The Australian Competition and Consumer Commission (ACCC), the consumer watchdog in Australia, is cracking down on businesses making false and misleading premium claims to obtain a selling advantage. One type of premium claim suggests a product has a perceived quality through association with a place of origin, for example “Swiss chocolate” or “Belgian beer.” King Island is a small, sleepy island situated in the Bass Strait between Victoria and Tasmania. Locals source fresh rock lobsters from the long, empty beaches, angus and dairy cattle roam the lush green paddocks and rush hour is when four utes meet at the island’s only roundabout. The high rainfall, cool climate and nutrient rich ancient soils combine to create ideal pasture for dairy farms and King Island is well known for its gourmet cheeses and high quality beef.
In 2001 Alexander Mastromanno set up an upmarket butcher shop in Victoria using the business name “King Island Meatworks” (which he later changed to “Kingisland Meatworks & Cellars”). At that time 70% of the beef he sold was sourced from the King Island abattoir. However, Mr. Mastromanno stopped sourcing beef from King Island in mid-2002 when ownership of the King Island abattoir changed hands and he was unable to obtain a sufficient supply. He did not purchase beef from King Island again until 2011 in response to a letter from the ACCC stating their concerns about the use of a place of origin in his business name. From 2001 to 2011 Kingisland Meatworks & Cellars promoted its meat retailing business through its business names “King Island Meatworks” and “Kingisland Meatworks & Cellars”, the words “King Island” were used on its shop signage, newspaper advertisements, domain name and internet website. It also used a logo containing an image of a white lighthouse with the words “King Island” and “Meatworks.”
The arguments: the meaty bits
The ACCC contended that Kingisland Meatworks & Cellars made false or misleading representations about the place of origin of the meat it sold which also amounted to misleading or deceptive conduct. The ACCC submitted evidence that King Island had a reputation for producing high quality beef and Kingisland Meatworks & Cellar’s use of the words “King Island” to promote its meat retailing business conveyed a representation that the meat for sale was grown, raised, or otherwise from King Island. Mr. Mastromanno was listed as the second respondent as he was knowingly concerned in, or a party to, the false and misleading representations and the misleading or deceptive conduct. Kingisland Meatworks & Cellars contended that the words “King Island” did not convey that the meat was sourced from King Island but instead conveyed that Mr. Mastromanno or his family was from King Island, that Mr. Mastromanno holidays in King Island or it was a reference to King Island point in Queensland or King Island overseas. Other arguments included the words “& Cellars” unsettled the King Island origin representation as it was common knowledge that alcohol is not produced on King Island and only a trading name such as “Strictly King Island (Tasmania) Goods” could convey that the majority of goods sold were sourced from King Island. Kingisland Meatworks & Cellars also argued other butcher shops in Victoria used a place of origin in their business name such as “Melbourne Meats” or “Alansford Meats.” However the court found these places did not have a reputation for producing high quality meat and were merely a description of the location of the shop. Kingisland Meatworks & Cellars also submitted that a reasonable consumer would understand that a significant proportion of Kingisland Meatworks & Cellars meat products were not sourced from King Island as it sold pork, lamb, poultry, delicatessen produce and wine that was not sourced from King Island and further the place of origin was indicated on the meat labels. The court held there was insufficient evidence of labelling of origin and it was irrelevant that a misleading impression that induced customers into the shop was subsequently corrected. Lastly Kingisland Meatworks & Cellars argued that it was mandated to use the name as there is a statutory obligation on companies to prominently display their business name. However, the court swiftly dismissed this argument stating the statutory obligation to display a business name does not enable the business to choose a name that breaches statutory consumer protections.
The decision: what’s in a name?
In August 2012 Murphy J found that since 2008 Kingisland Meatworks & Cellars represented (and intended to represent) to consumers that meat offered for sale through its butchery was grown on, raised or otherwise from King Island. This was factually incorrect as very little, or none, of the meat offered for sale was sourced from King Island and Murphy J found this amounted to false or misleading representations about the place of origin of the meat sold by Kingisland Meatworks & Cellars. The business had also engaged in misleading or deceptive conduct and Mr. Mastromanno was knowingly concerned in this behaviour. Murphy J ordered that Kingisland Meatworks & Cellars display corrective notices at the business premises, be restrained for three years from representing that its meat is grown, raised or from King Island when it is not, and pay a pecuniary penalty of $50,000 and the ACCC’s costs. Australian Competition and Consumer Commission v Kingisland Meatworks and Cellars Pty Ltd  FCA 859 (Judgment 14 August 2012; date of hearing 24 February 2012); Australian Competition and Consumer Commission v Kingisland Meatworks & Cellars Pty Ltd  FCA 48 (Judgment 5 February 2013; date of hearing 24 February 2012).
The take home message
As the ACCC is pursuing businesses making false or misleading premium claims, businesses with a place of origin in their name need to be careful that a majority of their products sold are sourced from that location (Murphy J suggests 70% is acceptable). If very few of the products are sourced from that location the business could face regulatory action for engaging in misleading or deceptive conduct.
This article was prepared by Alice Winter-Irving and Frances Drummond (firstname.lastname@example.org / +61 2 9330 8007) of Norton Rose Fulbright’s Australia’s Intellectual property group.