ACCC loses Woolworths appeal over forecasting theory failure

Published On 09/10/2020 | By Paula Mucha | Consumer protection, Enforcement, Litigation, Uncategorized

On 29 September 2020, the Full Federal Court unanimously dismissed an appeal brought by the Australian Competition and Consumer Commission (ACCC) against Woolworths.

The appeal concerned environmental claims made by Woolworths about their “W Select eco” picnic products. Woolworths sold a range of disposable cutlery and crockery with packaging that featured the statement “biodegradable and compostable”. The ACCC considered that this packaging represented to consumers that the products would biodegrade and compost within a reasonable time period.

The ACCC instituted proceedings alleging that Woolworths engaged in misleading or deceptive conduct, contrary to s 18 of the Australian Consumer Law (ACL). It also ran similar arguments under ss 29(1)(a), 29(1)(g) and 33 of the ACL.  As part of its case, the ACCC alleged that the statements were “with respect to future matters,” and that Woolworths did not have reasonable grounds for making the statements, in accordance with s 4 of the ACL.

Woolworths denied these allegations. It contended that the statements were about the characteristics or inherent features of the products and, as such, were statements of present fact. It also argued that the products were, in fact, biodegradable and compostable, and therefore the statements were true.

The Full Federal Court agreed with the trial judge. Below is a high level overview of both decisions.

Trial judgment

Accepting Woolworths’ submissions, the Federal Court of Australia found that the packaging represented that two inherent features of the products included that they were biodegradable and compostable. The Court rejected the ACCC’s implied representation that the products were capable of biodegrading and composting “within a reasonable period of time”. It also found that the representations were statements as to present facts, rather than with respect to future matters, and that they were true.

  • Specifically, the Court had regard to the authorities on “future matters”, and held that the representations were not in the nature of a “prediction, forecast or projection about a future event”.
  • The Court articulated that a future representation is “not capable of being true or false at the time the representation is made, because the state of affairs to which it relates lies in the future” (see [197]).
  • Conversely, the representations in this case concerned the inherent characteristics of the products, as the capacity to biodegrade and compost was a function of their constituent ingredients, which is an existing state of affairs.
  • Similar to “poisonous”, “flammable” or “toxic”, the representations could be tested or ascertained as a matter of fact. The fact the testing will happen in the future – when the product is used or disposed of – does not alter the nature of the representation.

On this basis, the trial judge ruled in favour of Woolworths. However, the Court also found that if, contrary to its findings, the representations were with respect to future matters, the ACCC had proven that Woolworths did not have reasonable grounds for making the representations (as there was no evidence that Woolworths had turned their mind to these features of the products).

Appeal

The Full Federal Court unanimously agreed with the primary judge. Consequently, the Court dismissed all of the ACCC’s grounds of appeal.

The appeal alleged that the trial judge erred in finding that the representations were not with respect to future matters. The resolution of the appeal therefore concerned the meaning of this phrase. Importantly, Woolworths conceded that if the representations were with respect to future maters, it did not have reasonable grounds for making the representations.

The Full Federal Court arrived at the same conclusions as the trial judge. The key points agreed by the Court include:

  1. There was no reason to imply into the packaging any requirements as to time. This is because the representations “make perfect sense without the implied representation as to the time within which the products will biodegrade or compost” (see [94]).
  2. As submitted by Woolworths, “s 4 of the ACL does not operate on truthful statements about presently measurable and provable scientific characteristics or properties such as flammable, recyclable and biodegradable” (see [120]).

The Court cited with approval the previous interpretations of s 4. Notably, the Court extracted Gleeson J’s reasoning in ACCC v Kimberly-Clark Australia Pty Ltd (see [132]):

The fact that a consumer needs to actually use a product is hardly grounds to give the representations a futuristic quality … It would substantially mischaracterise claims that something is “soluble”, “edible”, “dishwasher safe” or “water-proof”…

Further, the Court distinguished the case from the “therapeutic goods” cases relied on by the ACCC. In this case:

Nothing was represented as to what might need to be done in the future to effect biodegradation and composting nor was anything conveyed about how long those processes would ordinarily take. The representations here did not speak to the future at all.

Implications

This appeal provides some much needed clarity on the meaning of “future matters” under s 4 of the ACL. The Full Court’s confirmation will guide the ACCC’s approach to its outstanding court matters, and perhaps influence its enforcement of advertising claims.

The ACCC is considering the judgment. It has until the end of October to seek special leave to appeal to the High Court.

Undoubtedly, any speculative comments as to the likelihood of appeal would be in the nature of a “prediction, forecast or projection.” In any event, there are reasonable grounds to believe that we will be seeing future matters debating the meaning of “future matters.”

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About The Author

is a Solicitor in the Melbourne office of King & Wood Mallesons.

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