In recent articles, we have commented on the Australian Competition and Consumer Commission’s (ACCC) Country of Origin (COO) labelling regulations as they relate to food packaging and more recently, the ACCC’s focus for 2020 on misleading or deceptive claims relating to food packaging. Our previous articles can be reviewed here and here.
As COVID-19 has dramatically changed the Australian, and for that matter the global landscape, we are now seeing many manufacturers having to embrace greater flexibility in their supply chains in order to promptly respond to:
- Spikes in short-term demand for goods; or
- Shortfalls in ingredient product supply.
As a result, manufacturers may find it challenging to comply with labelling regulations relating to the origin of core ingredients.
The questions therefore arise as to:
- What actions manufacturers can take to deal with the greater need for flex
- How the ACCC will respond to this unique set of circumstances, and in particular, whether the ACCC too, will show flexibility when policing for regulatory compliance?
The current climate
As the global community faces an unprecedented shutdown of non-essential services in light of the COVID-19 pandemic, food and grocery manufacturers have faced extraordinary demand for grocery items. This has been generated by a range of factors including panic buying and the closure of restaurants and cafes. This has subsequently placed pressure on food and grocery manufacturers to increase output, and has forced manufacturers to adopt flexibility in their supply chains by considering alternate suppliers of key ingredients where demand outstrips usual supply sources, or where those supply sources dry up.
Consequently, manufacturers’ ability to comply with labelling requirements may be a challenge. To comply fully, manufacturers are faced with the choice of updating COO information on packaging to reflect the changing composition of their products on a constant basis, resulting in practical issues such as re-packaging costs and potentially delays in good reaching consumers. Alternatively, manufacturers are faced with the potential of not complying fully (for the short term) with strict COO labelling regulations.
It remains to be seen how the ACCC will approach this novel issue from an enforcement and compliance perspective. In its response to the COVID-19 pandemic to date, the ACCC has shown a preparedness to adopt a more lenient flexible approach to competition and consumer law issues. For example, we are seeing an increasing number of companies in critical industries (supermarkets, banking, medical devices, medicines, telecommunications and airline services) coming together to coordinate their business strategies to respond to the immediate impact of the crisis. For what ordinarily would be cartel behaviour, the ACCC has granted interim authorisation to enable coordination for aspects such as production, capacity and supply to meet demand.
In view of this, it seems likely that the ACCC would look favourably on manufacturers taking reasonable steps during this time to meet COO requirements under challenging circumstances if they are (and this is likely to be critical) seeking to ensure consumers are not misled or deceived by any variations in supply.
Some steps to take
Where manufacturers are faced with COO labelling complications due to supply chain flux during the COVID-19 crisis, some steps to consider to ensure that consumers are not mislead include:
- Opening a dialogue with the ACCC across the need to flex the usual supply models.
- Informing retailers of the situation and having them introduce signage throughout stores notifying consumers that the origin of ingredients of particular identified products may vary (e.g. placing signs on shelving containing affected products and/or placing signs at point of purchase).
- Requesting that retailers include disclaimers in product catalogues and on their websites.
- Manufacturers placing notices on websites, social media or other marketing collateral noting that due to the unprecedented circumstances, the origin of particular ingredients of certain brands may vary.
Each case should of course be considered in isolation, and legal advice sought before any changes are implemented. Importantly, businesses should assume that if a breach of COO labelling occurs or is expected to occur, dealing with the issues quickly and proactively (including by considering early notice to the ACCC) is recommended.