What you need to know
- Businesses should not advertise a product as "natural" if the product is not wholly or substantially derived from natural sources, or if the product contains artificial or synthetic substances.
- The dispute resolution mechanism offered by Ad Standards is a quick and cost-effective alternative for disputes between advertisers that might otherwise lead to litigation. However, such complaints should be carefully considered as they do not result in damages and are not enforceable.
What was the complaint about?
On 10 August 2018, Queen Fine Foods Pty Ltd (Complainant) lodged a complaint with Ad Standards against Heilala Vanilla Limited (Heilala).
The Complainant alleged that Heilala's advertising for its non-premium vanilla products, being its "Natural Vanilla with Vanilla Extract" product (Extract Product) and its "Natural Vanilla Bean Paste" product (Paste Product) (together, the Products) breached the Australian Association of National Advertisers Code of Ethics (the Code). In particular, the Complainant claimed that the "Natural Vanilla" flavour in the Products was not derived from vanilla beans but was comprised substantially of synthetic vanillin derived from non-vanilla products. Therefore, the use of the word "natural" in advertising and packaging on the Products was said to be misleading and deceptive.
Ad Standards convened a panel of 3 legal practitioners (the Industry Jury) to determine whether the Advertising Material was misleading or deceptive in breach of section 1.2 of the Code.
What was the 'Natural Vanilla' flavour made from?
The Extract Product was described as a mixture of "Natural Vanilla" flavour, vanilla bean extract, and additional ingredients. The Paste Product was described as a mixture of "Natural Vanilla" flavour and with a small quantity of ground vanilla. Heilala submitted that the "Natural Vanilla" flavour used in each of the Products was a high quality commercially prepared food ingredient manufactured from extracted aroma chemicals to emulate the flavour compounds found in a vanilla bean. Heilala acknowledged that the "Natural Vanilla" flavour was not derived from vanilla beans.
Was it misleading to describe the Products as "natural"?
Heilala submitted that the term "Natural Vanilla", used in the description for each the Products, was only a description of flavour and not composition. Heilala argued that consumers understand that a reference to "Natural Vanilla flavour" is a reference to an added flavour (or sometimes simply an indication of the taste to be imparted to food from the product), and the flavour can be described as "natural" if it is derived to some extent (even if insignificant) from vanilla beans.
The Industry Jury disagreed with Heilala and determined that the Advertising Material represented to consumers that each of the Products, and the vanilla flavour provided by each of the Products, was substantially derived from, or contained a substantial portion of vanilla beans. The Industry Jury found that:
- Consumers are familiar with vanilla as a flavour and commonly understand that vanilla beans are a natural source of vanilla flavour. The use of the word 'natural' in this context was likely to convey a message that the product was prepared from vanilla beans.
- The label descriptions for each of the products strongly suggested that the reference to "natural" was a reference to the product's composition rather than a mere statement of the flavour.
- Most consumers will not examine or understand the ingredients list that appears in the Advertising Material.
Given the representations were not able to be substantiated by Heilala, the Industry Jury found that the Advertising Material was misleading in breach of the Code.
Ad Standards dispute resolution process
This case is a rare example of the Ad Standards Industry Jury dispute resolution process being utilised.
The Ad Standards Industry Jury is made up of an expert panel of legal practitioners specialising in advertising, competition and consumer law. Any advertiser can use the process and it provides a quick and cheap dispute resolution process for complaints of misleading or deceptive advertising and advertising that may breach the law. The complainant is required to pay Ad Standards' costs of assessing the application and administering the complaint, and the costs of the members of the Industry Jury in making a determination.
The Industry Jury is only empowered to determine whether the claims in the impugned advertising are substantiated or not and whether the advertising should be modified or discontinued. The Industry Jury does not have the power to award damages or costs and its determinations are unenforceable. However, Ad Standards claims that there is a high level of compliance with the determinations of the Industry Juries. This is likely due to Ad Standards' ability to refer cases of non-compliance with Industry Jury determinations to the appropriate regulator, such as the Australian Competition and Consumer Commission, which creates a real risk of enforcement action being taken against the advertiser if it does not change behaviour which is found to contravene the Code.
Therefore, for companies that wish to make a complaint about a competitor's advertising which is potentially misleading or cannot be substantiated, but do not want to commence court proceedings due to the time and costs, the Ad Standards Industry Jury dispute resolution process should be considered.
Authors: Nina Fitzgerald, Partner; and Andrew McClenahan, Lawyer
