CoOL challenge to “Australian-made” claims


Posted By on 14/11/18 at 5:06 PM

There’s been a lot of coverage about country of origin labelling (CoOL) rules relating to labelling of food.  But what about complementary healthcare products?

Claims about where complementary healthcare products are made or manufactured need to comply with the Australian Consumer Law (ACL).  Of course, compliance with the ACL is in addition to sponsors’ compliance with the Therapeutic Goods Act 1989 (Cth) and the regulations and advertising codes made under that Act.

Vitamin company Nature’s Care has filed a claim in the Federal Court of Australia seeking to test the “safe harbour” provisions in the ACL and confirm that its products can be labelled as Australian-made.  The court action comes in the wake of the new ACCC guide for business, Country of Origin Labelling for Complementary Healthcare Products (Guide), released earlier this year.

Manufacturers and sponsors of complementary healthcare products should review the Guide and consider what impact the ACCC’s guidance has on the claims they make about where their products are made.

Advertising and marketing – the CoOL provisions and the safe harbour defences

Generally, businesses can make any claims about their products (other than food) as long as they are truthful and accurate.  The ACL contains general prohibitions relating to misleading and deceptive conduct and specific prohibitions on making false or misleading representations relating to the place of origin of goods.

The ACL also contains a set of three “safe harbour” defences to the place of origin prohibitions when claims relate to the country of origin of a product.  It is a defence if the goods:

  1. were grown in the country; or
  2. are the product of the country; or
  3. were made in (or manufactured in), or otherwise originated in, the country.

Each defence has certain criteria to be met and it is expected that the Nature’s Care case will focus on the third defence.  To fall within the third safe harbour defence and be able to make a “made in” claim, the goods must have been “last substantially transformed” in the relevant country.

The ACL states that to be substantially transformed in a country, the goods are, as a result of processes undertaken in that country, fundamentally different in identity, nature or essential character from all of their ingredients or components that were imported into that country.

The Guide and the ACCC’s approach to CoOL

The ACL does not give a specific definition of “identity”, “nature” or “essential character” and according to the Guide, their ordinary meaning will need to be considered.

The Guide indicates that the ACCC would expect that to make a “made in” claim, the processing needs to result in an end product that is fundamentally different from the ingredients used to make it, and merely changing the form or appearance of a product will not be sufficient to satisfy the “substantial transformation” test.

The Guide provides insight into how the ACCC views six different manufacturing processes or types of complementary healthcare products:  dry blending; encapsulation; tabletting; herbal extractions; essential oils and semi-solid formulations.

Media reports suggest that the Nature’s Care case is likely to focus on the process of encapsulation relating to fish oil products.

According to the Guide, the ACCC’s view is that encapsulating imported ingredients is unlikely to constitute a substantial transformation of a good.  Whilst the delivery method or form of the product might have changed, it does not result in a fundamental change in the identity, nature or essential character of the end product when compared to the imported ingredients.  Further, the addition of excipients (ingredients that are not therapeutically active such as fragrances, preservatives or binders) is unlikely to result in a substantial transformation.

Relevantly for Nature’s Care, the ACCC Guide contains encapsulation examples:

  • Probiotics – a business that imports 10 strains of bacteria and combines and encapsulates them into one capsule is unlikely to have substantially transformed all the ingredients simply by combining them in a more convenient form (instead of 10 different capsules).
  • Krill oil – a business importing krill oil and processing it into a capsule has not substantially transformed it, as the end product retains the fundamental properties and identity of krill oil  which have not changed when compared with the imported krill oil, even though its delivery method and dose has changed.  In the ACCC’s view it is relevant the krill oil can be consumed as a liquid.

According to the ACCC, if a business is unsure whether it meets the criteria for a safe harbour defence, instead of making a country of origin claim, it could consider alternative claims such as:

  • the place of origin of particular ingredients;
  • the ownership of the company;
  • describing the actual processing undertaken; or
  • highlighting any quality standards that were complied with.

Of course, any alternative claims must still comply with the ACL and be true, accurate and not misleading or deceptive.

Where to from here?

It is important to remember that this is a new area of law and the ACCC Guide is not binding.  The guidance is general in nature and businesses should seek independent legal advice on labelling their products.  The Nature’s Care case shows that the ACCC’s approach can be tested and it is ultimately the task of the courts to interpret the meaning of the new CoOL laws.  In that regard, watch this space.

If you have any questions or would like to discuss further, please contact us.

Koula Politis

Koula Politis Special Counsel

Koula is a Special Counsel in our Corporate & Commercial team.  She has extensive experience spanning a range of corporate and commercial matters, with particular expertise in mergers and acquisitions,... Read More