What you need to know
- The Federal Court found that advertising claims made by activewear company Lorna Jane that its products could eliminate, protect against, and stop the spread of COVID-19 constituted misleading and deceptive conduct in contravention of the Australian Consumer Law.
- The Court imposed a penalty of $5 million and described Lorna Jane's behaviour as "exploitative, predatory, and potentially dangerous" at a time when the concern for the consequences and fear of COVID-19 were deeply felt by the public.
What you need to do
- The ACCC is actively monitoring consumer and competition issues arising from the COVID-19 pandemic, so businesses should be vigilant about the accuracy of representations that appear to be based on scientific or technological evidence and particularly when making claims regarding public health.
- Businesses should be mindful that marketing and advertising claims can be scrutinised by a number of regulators and government agencies depending on the nature and application of a particular product or service, so care needs to be taken to ensure that these claims comply with all relevant legislation.
Background
In July 2020, Lorna Jane Pty Ltd launched a marketing campaign for a new line of athletic leggings called 'LJ Shield Activewear' that included the following types of claims:
- Elimination representations – eg LJ Shield Activewear had been treated with a spray called 'LJ Shield' that "makes the transfer of all pathogens, including COVID-19, impossible by eliminating the virus on contact with the fabric";
- Protection representations – eg "LJ Shield Activewear protects you from COVID-19";
- Stop the spread representations – eg "LJ Shield was a cure for the spread of COVID-19"; and
- Reasonable basis representations – ie that Lorna Jane represented to consumers that it had a reasonable scientific or technological basis to make each of the above categories of representations.
These claims had been made through various mediums including email communications, in-store signage, on the Lorna Jane website and social media posts and in media releases.
Strike 1- TGA Infringement Notices
In July 2020, the Therapeutic Goods Administration (TGA) determined that by promoting LJ Shield Activewear as "anti-virus activewear", Lorna Jane was representing that these products were therapeutic goods.
Since the advertising of therapeutic goods is subject to the regulations administered by the TGA, the TGA investigated Lorna Jane's marketing campaign and issued three infringement notices totalling $39,960 to Lorna Jane for the following contraventions:
- Advertisements referred to therapeutic goods that were not included in the Australian Register of Therapeutic Goods;
- Any references to COVID-19 in the promotion of therapeutic goods is unlawful without prior formal approval or permission from the TGA and Lorna Jane did not obtain approval from the TGA before making its claims in relation to COVID-19; and
- It is also a breach of the Therapeutic Goods Advertising Code (No. 2) 2018 to promote a therapeutic good as being safe, harmless or without side-effects.
We discussed the TGA's action in relation to COVID-related claims against numerous businesses, including Lorna Jane, in the October 2020 edition of Life Sciences Update.
Strike 2 – Legal Action by the Australian Competition and Consumer Commission
In December 2020, the ACCC filed proceedings in the Federal Court alleging that the marketing claims set out above also constituted misleading or deceptive in contravention of the Australian Consumer Law by representing to consumers that LJ Shield Active protected wearers against lethal viruses, including COVID-19, when this was not the case.
Lorna Jane admitted it did not have any scientific testing results showing the effectiveness of LJ Shield Activewear on viruses nor did it have any scientific results or evidence which would establish the truth of the representations. It was also made clear that the claims had been approved and personally repeated by Lorna Jane’s director and chief creative officer.
The Court found all of Lorna Jane's representations to be misleading or deceptive, or likely to mislead or deceive consumers, and therefore in contravention of the Australian Consumer Law.
Penalty
The penalty of $5 million agreed to by both parties was upheld by the Court.
Although Lorna Jane was not shown to have profited from its conduct, the Court described Lorna Jane's behaviour as "exploitative, predatory, and potentially dangerous" at a time when the concern for the consequences and fear of COVID-19 were deeply felt by the public.
In upholding the penalty, the Court noted that there was a need to impose a substantial penalty to reflect the seriousness of the conduct particularly given that the representations had emanated from a very high managerial level within the company and to demonstrate that exploitative conduct of this kind will not pay.
Authors: Helen Wei, Graduate; Maria Sun, Senior Associate; and Lisa Ritson, Partner.
