That’s a lot of beans: Heinz ordered to pay $2.25 million for contravening the Australian Consumer Law

Up to May 2016 Heinz sold a “Little Kids Shredz” brand of products (pictured in body of article). The products were displayed in the children’s sections of major supermarkets and sold to parents and carers of children aged 1 to 3 years.

Justice White of the Federal Court found that Heinz had, in respect to the sale of the products, conveyed representations that were misleading or deceptive, and which thereby contravened the Australian Consumer Law.

On 24 August Heinz was ordered to pay the Commonwealth of Australia $2.25 million by way of a penalty and, within 3 months, establish a consumer protection law compliance program, to be maintained and administered for 3 years.

Background facts

In addition to “nutrition information”, the packaging of the products contained the word “nutrition” and its cognates four times.

The text on the products’ packaging stated “[o]ur range of snacks and meals encourage your toddler to independently discover the delicious taste of nutritious food. With our dedicated nutritionists who are also mums, we aim to inspire a love of nutritious food that lasts a life time” and “[o]ur wide range of snacks and meals is packed with the tasty goodness of vegetables, fruits, grains, meat and pasta to provide nutritious options for your toddler”.

The ACCC alleged that the packaging of the products as a whole – including the repeated use of the word “nutritious” – conveyed a representation that the products contained nutritious food that was beneficial to the health of children aged 1 to 3 years.

The ACCC also argued that the representations, if made, were false or misleading because the products were, in fact, high in sugar and kilojoules, had a low moisture content and satiety value, and had a sticky texture (which was likely to increase the risk of poor dental health).

Heinz broadly opposed every limb of the case sought to be proved by the ACCC.

It argued, for example, that ordinary reasonable consumers would observe and take account of the products’ “nutritional information” and an “ingredients panel” on the products’ packaging, would understand that a serve of the products contained on average 68.7% sugar, and would not have understood the word “nutritious” as conveying a representation that the products were a “nutritious food and beneficial to the health of children aged 1 to 3 years”.

The Trial

Heinz led expert evidence from three witnesses, and evidence from five of its employees who were involved in the development of the products and the products’ packaging, (all of whom had qualifications in nutrition and, or, dietetics).

The ACCC led expert evidence from two witnesses, Dr Rosemary Stanton, a highly qualified nutritionist, and Professor David Manton, the Elsdon Storey Chair of Child Oral Health at the University of Melbourne.

There was also, in evidence, internal Heinz documentation.

An internal “comms briefing”, for example, reported, under the heading “What’s Working”, “… [t]ree symbolising strong benefits; natural, health, slow growth, freshness, healthy outdoor lifestyle (aspiring to mums who are fighting to get their kids outside); [e]arthy colouring dialing up organic cues (natural) … [t]he new pack is emotionally engaging (telling a story) and strongly delivers on natural product benefits …”.

The decision of the Court

Justice White was satisfied that the products’ packaging did convey the representation alleged by the ACCC, because a not insignificant number of ordinary reasonable consumers would have understood this to be the case, particularly because such consumers would likely “pass over” the nutritional information and ingredients panels on the products’ packaging (especially in a busy supermarket isle, and given that the information was displayed in the nature of “fine print”), and because many consumers would respond in a more impressionistic way to the dominant message conveyed by more prominent words and imagery.

Justice White also found there was no logic or principle why the ACCC could not prove the falsity of a representation concerning the quality of the products by resorting to expert evidence concerning features of the products about which a consumer might have been unaware or overlooked. It was decided that it is commonly the case that features of a product which make representations about it misleading are revealed only by expert investigation or analysis.

Regarding the expert evidence, Justice White accepted (and it seemed to be common ground between the parties), that the products contained a high level of sugar – whereby the products contained two-thirds sugar.

Justice White concluded that the high levels of sugar in the products was not beneficial to the health of toddlers, having regard to the potential to cause dental caries, and because it was not easy to accept that consumption of a high amount of sugar could be regarded as beneficial to the health of children ages 1 to 3 years, especially given that excess weight and obesity is a significant problem among Australian children.

Justice White found that the representations were false or misleading, in breach of the Australian Consumers Law, and that Heinz nutritionists ought to have known that a representation that a product containing approximately two-thirds sugar was beneficial to the health of children ages 1 to 3 years was false or misleading.

Penalty and other Orders

The ACCC sought a penalty of $10 million, whereas Heinz contended that a single penalty of $400,000 was appropriate.

It was found that there were serious aspects to Heinz conduct and that the conduct was extensive; Justice White accepted that Heinz had made the false or misleading representations at least 1,207,560 times on every packet of the products sold.

Yet, it was decided that whilst it would not be appropriate to fix the aggregate of penalties to be imposed on Heinz at an amount which went no further than negating the profit Heinz derived from the sale of the products, penalties totaling $10 million would be inappropriate.

It was ordered that Heinz pay the Commonwealth of Australia $2.25 million by way of a penalty and, within 3 months, establish a consumer protection law compliance program, to be maintained and administered for 3 years.

The Decisions

On liability – Australian Competition and Consumer Commission v H.J. Heinz Company Australia Limited [2018] FCA 360

On penalty – Australian Competition and Consumer Commission v H.J. Heinz Company Australia Limited (No 2) [2018] FCA 1286