Case note: ACCC v Luv-a-Duck

By Emmanuel Giuffre, former Legal Counsel and Sarah Margo, Legal Intern

Citation – Australian Competition and Consumer Commission v Luv-a-Duck Pty Ltd [2013] FCA 1136

Court – Federal Court of Australia
Judge – Davies J
Date of Judgment – 1 November 2013

Earlier this year, the Australian Competition and Consumer Commission (ACCC) took action against Luv-a-Duck, an Australian family-owned duck company, for alleged “false, misleading and deceptive conduct” in relation to the promotion of its duck meat products.

The consumer watchdog alleged that the Melbourne-based company misled consumers into thinking its ducks had substantial access to outdoor areas and were “grown and grain fed in the spacious Victorian Wimmera Wheatlands”.

The Federal Court found in favour of the ACCC, and on 1 November 2013, fined Luv-a-Duck $360,000 for misleading and deceptive conduct under the Australian Consumer Law (ACL).

This is the second time in less than a year the ACCC has initiated action against an Australian duck company, with Pepe’s Ducks ordered to pay $400,000 in penalties and costs by the Federal Court in December 2012 after claiming its ducks were ‘open range’ and ‘grown nature’s way’.

The news also comes at a time when the Federal Court has just ordered Baiada Poultry Pty Ltd and Bartter Enterprises Pty Ltd, the processers and suppliers of Steggles branded chicken products, to pay a total of $400,000 in civil pecuniary penalties for misleading claims that their chickens were ‘free to roam’.

In an ACCC statement, Commissioner Sarah Court identified “credence claims” as the new priority area.

“Consumers must be able to trust that what is on the label is true and accurate. Businesses need to make sure they are not misleading consumers into paying a premium for products that don’t match the claims made on the label,” Court says.

Facts of the case

As a large supplier of duck meat products, Luv-a-Duck sells 80,000 ducks per week and holds a 40% market share in the industry. Various packing, logos, advertising, website material and brochures issued by the company claimed that their ducks were “range reared and grain fed” in the “spacious Victorian Wimmera Wheatlands.” Such product descriptions were also made in a promotion for the 2012 Good Food & Wine Show in Adelaide.

In response to concerns by animal rights groups that Luv-a-Duck allegedly confined their ducks in barns, the ACCC brought the matter before the Federal Court in March 2013. The Court considered whether Luv-a-Duck’s conduct amounted to misleading or deceptive conduct, or was likely to mislead or deceive consumers.

The ACCC’s case against Luv-a-duck

The ACCC alleged that the Melbourne-based Luv-a-Duck misled consumers into thinking its ducks had substantial access to outdoor areas, by claiming that the ducks were “range reared and grain fed” in the “spacious Victorian Wimmera Wheatlands.” That is, the ACCC alleged that consumers may believe the ducks and the production of the duck meat products were of a different quality from ducks that had been raised in barns.

The ACCC alleges the duck meat was actually processed from ducks which did not have substantial access to the outdoors.

The consumer watchdog sought declarations, injunctions, monetary penalties, an order for Luv-a-Duck to implement a trade practices compliance program and orders for Luv-a-Duck to publish corrective notices on its website and business premises and provide a corrective notice to its customers, and costs.

Luv-a-Duck’s Response

Theresa Sfetkidis, Luv-a-Duck company director, told the Court that it was not the company’s intention to mislead or deceive consumers.

According to Sfetkidis, the label “range reared” never intended to imply “free range,” and the company would never have made the statements had they realised the statement could be potentially misleading to consumers.

Luv-a-Duck admitted that the conditions in which the ducks were raised were known at the time the representations were made.

The Federal Court’s decision

Davies J held that the conduct of Luv-a-Duck constituted misleading or deceptive conduct, or conduct that was likely to mislead or deceive, in breach of sections 18, 29 and 33 of the Australian Consumer Law 2010. The conduct included false representations on packaging, brochures, website and promotional materials.

In giving reasons for her judgment, Davies J stated that Luv-a-Duck’s representations “…would have been an inducement to consumers to prefer Luv-a-Duck’s products and give Luv-a-Duck a competitive advantage in the industry.”

Although the respondent is facing pecuniary penalties in excess of $1 million for such an offence, the Court accepted the lower penalty agreement forged between the parties, as the ACCC had accepted that the misleading conduct was not deliberate.

Penalty

Luv-a-Duck was fined $360,000 in civil pecuniary penalties, and ordered to contribute $15,000 to the ACCC’s legal costs. The Court also restrained Luv-a-Duck from using the previous representations for 3 years where ducks were not raised in such conditions, and made consent orders requiring Luv-a-Duck to publish corrective notices on public forums, apologise to customers and implement a trade practices compliance program.