Australia Pty Ltd (Nudie) has engaged in conduct likely to mislead and deceive and made false representations concerning the contents of its Rosie fruit juices in contravention of sections 52, 53(a) and 55 of the Trade Practices Act 1974 (the Act). By consent the Court also made an order restraining Nudie from engaging in similar conduct in the future. Nudie's Rosie fruit juice labelling represented that the Rosie Range Juices were solely "Cranberry Cloudy juice" and "Cranberry Blueberry juice" when in fact the juices contained either 78% or 80% reconstituted apple juice. Nudie has since changed its labelling of the Rosie Range juices. The new labelling featured on all Rosie Range juice products supplied to stores from early February 2008. Nudie is writing to inform you of the Federal Court's declarations about its conduct and to request that you remove any Rosie fruit juices carrying the old labelling from your shelves. Please contact James Ajaka, Chief of Sales and Marketing, at Nudie if you have any queries about our labelling. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 32 of 2008 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: NUDIE FOODS AUSTRALIA PTY LTD Respondent JUDGE: FRENCH J DATE: 19 JUNE 2008 PLACE: PERTH REASONS FOR JUDGMENT Introduction 1 These proceedings were commenced by the Australian Competition and Consumer Commission (ACCC) against Nudie Foods Australia Pty Ltd (Nudie) in relation to the packaging and promotion by Nudie of two fruit juice products, namely Rosie Ruby and Rosie Blue. The company has admitted that its packaging and promotional materials were misleading or deceptive in that they misrepresented the composition of the juices. Declaratory orders, an injunction, a corrective advertising order and an order for establishment of a compliance program within the company have been agreed to. For the reasons that follow, I am of the opinion that the proposed orders are within power and appropriate and, subject to some minor variations, will make the orders sought. Factual background 2 Nudie is a company incorporated in New South Wales in July 2004. It manufactures and supplies fruit juice to retailers throughout Australia. 3 Commencing from 1 July 2007 Nudie supplied to retailers for sale to consumers a new product range under the brand name "Rosie" comprising two fruit juice products called "Rosie Ruby" and "Rosie Blue". The company has the right to use the registered trade marks Rosie Ruby and Rosie Blue. The products were supplied between July 2007 and 30 January 2008 to retailers throughout Australia through national supermarket chains and independently owned shops. They were promoted by advertising campaigns in Sydney, Melbourne and Brisbane using signboards on buses and trams, street posters and postcard flyers. 4 During the relevant period the Rosie Ruby product was marketed in a transparent plastic screw top bottle of 1.25 litre capacity, approximately 68 centimetres high, with packaging which included the following characteristics: 1. A wrap-around label with the name "Rosie Ruby" in large and prominent font on the front and rear of the label. 2. A description of the product on the front and rear of the label as "cranberry cloudy juice". 3. Adjacent to the description a prominent picture of a cranberry on a white background. 4. No pictorial representation of any other type of fruit. 5. The visible contents of the bottle being substantially the same colour as the fruit pictured on the label. 5 The Rosie Blue product came in a transparent plastic screw top bottle of the same dimensions as the Rosie Ruby product. It bore: 1. A wrap-around label with the name "Rosie Blue" in large and prominent font on the front and rear of the label. 2. A description of the product on the label as "cranberry blueberry juice". 3. Adjacent to the description and below the name was a prominent picture of a cranberry and a blueberry on a white background. 4. No pictorial representation of any other fruit on the label. 5. Beneath the picture and at the bottom and rear of the label were the words "no preservatives, additives, added sugar or guilt". These products were supplied to retailers for sale to consumers between 1 July 2007 and 30 January 2008. 6 The promotion of the two fruit juices involved the use of bus and tram signboards, street posters and postcards as already mentioned. The Rosie Ruby and Rosie Blue signboards used on buses and trams described Rosie Ruby as "cranberry cloudy juice" and Rosie Blue as "cranberry blueberry juice". They also bore the statement: NOTHING ADDED, NOTHING GAINED (PHEW) in conjunction with a description of the product as "Chilled cranberry juice with no added sugar. And no guilt." These signboards were used between 20 August 2007 and 16 September 2007. A variant of the signboards used between 3 September 2007 and 16 September 2007 bore the descriptions of Rosie Ruby and Rosie Blue as "cranberry cloudy juice" and "cranberry blueberry juice" and the statement: IT'S WHAT WE DON'T PUT IN THAT YOU DON'T PUT ON in conjunction with the use of the words "Chilled cranberry juice with no added sugar. And no guilt." 7 The street posters which were used between 3 September 2007 and 16 September 2007 described the products as "cranberry cloudy juice" and "cranberry blueberry juice" respectively and contained the words "NOTHING ADDED NOTHING GAINED (PHEW)" in conjunction with the use of the words "Chilled cranberry juice with no added sugar. And no guilt." The postcard promotional flyers were used between 16 January 2008 and 30 January 2008 and again described the two products as "cranberry cloudy juice" and "cranberry blueberry juice" respectively. They stated on one side that: At rosie we can't help but look at the fun side of life. With no added sugar or preservatives, you can enjoy the refreshing taste of real cranberries whenever (or however) you like and feel great about it". This was accompanied by a pictorial representation of the packaging and labelling of Rosie Ruby and Rosie Blue. On the reverse side of the postcards was a pictorial representation of a single cranberry and blueberry accompanied by the words "Chilled cranberry juice with no added sugar. And no guilt." 8 It is an agreed fact between the parties that by reason of the promotion, marketing and sale of these products as described above, Nudie represented to consumers that: 1. Rosie Ruby consisted solely of cranberry juice; and 2. Rosie Blue consisted solely of cranberry juice and blueberry juice. 9 Nudie now admits that in respect of those members of the public that purchase fruit juice, the representations were false, misleading and deceptive. As appears from its specific admissions, both Rosie Ruby and Rosie Blue comprise largely apple juice with significantly lesser proportions of cranberry juice and blueberry juice respectively. Specifically Nudie admits that: 1. the proportion of apple juice in Rosie Ruby is 80%; 2. the proportion of apple juice in Rosie Blue is 78%; 3. the proportion of cranberry juice in Rosie Ruby is 20%; 4. the proportion of cranberry juice in Rosie Blue is 15%; 5. the proportion of blueberry juice in Rosie Blue is 7%. Proposed orders 10 The ACCC and Nudie have agreed upon various orders that the Court should make in these proceedings. These comprise declarations setting out the admitted contraventions of ss 52, 53 and 55 of the Trade Practices Act 1974 (Cth). An injunction restraining Nudie from repetition of such conduct for a period of three years, a corrective advertisement and the establishment by Nudie of an education, training and trade practices compliance program. They also filed an agreed statement of facts upon which the preceding factual background is based. Whether the orders proposed should be made 11 The ACCC and Nudie filed joint submissions in support of the consent orders. They referred to the well established proposition that in such cases the Court will not impede settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to a settlement. The Court will not ordinarily refuse to give effect to terms of settlement by refusing to make orders or accept undertakings where they are within the Court's power to make and are otherwise appropriate. The Court will generally not substitute its own view of the orders or undertakings which it would have made provided that those which are suggested fall within the range of an appropriate disposition in the case: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [20]. 12 I am satisfied that the Court has power to make the orders which are sought. I am also satisfied that the orders are appropriate. The declarations that are proposed are more numerous than would appear necessary and could have been collapsed into one or two declarations. That, however, is a matter of drafting rather than a matter of substance. The proposed injunction is expressed with sufficient precision to make it enforceable. 13 Having regard to the misleading promotion, which has been admitted, the corrective advertisement is appropriate. The compliance program is related to the contraventions which have occurred and is appropriate in the circumstances. 14 Subject to some slight redrafting, which the parties have accepted, of the terms of the orders to express them with greater clarity, I am prepared to make the orders sought. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French J. Acting Associate: Dated: 19 June 2008 Counsel for the Applicant: Ms J Lord Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Ms K Morgan Solicitor for the Respondent: Gilbert Tobin Date of Hearing: 19 June 2008 Date of Judgment: 19 June 2008