CN05 - Shield lost - Lorna Jane fined 5 million for false claims of anti-Covid-19 activewear

On 23 July 2021, the Federal Court of Australia ordered that Lorna Jane Pty Ltd ("Lorna Jane") pay AUD 5 million for making false or misleading representations about the ability of its “LJ Shield Activewear” to protect against COVID-19 in contravention of the Australian Consumer Law ("ACL").

During a global pandemic, such claims might otherwise be welcomed - but only if true. Ultimately, Lorna Jane admitted that it had no reasonable scientific or technological basis for its claims.

Key takeaways

• Businesses should be careful of advertising that taps into people's fears of the current COVID-19 crisis – the case is a strong warning that regulators like the Australian Competition and Consumer Commission ("ACCC") will scrutinise such conduct closely and seek significant penalties where appropriate.
• Advertising health benefits of products or services must as a minimum be supported by reasonable scientific evidence, and approval of the Therapeutic Goods Administration ("TGA") may sometimes be necessary.
• The ACCC will often seek penalties against individuals involved in businesses' misrepresentations, although ultimately in this case it withdrew proceedings against a director of Lorna Jane.

Background

Lorna Jane is a well-known women's activewear company, founded in 1990 by director Lorna Jane Clarkson. 

In July 2020, Lorna Jane conducted a marketing campaign for its LJ Shield Activewear.  The campaign claimed that the "Anti-virus Activewear", which was sprayed with a substance called "LJ Shield", provided protection against viruses and pathogens (including COVID-19).  The campaign was promoted through Lorna Jane's website and Instagram account, media releases, direct emails to customers, and in-store advertising. 

Although most of the advertisements were removed in July 2020, the ACCC claimed that some Lorna Jane garment tags continued to include the anti-virus messaging until at least November 2020.

Lorna Jane's anti-virus activewear quickly came under regulatory scrutiny -  in July 2020, the Australian TGA fined Lorna Jane $39,960 for failing to register its Anti-Virus goods, as well as for advertising regulation breaches.

Subsequently, on 21 December 2020, the ACCC instituted proceedings in the Federal Court ("the Court") against both Lorna Jane, for alleged false and misleading claims, and Ms Clarkson herself for allegedly being "knowingly concerned" in the making of these claims.  Ultimately, the parties agreed the proceedings against Ms Clarkson should be dismissed.

The judgment

Lorna Jane admitted, and the Court found, that Lorna Jane made four types of false and misleading representations in July 2020:

• the "Elimination Representations": that LJ Shield Activewear eliminated or killed pathogens or viruses including COVID-19;
• the "Protection Representations": that LJ Shield Activewear protected wearers against COVID-19;
• the "Stop the Spread Representations": that LJ Shield reduced the spread of COVID-19; and
• the "Reasonable Basis Representations": that Lorna Jane had a reasonable scientific or technological basis to make the above claims.

The Court found that Lorna Jane contravened the ACL because: 

• these representations were misleading or deceptive or likely to mislead or deceive, contrary to section 18;
• these representations included false or misleading claims that the Activewear had certain performance characteristics, uses and benefits, in breach of section 29(1)(g); and
• the representations were liable to mislead the public as to the nature, characteristics and suitability for purpose of the Activewear, contrary to section 33.

In addition to ordering that Lorna Jane pay a AUD 5 million pecuniary penalty, the Court issued an injunction against similar conduct by Lorna Jane, and ordered that Lorna Jane publish a corrective notice, establish a compliance program, and pay the ACCC's costs. 

The proceedings suggest that regulators continue to be concerned with those taking advantage of the current COVID-19 crisis, and also that judges will forcefully denounce such conduct – the Court labelled Lorna Jane's conduct "exploitative, predatory and potentially dangerous" and set its penalty in that light.  Even so, the penalty should not be seen as the maximum for similar conduct – there were mitigating circumstances because the ACCC did not allege Lorna Jane knew its claims were untrue, and there was no evidence that Lorna Jane profited from its conduct or actually harmed consumers.  Greater penalties could be ordered in future cases.

With thanks to Matthew Harper and Alexandra Martin of Ashurst for their contributions.