In Nature's Care Manufacture Pty Ltd v Australian Made Campaign Limited [2018] FCA 1936 Perram J comments
When is it permissible to claim that goods manufactured in Australia from ingredients sourced from overseas are ‘Made in Australia’? That is the question in this case. The Applicant is a manufacturer of complementary medicines. One of its product lines is a soft-gel capsule marketed as ‘Fish Oil + Vitamin D’ which is marketed to the public by the Applicant under its ‘Healthy Care Australia’ brand ...
For present purposes three aspects of the label should be noted. First, it bears the well-known ‘Australian made and owned’ kangaroo logo (‘Logo’) on the bottom right. Secondly, it indicates that each capsule contains 1g of fish oil and 5µg of vitamin D. Thirdly, it is consistent with a label which suggests that what is inside the jar is fish oil and vitamin D.
The issues in this case concern the Applicant’s claim by its use of the Logo that the capsules are made in Australia. The Logo is a registered certification trade mark owned by the Respondent who is responsible for regulating its use including by the issue of 12-month renewable licences which allow businesses to use the Logo. The Applicant has been licensed to use the mark in relation to a number of its products since 2012 including in respect of its Healthy Care Fish Oil and Vitamin D capsules. For reasons to which I will briefly return at the end of these reasons, the Respondent does not accept that the Applicant’s Fish Oil and Vitamin D capsules are manufactured in Australia and has indicated that it does not propose to licence the Applicant to use the Logo on the relevant products after 31 December 2018.
The Applicant does not agree with the Respondent’s position and now seeks declaratory relief which would vindicate its view that its capsules are made in Australia. The Respondent’s position is, to a large extent, driven by views published by the Australian Competition and Consumer Commission (‘ACCC’) about when a claim that a product is manufactured in Australia may be made. As a result, the ACCC intervened to make substantive submissions and the Respondent filed a submitting notice.
The central issue in this case is, therefore, whether it is accurate to say that the capsules are made in Australia. It arises this way. The fish oil is imported into Australia by the Applicant from Chile in 200kg drums. Fish oil is a pale yellow oil with a vague but distasteful odour of fish. The vitamin D (more precisely, vitamin D3 or ‘Coleralciferol’) is imported from China in 25kg or 1kg drums. It is a white crystalline powder with no odour according to the parties’ witnesses. Having smelt Exhibit MX-4 (Vitamin D3 Sample) I am not sure I agree but this is of no moment.
The soft-gel capsules (into which the fish oil and vitamin D would be eventually inserted) were made from gelatine sheets which were themselves manufactured from gelatine powder, purified water and glycerol. The glycerol is imported from Indonesia in 220kg drums but the water and the gelatine powder were sourced in Australia.
It will be seen that the Applicant’s product is quite cosmopolitan in terms of the sources of its constituent elements. However, those elements are put together in Australia by the Applicant.The Court goes on to state
The Australian Consumer Law (‘ACL’) is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). The ACL includes a number of prohibitions on engaging in misleading and deceptive conduct. Amongst these is the central prohibition in s 18 (‘A person shall not, in trade or commerce, engage in conduct which is misleading or deceptive or likely to mislead or deceive’). There are other prohibitions of a more specific nature but these may be disregarded for present purposes.
The ACL contains a number of rules about specific conduct which is taken not to be a breach of s 18 (and the other related prohibitions). One of these rules insulates claims that particular goods were manufactured in a particular country. Provided its requirements are satisfied such a claim is taken not have been a breach of s 18 et al. Because of its operation in rescuing conduct from being subject to s 18 et al, provisions of this kind are frequently referred to as safe harbour provisions. The relevant safe harbour provision is s 255. ...
one can only represent that one’s goods are made in Australia if the goods ‘were last substantially transformed’ in Australia and the effect of s 255(2)(b) is that goods will only be ‘substantially transformed’ in Australia if it can be said – and these are the critical words in the case – that:
"...as a result of one or more processes undertaken in [Australia], the goods are fundamentally different in identity, nature or essential character from all of their ingredients or components that were imported into [Australia]."
This requires a comparison between the ‘ingredients’ which were imported and the goods which were produced as a result of the ‘processes undertaken’. The comparison requires one to ask whether the manufactured goods differ ‘fundamentally’ from the imported ingredients ‘in identity, nature or essential character’.Perram J states
I do not accept that there is any change in any of the qualities of the fish oil as a result of its mixing with the vitamin D3. It is still, when all is said and done, fish oil and there is no chemical change to its molecular structure or fundamental change to its chemical qualities. I also do not accept that there is any change to the vitamin D3. There was a hint at the start of the case than an argument might have been pursued that the solution of vitamin D3 into the fish oil improved the bioavailability of the vitamin D3. However, Professor Barrow gave evidence to the contrary and the point was not thereafter pursued. I therefore accept that the vitamin D3 which is imported into Australia is the same as the vitamin D3 which is found in the fish oil within the capsules. ...The Court notes
I find that the fish oil imported from Chile smells unpleasant. I was provided with a sample of this fish oil as Exhibit MX-3 and have smelt it. It is smells like a cross between stale fish and vinyl. My associate thinks it smells like semi-fermented grass cuttings revealing his more sophisticated nose. I have not tasted it but I am prepared to infer that it would be very unpleasant to consume even in small doses. I also accept that placing the fish oil in the soft-gel capsules has the effect of making palatable and flavourless a product which is essentially very unpleasant. It has another benefit too. By sealing the fish oil in the capsules the speed of oxidation is reduced and, along with that, the rate of deterioration in the fish oil caused by exposure to light. This is not the case with the liquid fish oil imported from Chile. ...In one of those paragraphs that delight law students Perram J then states
There is a related issue. Professor Barrow properly drew my attention to the phenomenon of ‘burp-back’. ‘Burp-back’ occurs when a soft-gel capsule containing something malodorous such as fish oil is consumed. Once the capsule descends into the digestive depths of the stomach the soft-gel dissolves releasing its noxious payload the odour of which, thus liberated, rises up the gullet to the mouth where, unsought and unwelcome, it presents itself as a salutary warning against the perils of belching. Professor Barrow succinctly described it as ‘unpleasant fishy burping’. Just because the soft-gel fails in the inhospitable regions of the upper reaches of the alimentary canal does not mean that for many people the capsule is not effective to protect them from the smell of the fish oil. It does mean, however, that it cannot be entirely correct to say that encapsulation has changed the nature of the fish oil so that its odour is no longer present. It can be present when the fish oil is extracted from the capsules and it may emerge if a consumer should burp.Onwards!
So the question is whether in light of those findings one can say that the capsules ‘are fundamentally different in identity, nature or essential character’ from the fish oil, vitamin D3 and glycerol which were imported in Australia. This is a question of statutory interpretation. I take the position to be that one starts, as a beginning point, with the ordinary meaning of the words on the page and asks whether some other meaning is required by the statutory context where that concept includes, if they throw any light on the issue, the text and architecture of the surrounding statute, the legislative history and other extrinsic materials such as second reading speeches and explanatory memoranda: SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; 91 ALJR 936 at 940-941 [14], citing CIC Insurance Limited v Bankstown Football Club Limited [1997] HCA 2; 187 CLR 384 at 408.Perram J concludes -
The application of s 255(2)(b) to the facts
What s 255(2)(b) requires is a fundamental change in the essential characteristics of the imported ingredients collectively when compared to the manufactured goods. In a sense this makes no strict sense because it is impossible to compare the essential characteristics of a combined good with the essential characteristics of each of its constituent elements in the same way that it is idle to ask whether a car is a tyre. In this case, for example, it is nonsensical to ask whether the capsules differed in their essential characteristics from the glycerol. Plainly a capsule containing fish oil and vitamin D is fundamentally different to a barrel of glycerol. However, what is required by s 255(2)(b) is an overall assessment: the manufactured goods must be compared to the imported ingredients collectively and an overall opinion formed as to whether they are fundamentally different in nature, identity or essential character.
In this case, the answer to that question is clear. The fish oil and vitamin D3 in the capsules is identical to the fish oil imported from Chile and the vitamin D3 imported from China. The only differences between the capsules and the fish oil and vitamin D3 are: (a) the fish oil and vitamin D3 are mixed together with no chemical change to either; (b) the capsules generally conceal the bad flavour of the fish oil (although not invariably as in some circumstances the capsule is deliberately pierced and there remains the ever-present threat of burp-back); (c) the capsules provide an easy means of delivering a 5µg dose of vitamin D3 which could not practically be achieved using the substance in its raw crystalline form; (d) the capsule retards the oxidation and degradation of the fish oil; and (e) the capsule is made from gelatine sheets.
However, those matters do not establish that the capsules are fundamentally different to the fish oil or vitamin D3 which were imported in their nature, identity or essential character. Far from it. What was imported from Chile and China was fish oil and vitamin D3. What is being sold is as is what is being marketed, that is capsules containing ‘Fish Oil and Vitamin D’.
That leaves the question of the glycerol. I accept that the glycerol is fundamentally different in nature in the capsules to the form it was in when imported from Indonesia as a liquid in a drum. It is now part of a gel. However, when viewed overall I do not regard the role of the glycerol as being significant. Granted that the glycerol has been substantially altered, I do not accept that, overall, the capsules are fundamentally different in their nature identity or essential character from the fish oil, vitamin D3 and glycerol imported into Australia.
8. Result
The safe harbour is therefore not available and the claims made by the Applicant are not protected by s 255 of the ACL. That conclusion is sufficient to dispose of the proceeding which should be dismissed.
Had I been satisfied that s 255 did protect the Applicant’s claim to be made in Australia I would have been satisfied of its entitlement to declaratory relief. Very briefly the reasons for this are that the Respondent has indicated it will not continue to licence the Applicant to use the Logo if to do so would be contrary to the views of the ACCC. The ACCC publicly indicated in March 2018 that it does not accept that the encapsulation of imported substances fell within the safe harbour provisions even with the addition of bulking oils. It gave the particular example of a capsule of imported krill oil as a good which would not satisfy the test and also rejected the view that it would make any difference if the gelatine casing were itself made from imported gelatine. The consequence of that stance was that the Respondent will not licence the Applicant beyond 31 December 2018 to use the Logo unless the Applicant is able to reverse the ACCC’s position. For that reason, I would have granted the relief sought had I reached the opposite view about the operation of s 255(2)(b).In the US there has been cheering news for people disquieted about 'recreational' (aka junk) medicine, with news that Goop, Inc. has settled a Californian consumer protection lawsuit regarding three 'Wellness Products'. Yes, celebrities do need to be careful about claims relating to vaginal eggs and magical essences.
The Deputy District Attorney media release states
Goop, Inc. has settled a consumer protection lawsuit filed by Santa Clara County District Attorney Jeff Rosen and nine other state prosecutors alleging that Gwyneth Paltrow’s wellness empire sold a series of women’s health products whose advertised medical claims were not supported by competent and reliable science.
The suit was based on unsupported attributes for Goop’s Jade Egg, Rose Quartz Egg, and Inner Judge Flower Essence Blend.
Goop advertised that the Jade and Rose Quartz eggs — egg-shaped stones designed to be inserted vaginally and left in for various lengths of time — could balance hormones, regulate menstrual cycles, prevent uterine prolapse, and increase bladder control. Goop advertised that the Inner Judge Flower Essence Blend, a blend of essential oils meant be taken orally or added to bathwater, could help prevent depression. xxx “The health and money of Santa Clara County residents should never be put at risk by misleading advertising,” District Attorney Jeff Rosen said. “We will vigilantly protect consumers against companies that promise health benefits without the support of good science…or any science.”
Goop has offered to refund the full purchase price to any consumer who purchased the Jade Egg, Rose Quartz Egg, and/or Inner Judge Flower Essence Blend on or between January 12, 2017 and August 31, 2017. ...
The judgment includes provisions prohibiting Goop from:
(1) making any claims regarding the efficacy or effects of any of its products without possessing competent and reliable scientific evidence that substantiates the claims; and
(2) manufacturing or selling any misbranded, unapproved, or falsely advertised medical devices.
Under the terms of the stipulated judgment, Goop agreed to pay $145,000 in civil penalties.The eggs and other products are still on sale.
