Bad hair day for Aldi: "natural" marketing claims contravened the Australian Consumer Law

A recent decision of the Federal Court of Australia provides guidance on "natural" marketing claims and also claims of performance benefits.

The marketing of products as "natural" when they do not wholly or substantially contain natural ingredients, and claims of performance benefits that cannot be properly substantiated, are likely to contravene the Australian Consumer Law (ACL).

What was the case about?

In Moroccanoil Israel Ltd v Aldi Foods Pty Ltd [2017] FCA 823, Moroccanoil Israel Ltd, an Israeli company that manufactures and distributes the popular Moroccanoil hair products containing argan oil, sued Aldi for trade mark infringement, contraventions of the ACL and passing off in relation to Aldi's in-house line of hair products, which also contained argan oil.

In response, Aldi brought a cross-claim for rectification of the Register of Trade Marks, alleging that Moroccanoil's trade marks were not sufficiently distinctive and also alleging non-use by Moroccanoil of its trade marks for some of the goods for which they were registered. At the same time, the Court heard Moroccanoil's appeal from a decision of the Registrar of Trade Marks refusing its application to register the MOROCCANOIL word trade mark.

We focus on the Court's findings regarding Aldi's use of the word "naturals" and the claimed performance benefits of argan oil.

Aldi's range of hair products

Aldi's products were mostly sold as part of its regular "Special Buys" promotions. "Special Buys" are discounted products that are offered for sale for a limited time and in limited quantities. The range included shampoo, conditioner and treatment products, as well as a hair straightener, hair dryer, hair brush and hair curler. The shampoo, conditioner and treatment products were sold by reference to the words:

• "Protane Naturals"; and
• "Moroccan argan oil".

The "naturals" representations

Moroccanoil alleged that, by using the word "naturals" on the main and rear panels of its products and on its packaging, Aldi represented that each of its products contained only or substantially natural ingredients.

In response, Aldi argued that:

• the word "naturals" appears as part of its composite trade mark, PROTANE NATURALS, and that customers would understand that it was part of a brand name. (This argument was easily dismissed by the Court because, in its defence, Aldi had admitted that the use of the word "naturals" on its products was intended to convey to consumers that they contain one or more natural ingredients);
• its products contain at least one natural ingredient, argan oil, and that other ingredients that are properly regarded as "natural" are present; and
• the expert evidence did not suggest that a product which contained one or more "natural" ingredients as well as synthetic ingredients could not be regarded as "natural".

Although the parties' experts gave evidence about the meaning of the word "natural", the Court found that this was of little assistance because "the ultimate question is whether the representation is misleading or deceptive to the ordinary or reasonable member of the relevant class of consumer" and that this "requires attention to what the word "natural" or "naturals" in the context in which it is used connotes to that person, not to a scientist" [emphasis in original].

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

The Court considered evidence from both parties' experts in relation to the proportion of "natural" vs "synthetic" ingredients and found that:

• Aldi's oil treatments, shampoo and dry shampoo were each made up of substantially synthetic ingredients and that the representation that they were natural contravened the ACL;
• Aldi's use of the word "natural" to market certain other products (including its conditioner) did not contravene the ACL, because Moroccanoil did not discharge its burden of proof in relation to those products.

The Court found that, while the representations were not "false" because each product contained one or more natural ingredients, it was nonetheless misleading for Aldi to market these products as "natural" having regard to the percentage of synthetic ingredients.

The performance benefit representations

These are some of the performance claims made by Aldi about its products:

"Helps strengthen hair"

"Bristles are infused with Argan Oil to aid in delivering shine and hydration - perfect for dry to normal hair"

Moroccanoil alleged that, by making the above statements (and others) in conjunction with the use of the phrase "Moroccan Argan Oil" or "PROTANE NATURALS Moroccan Argan Oil" on products and packaging, Aldi represented that:

• the argan oil in its oil treatment, shampoo and conditioner makes a material difference to the performance of those products in various ways including strengthening and conditioning the hair and leaving it healthy, stronger, shiny, soft and silky (depending on the product); and
• the argan oil infused in its hair brushes and hair tools makes a material contribution to the performance of the product in various ways such as shine, hydration, condition and finish (depending on the product).

The Court noted that, although Aldi's product claims were "squarely challenged" in the proceeding, it had "failed to substantiate them" and that "one would expect a trader to do this before taking the product to market". Ultimately, the Court found that there was no reasonable foundation for the performance claims made by Aldi about its oil treatment, shampoo and conditioner and that Aldi had contravened the ACL.

Aldi's primary argument in response to Moroccanoil's allegations was that, "sensibly construed", the performance claims were not directed to the argan oil but to the products as a whole. This was emphatically rejected by Justice Katzmann, who noted that the "obvious" purpose of the claims was to persuade consumers to purchase products infused with argan oil, instead of comparable products not infused with argan oil.

Aldi's substantiation documents dismissed as "no more than claims"

Aldi attempted to rely on an unsigned letter from the manufacturer of the hair straighteners, curlers and dryers, which it argued demonstrated that it had a "credible basis" for believing that the hair tools acted consistently with the representations made on their packaging. In the letter, the manufacturer stated that it was "confident" that "there will be no repercussions due to these statements being false". Further evidence was led about attempts by Aldi to substantiate the product claims, including evidence that official confirmation was sought from the manufacturer of the brushes that they were indeed infused with oil.

However, the Court noted that:

• as the basis for the manufacturer's confidence was not disclosed and that no evidence was given by the manufacturer, the substantiation document contained "no more than claims"; and
• whether or not the brushes were infused with argan oil was not the point, and no confirmation appeared to have been sought that the amounts of argan oil used in the manufacturing of the products had any effect on their performance.

Each of the performance claims were found to be unjustified and the representations found to be false and likely to mislead or deceive consumers.

The ACCC's position regarding "natural" claims

The decision should not have come as a great surprise to Aldi. Some years ago, the ACCC issued guidelines regarding product claims in the food and beverage industry. The ACCC said that claims such as "nature" and "natural" "often suggest that a product is superior because it has certain ‘natural’ characteristics as opposed to being processed or artificial or otherwise removed from its natural form" and that such claims "imply that the product is made up of natural ingredients". Foreshadowing the Federal Court's comments about the relevance of expert evidence, the ACCC also gave the following warning:

"Consumers may view what is ‘natural’ differently to manufacturers and food technologists. When providing a label with a claim that the product is ‘natural’, thought should be given to what the consumer would think."

While it might be said that consumers would place a particularly high standard on "natural" claims when it comes to food, the same general principles apply to personal care products.

Final orders and takeaways for businesses

As a result of the contraventions, the Court made declarations and permanent injunctions in relation to some of Aldi's products. The decision has been appealed. However, the lesson from the decision regarding product claims is clear. To avoid contravening the ACL (and potential action by the ACCC and/or competitors), businesses should:

• be careful when making representations that a product is "natural" (or similar) - based on this decision, products marketed as "natural" must be made wholly or substantially from natural ingredients;
• be aware that there may be differing opinions about whether an ingredient is natural or synthetic, so it would be wise to take a somewhat cautious approach on this point (in this case, in a number of instances the parties' experts did not agree on whether a particular ingredient was natural or synthetic);
• ensure that representations about performance benefits of products can be properly substantiated and that substantiation documents do not just contain bare assertions - this may involve conducting performance tests;
• make sure any substantiation sought asks the right questions (for example, not whether there was argan oil infused in Aldi's products, but whether the infusion of argan oil had the claimed effect on the performance of the products); and
• do not assume that because other businesses are making similar representations, your business will not face action from a regulator or competitor.