Legal Insights

Advertising therapeutic goods? Don’t forget about Australian Consumer Laws

By Angela Wood & Sophie Vo

• 17 June 2021 • 8 min read

Advertising and selling practices have rapidly evolved with the availability of digital platforms, such as social media, apps and online stores, to disseminate information very quickly. When it comes to advertising health and medical products, businesses must be extremely vigilant about conveying accurate and truthful information due to the influence advertising can have on health consumers and the serious potential implications where consumers are misled or deceived.

We previously wrote about cautionary tales from the advertising of therapeutic goods during the COVID 19 pandemic (read article here) where we discussed the regulatory role of the Therapeutic Goods Administration (TGA).

However, we cannot forget that the Australian Competition and Consumer Commission (ACCC) also has oversight on the advertising of therapeutic goods in Australia as part of their role to enforce consumer protection laws under the Australian Consumer Law (ACL).[1]

The key ACL protections that businesses should consider when advertising therapeutic goods are:

Misleading or deceptive conduct (section 18)

A person must not engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

This is a general protection under section 18 of the ACL which prohibits a business from engaging in conduct that would lead consumers to an overall impression that is false or inaccurate. This will depend on the relevant circumstances surrounding the conduct of the business and the potential audience, not just target audience, of their advertisement or promotional material. The ACCC Advertising and selling guide can be viewed here.[2]

Businesses should ensure they provide their representatives with appropriate training to avoid conduct that could be found to be misleading or deceptive.

False or misleading representations (section 29)

A person, in supplying of goods or services, must not make false or misleading representations about:

  • the quality, style, model or history of a product or service
  • whether the goods are new
  • the sponsorship, performance characteristics, accessories, benefits or use of products and services
  • the availability of repair facilities or spare parts
  • the price
  • the origin of goods
  • the need for the goods or services
  • any exclusions on the goods and services.

For therapeutic goods, businesses should be particularly careful when making claims about how effective the goods are at preventing or alleviating certain health conditions, or that the goods have certain health benefits. Businesses should avoid graphics or phrases in its advertising material that could imply that the goods are ‘scientifically proven’ to work.

Claims regarding ‘therapeutic use’ would trigger additional requirements under the Therapeutic Goods Act 1989 (Cth), such as the requirement to enter the goods in the Australian Register of Therapeutic Goods for the legal supply and advertising of the goods (see our previous article for more information).

Misleading conduct as to the nature, manufacturing process, characteristics and suitability of goods (section 33)

A person must not engage in conduct that is liable to mislead the public about the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods.

This specific prohibition regarding ‘conduct that is liable to mislead’ is narrower than ‘likely to mislead’ under section 18 of the ACL, as the advertiser would only be in breach of section 33 if the there was an actual probability that a sufficiently large number of people would be misled about the nature, manufacturing process, characteristics or suitability of the goods.[3]

The ACL protections in action: ACCC v Lorna Jane

As mentioned in our previous article, Lorna Jane Pty Ltd (Lorna Jane) was fined $40,000 in July 2020 by the TGA for its non-compliance with the Therapeutic Goods Act when it advertised ‘anti-virus activewear’.

The ACCC has since instituted proceedings in the Federal Court against Lorna Jane for representations and conduct regarding its LJ Shield Activewear. The ACCC alleges that in promotional material published predominantly in July 2020, being “during the peak of the COVID-19 pandemic in Australia”, Lorna Jane had contravened the protections described above through false or misleading statements and conduct.[4]

The ACCC alleges that Lorna Jane expressly or impliedly represented to consumers that its LJ Shield Activewear protects consumers against viruses, including COVID-19, and stops their spread whilst suggesting that there was reliable or technological evidence for its claims.

In the ACCC’s Concise Statement to the Federal Court of Australia, it relied on various statements on the promotional material for Lorna Jane’s LJ Shield Activewear, such as:[5]

  • LJ Shield – Protecting you with ANTI-VIRUS ACTIVEWEAR
  • Cure for the Spread of COVID-19? Lorna Jane Thinks So.’
  • LJ SHIELD is a groundbreaking [sic] technology that makes transferal of all pathogens to your Activewear (and let's face it, the one we're all thinking about is Covid-19) impossible by eliminating the virus on contact with the fabric

The case is due to be heard in July this year.

FQA

Consequences of non-compliance

Contravention of the ACL in respect of the false or misleading conduct above could result in the ACCC:

  • accepting court-enforceable undertakings[6]
  • issuing Infringement Notices which is usually fixed at $13,320 for a corporation per notice (or $133 200 for a listed entity) and issuing public warning notices[7]
  • commencing legal proceedings for pecuniary penalties of up to $10 000 000, three times the value of the benefit received or 10% of the annual turnover in the preceding 12 month period (if the court cannot determine the benefit obtained from the offence) [8]

Businesses should also take into account the potential reputational damage of being found to have engaged in misleading or deceptive conduct.

Key takeaways

  1. Avoid engaging in conduct that is likely to mislead or deceive, and making false or misleading statements.
  2. Consider all material that could potentially be used to advertise, promote, or market the therapeutic good. For example, product labels, statements made by a sales representative, fine print, graphics that are shared online etc.
  3. Be careful with bait advertising, comparative advertising and special offers to ensure accurate representations are being made.
  4. Consider seeking legal advice, particularly where the business is proposing an advertising technique that it has not tried before.
  5. Don’t forget the requirements under the TGA’s regulatory regime for therapeutic goods, as there are additional requirements and advertising restrictions for therapeutic goods. If the business is not sure whether the product is a “therapeutic good” that is regulated by the TGA, seek legal advice.

[1] Schedule 2 of the Competition and Consumer Act 2010 (Cth).

[2] https://www.accc.gov.au/accc-book/printer-friendly/29527

[3] Trade Practices Commission v J & R Enterprises Pty Ltd (1991) 99 ALR 325.

[4] Paragraph 14 of Concise Statement from ACCC v Lorna Jane Pty Ltd and Lorna Jane Pty Ltd & Anor.

[5] See Schedule 1 of the Concise Statement from ACCC v Lorna Jane Pty Ltd and Lorna Jane Pty Ltd & Anor for a complete list of conducts and statements that the ACCC is relying on.

[6] Section 218 of the Australian Consumer Law.

[7] Section 134A of the Competition and Consumer Act 2010 (Cth).

[8] Sections 151 and 155 of the Australian Consumer Law (noting that contravention of section 18 alone will not attract a pecuniary penalty).

To read more articles from this edition of The Prescription, please click here.

By Angela Wood & Sophie Vo

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