Enforceable Undertakings

September 18, 2015

 

Enforceable Undertakings

 

Section 87B of the Competition and Consumer Act provides for what are called " enforceable

undertakings". An enforceable undertaking under this provision is only one of the many possible

sanctions available to the regulator ("the ACCC") and is often used instead of the ACCC

commencing legal proceedings against an offender for an offence.

 

The legal nature of an enforceable undertaking is a promise enforceable in court whereby the

promisor/offender promises the ACCC to engage or not to engage in certain prescribed conduct.

The result enables the regulator to enclose disciplinary/remedial action without expending its

limited resources on court action.

 

Enforceable undertakings are widely used by regulators in many disciplines but in particular by

the ACCC and ASIC. Examples of enforceable undertakings recently imposed by the ACCC are

the 3 cases of:

 

- George Weston Foods Limited (trading as KR Castlemaine) ("George Weston");

Pastoral Pork Company Pty Ltd (trading as Otway Pork) ("Pastoral Pork"); and,

P&M Quality Smallgoods Pty Ltd (trading as Primo Smallgoods) ("Primo").

 

Example 1 George Weston Foods Limited

 

The first of these 3 cases is an undertaking made by George Weston on 2 September, 2015.

George Weston is a food manufacturer whose range of products includes packaged smallgoods

and ham products marketed under the KR Castlemaine brand. It supplies KR Castlemaine

products to Woolworths, Coles and independent supermarkets in Australia.

 

George Weston acquired the KR Castlemaine brand in 2008. From 2008 some KR Castlemaine

pork products included the prominent statement ‘bred free range’ on its packaging and labelling.

The prominent statement was also made on the website www.krcastlemaine.com.au.

 

The ACCC considers that the reference to ‘bred free range’ in the promotion of KR Castlemaine

pork products is likely to give consumers the overall impression that the pigs from which the

products are made are farmed according to free range methods, which include at a minimum,

that pigs are kept in an outdoor paddock and are able to move about freely on most ordinary

days.

 

In fact, pigs from which the products are made are born and initially raised in huts on paddocks

where the adult breeding sow lives in open spaces able to move about freely on most ordinary

days. At the age of between 21 – 28 days, the pigs are then moved into straw-based shelters

where they live until slaughter.

 

The ACCC considered KR Castlemaine’s use of the phrase ‘bred free range’ to be inconsistent

with consumers’ understanding of those words and may therefore be false or misleading or

deceptive in contravention of sections 18 and 29(1)(a) of the Australian Consumer Law.

 

Under the terms of the undertaking, George Weston has undertaken, for a period of three years,

to among other things:

 

• commencing four months after the date of the Undertaking coming into effect, not make

any representation to the effect that pigs used for the production of any pork product

supplied by George Weston are born and raised, for the duration of their lives, in an

environment where the pigs are able to move about freely in an outdoor paddock on most

ordinary days, in circumstances when this is not the case;

 

- Implement a Competition and Consumer Act Compliance Program for persons involved

in George Weston’s business; 

 

- Publish a corrective notice on its website [www.krcastlemaine.com.au] within seven (7)

days of the date of this Undertaking coming into effect, for a period of sixty (60) days

 

Example 2 Pastoral Pork

 

The second undertaking involved Pastoral Pork which is a pig production company whose range

of products includes packaged cuts of fresh meat and ham under the Otway Pork brand. It

supplies Otway Pork products to Coles, independent supermarkets and butchers in Australia.

Between July 2000 and December 2014 Otway Pork products included the headline statement

‘bred free range’ on its packaging, labelling, and point of sale material. The headline statement

was also made on the website www.otwaypork.com.au.

 

The ACCC considered that the reference to ‘bred free range’ in the promotion of Otway Pork

products is likely to give customers the overall impression that the pigs are farmed according to

free range methods, which include at a minimum, that pigs are able to move about freely in an

outdoor paddock on most ordinary days.

 

In fact, pigs reared for the Otway Pork product range are born in huts on paddocks. At

approximately 3 weeks of age, the pigs are moved to straw based shelters where they live until

slaughter.

 

Accordingly, the ACCC considered Pastoral Pork’s use of the phrase ‘bred free range’ to be

inconsistent with the consumers’ understanding of those works and may therefore be false or

misleading or deceptive in contravention of sections 18 and 29(1)(a) of the Australian Consumer

Law.

 

Under the terms of the undertaking, Pastoral Pork has undertaken, for a period of three years, to

among other things:

 

- Commencing four months after the date of the Undertaking coming into effect, not make any

representation to the effect that pigs used for the production of any pork product supplied by

Pastoral Pork Company are born and raised, for the duration of their lives, in an environment

where the pigs are able to move about freely in an outdoor paddock on most ordinary days, in

circumstances when this is not the case;

 

- Implement a Competition and Consumer Act Compliance Program for the directors, employees

or other persons involved in Pastoral Pork Company’s business;

 

- Publish a corrective notice on its website [www.otwaypork.com.au] within seven (7) days of the

date of this Undertaking coming into effect, for a period of sixty (60) days

 

Example 3 Primo Smallgoods

Primo is a supplier of smallgoods. It produces a range of products including sliced meats, deli

meats, salami, ham, bacon, continental sausages, frankfurts and cold cuts. Its products are sold

under various labels including Mayfair, Hans and Primo Smallgoods. Its products are supplied

to retailers around Australia including Coles, Woolworths and independent supermarkets. Primo

exports to 52 countries.

 

Between December 2009 and at least the date of this Undertaking (24 July, 2015) Primo

products were sold by retailers in packaging displaying the words ‘free range’.

 

The ACCC considers that the free range claim on the labelling of the Primo products created the

overall impression that the pigs from which these products were produced were farmed

according to free range methods, which include, at a minimum, that pigs were able to move

about freely in an outdoor paddock on most ordinary days.

 

The relevant pork products were sourced by Primo from producers in Denmark and were

produced in accordance with the Friland Code of Conduct (Friland Code). The Friland Code

requires, at a minimum, that all pigs have free access to open areas with fresh air.

 

However, in most cases these areas were either completely or partially roofed to accommodate

for the European climate and were characterised by solid (impermeable) drained or partly slatted

floors consistent with the Friland Code.

 

The ACCC considers that, by engaging in the conduct described above, Primo contravened

sections 18 and 29(1)(a) of the Australian Consumer Law contained in Schedule 2 of the Act.

Under the terms of the undertaking, Primo has undertaken, for a period of three years, to among

other things:

 

- Cease making the Free Range Claim in relation to pork products unless the pigs used in the

production of those products have been born and raised, for the duration of their lives, in an

environment where the pigs are able to move about freely in an outdoor paddock on most

ordinary days;

 

- Implement a Competition and Consumer Act Compliance Program (the Compliance Program)

within 3 months of the date of this Undertaking coming into effect.

 

- Publish a corrective notice on its website [www.primosmallgoods.com.au] within fourteen (14)

days of the date of this Undertaking coming into effect, for a period of sixty (60) days.

 

Conclusion

It will be evident from these 3 recent examples of Enforceable Undertakings that the ACCC

achieves the following objectives:

 

1 stopping the alleged breach;

2 corrective action in relation to parties adversely affected;

3 implementation of compliance measures to prevent future breaches of the law; and,

4 creating a deterrent effect.

 

The above outcomes are achieved through the promises given by the promisor and it can be seen

from the examples that the promises/undertakings often involve:

 

1 Cessation of the alleged offence;

2 Implementation of a compliance program;

3 Implementation of training programs for employees ;

4 Implementation of complaint handling systems;

5 Compensation where relevant to adversely affected parties;

6 Involvement in community services where relevant; and/or,

7 Disclosure of the undertaking to a specified categories of people.

 

Bennett and Bennett can assist clients with their compliance problems. Please ring the

firm's Practice Director, Jeff Bennett on 1300 864 769 to discuss your company's

compliance issues.

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