What is "natural" anyway? The Federal Court explains when it is (and isn't) a misleading claim

By Richard Hoad, Kezia Adams and Tali Grossman

16 Aug 2018

Exercise caution when marketing products as natural, and make sure you can substantiate your claims.

The growth in "natural" products has, naturally, been accompanied by a growth in litigation about the representations made to sell them. A recent dispute about hair care products gives some guidance on what claims will survive an inquiry under the Australian Consumer Law (Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93).

Hydrated hair claims are made – and challenged

Moroccanoil Israel Ltd is a company that manufactures and distributes argan oil-based hair products under the MOROCCANOIL trade mark. Aldi introduced its own range of argan oil-based hair products under the PROTANE NATURALS brand.

Moroccanoil Israel Ltd sued Aldi for trade mark infringement, contraventions of the ACL and passing off in relation to some of its PROTANE NATURALS hair products.

Last year, the trial judge decided that Aldi contravened the Australian Consumer Law (ACL) by marketing its PROTANE NATURALS products as "natural" when they did not wholly or substantially contain natural ingredients, and by making unsubstantiated claims about their performance benefits.

On appeal, the Full Court overturned the first instance decision in relation the "naturals representation", finding that Aldi's use of the word "naturals" did not contravene the ACL. However, the Full Court agreed with the trial judge that the performance benefits claims were misleading (we'll look at the trade mark aspects of the case in a separate article).

What would the ordinary reasonable consumer make of the naturals representations?

The trial judge found that a consumer would expect a "natural" product to be made "wholly or substantially from natural ingredients" and that there was no logical reason why a trader would choose to call a product line "natural" unless it intended to convey that message.

The Full Court overturned the trial judge's decision on this issue, finding that the use of the word "NATURALS" did not convey to an ordinary reasonable consumer that the products comprised substantially natural products because:

  • if an ordinary reasonable consumer noticed the word NATURALS, they would have understood it to be a sub-line of the PROTANE range of products and not a statement about the quantity of the natural ingredients in the product (the word NATURALS appeared (in smaller size font) underneath the word PROTANE – and notably was used in the plural form);
  • given the Aldi products were sold in a discount bin, sometimes in a jumble, an ordinary reasonable consumer would approach the packaging on the basis that they are in the cheapest part of one of the cheapest stores and would not expect to find products that are made from substantially natural ingredients like argan oil; and
  • an ordinary reasonable consumer would have understood that argan oil was a natural product and, to the extent that he or she wondered what was natural about the Aldi products, he or she would have understood that it was that they contained some argan oil.

The performance benefit representations

Aldi's performance benefit representations included that the products "Help… strengthen hair" and that its hair brushes' "[b]ristles are infused with Argan Oil to aid in delivering shine and hydration - perfect for dry to normal hair".

The trial judge held that the benefits claimed would be understood by consumers as implying that they resulted from the presence of argan oil in the products. It found that the performance benefits claimed for the products were misleading as there was no reasonable foundation for them.

These findings were upheld by the Full Court on appeal.

Substantiation, or a lack of it, was key to the Federal Court's decision. Aldi's attempt to substantiate its performance benefit claims (including a letter from the manufacturer of some of the products) was dismissed as "no more than mere claims". The Court also noted that substantiation sought by Aldi asked the wrong question (in relation to its hairbrushes with argan oil infused bristles, the relevant question to be substantiated was not whether the bristles were in fact infused with argan oil, but whether the infusion or argan oil had any effect on the performance of the products).

So, what should you think about when making "natural" claims?

Businesses that market products as "natural" or make claims about the performance benefits of products should:

  • continue to exercise caution when marketing products as natural (including where the word natural is part of a brand name or sub brand). Each case will ultimately turn on its facts and each claim or representation should be considered in context to ensure it is not misleading to consumers;
  • ensure that all performance claims can be substantiated and, critically, ensure that the substantiation asks the right questions. Be wary of substantiation provided by manufacturers of goods, particularly if that substantiation appears to be a collection of claims about the product without proper testing to back up the claims; and
  • not assume that because other businesses are making similar representations, your business will not face legal action by a regulator, competitor or consumers.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.