Dangers of Geography in a Label or Product Name

by Joe Lederman © February 2007
BALDWINS – FoodLegal
Australian Food Lawyers & Consultants

In late December 2006, Australia’s beef producers were first warned that the Japanese Agriculture Ministry would be prohibiting them from using the ‘Wagyu beef’ description for any Australian meat, notwithstanding that this highly-prized Japanese breed has been enhanced by some of Australia’s top breeders and exporters in Australia. The issues of using a geographical reference in a product name have been highlighted by this case. This article 1,400 word article discusses the risks involved.

Readers would be familiar with the earlier successful French campaign in Australia to protect the champagne label and those of other wines with names associated with different parts of France. Even though the Japanese Wagyu beef claim might seem tenuous, with the Australian government response being possibly inhibited in its approach to free trade negotiations, this article outlines some of the legal dangers that do exist in Australia when a product label or name also contains or implies a reference to a geographic location.

'TRIPS'

Under the international treaties to which Australia is a signatory as part of its membership of the World Trade Organisation (‘WTO’), Australia is bound by the Agreement on Trade-Related Aspects of Intellectual Property Rights (‘TRIPS’). TRIPS is a WTO Agreement which sets out the minimum standards with which member states must comply to protect intellectual property. Article 22 of the TRIPS Agreement requires that countries must provide legal means to prevent the use of a sign or presentation suggesting that goods come from an area different from their actual origin. Australia fulfills this requirement through its Trade Practices Act 1974, Trade Marks Act 1995 and Australian Wine and Brandy Corporation Act 1980, each as amended.

Irrespective of whether TRIPS might or might not apply, a number of Australian laws can also apply to prevent an Australian food business from selling a product with a geographical indicator in its name if the product is not sourced from that location.

Trade Practices Act

The Trade Practices Act s52 prohibits misleading and deceptive conduct. Under s53(eb), false representations as to the place of origin of goods are prohibited. The corporation may also be penalized under s75AZC of the Trade Practices Act, which makes false representations as to the place of origin an offence of strict liability with severe penalties such as huge fines, mandatory product withdrawal and corrective advertising orders.

Under s65AC, a representation claiming a product was ‘produced’ in a particular place of origin can require 100% production at the claimed place but under s65AB one can claim legitimately that a product has been ‘made’ there if the goods have been ‘substantially transformed’ in that place and 50% or more of the cost of producing or manufacturing the goods is attributable to processes that occurred there. Substantial transformation refers to a fundamental change in the form, appearance or nature of the goods, such that they are new and different goods from those existing before the change (s65AE(1)).

The Australian Competition and Consumer Commission (ACCC) is responsible for enforcement of the TPA and in November 2006, the ACCC issued its guidelines on food descriptors and claims, including any claim  about the origin or source of a food. The starting point is that the label must be accurate and not mislead consumers. This applies not only to the claims ‘Product of …’ and ‘Made in …’ but equally to those claims for products which purport to originate from a particular geographic area.

For example, the term ‘locally grown’ may lead consumers to conclude that the produce was grown in the immediate vicinity of the place of purchase. However, the conclusion ‘locally grown’ may well be different for the consumer making the purchase in an inner-city grocer, as distinct from a country grocer. The guiding principle in making claims is to consider what the consumer may conclude after all the relevant circumstances were taken into account.

The ACCC provides, as an example, its Federal Court action in 2002 against Woolworths, which had published misleading advertisements in breach of the Act in claiming that their beef was fully sourced from local suppliers. In a colour full-page newspaper advertisement, Woolworths included the words ‘WOOLWORTHS: Beefing up the local economy’ alongside the image of a butcher. Woolworths also claimed that all the beef it sold in its local stores came from among 150 cattle suppliers located in the North West and New England regions of New South Wales, when in fact, its Economy beef and some of its premium beef were sourced from cattle suppliers outside the area.

The ACCC website also refers in more detail to the Trade Practices Act requirements (not to be confused with the additional requirements under the Australia New Zealand Food Standards Code) which prohibit labelling, packaging, logo or advertising with misleading statements, claims or implications as to the country where the goods have come from.

The ACCC does not specifically refer to the situation of a food producer using a brand with the name of a town where a food product was formerly produced. My argument would be that the perceptions of the consumers are the all-important determinant, so that comprehensive consumer surveys by the company might help substantiate its legal defence against a prospective ACCC action in this regard.

Trade Marks Act

Another avenue may be the application of the Trade Marks Act in some circumstances.  For example, since 23rd October 2006, the amended s61(1) of the Act specifically empowers an opposition to be made to a trade mark registration if it contains a geographical indicator of a country or region or locality and the relevant goods of the opponent are similar to the designated goods and the use of the proposed trade mark would be likely to deceive or cause confusion. Section 43 already provided that a proposed registration could be rejected if its use was likely to deceive or cause confusion.

Nevertheless, an already registered trademark may be cancelled for either of these grounds (s88). The relationship between TRIPS and the Trade Marks Act has also arisen as a legal issue in a number of Australian court cases which are not totally consistent in outcome.

Passing off

Apart from legal actions and defences under Australian trade practices and trade mark legislation, there is also a separate set of remedies against the common law tort action of ‘passing off’. Normally, such a claim would be combined with the other claims into the one action.

International trade implications

Ultimately, TRIPS may be of less relevance except in cases where a food producer, or a representative of a group of producers, is claiming the protection of the international treaty from impostors who have no legal right or legitimate claim. Of course, different countries are entitled to apply the TRIPS law differently for their jurisdiction so the approach will not always be consistent internationally. Nevertheless, the Australian government could do better to protect Australian food producers when negotiating its trade agreements to make exceptions for Australian producers to use a brand which carries foreign geographic connotations if there is or has been an Australian-generated ‘value add’ for that product. There is precedent for this in the wine industry. With Australia and Japan now in the early negotiating phase of a proposed Free Trade Agreement, the Australian government would be entitled to meet the challenge presented by any Japanese legal threat to Australian ‘Wagyu beef’ producers by appropriate legal means if trade negotiations fail.

Conclusions

Apart from any potential international law implications, an Australian food producer selling products from a different geographical region other than that indicated from their brand name risks breaching several laws. These include the potential offence of misleading and deceptive conduct, or false representations under the Trade Practices Act and/or a passing off action. In addition, a brand may have its trade mark registration jeopardized by potential cancellation under the Trade Marks Act. Companies ought to consider a number of steps to confer better legal protection for their differing circumstances.