In late December last year, the Australian Competition and Consumer Commission (ACCC) commenced proceedings against Lorna Jane, alleging they had engaged in false or misleading representations. The allegations related to an advertising campaign which represented that the LJ Shield Activewear protected people wearing it from contracting and spreading viruses, including COVID-19. This campaign was spread across multiple platforms, including in-store advertising, tags on garments, Instagram, Facebook, the Lorna Jane website and electronic direct mail.
The increase in social media and the internet as a means of advertising has brought with it a range of legal implications that need to be considered, which this article will highlight with reference to the Lorna Jane case.
The parties
The ACCC is an organisation that ‘promotes competition and fair trade in markets to benefit consumers, businesses, and the community’. One of their main roles is to make sure individuals and businesses comply with any laws that regulate competition, fair trading and consumer protection. Mainly, this is the Competition and Consumer Act 2010 (Cth) (“the Act”). This article will discuss the Act and, in particular, Schedule 2. Schedule 2 of the Act is known as the Australian Consumer Law, or ACL. For more information about the ACL, have a look at our article ‘Australian Consumer Law (ACL): What businesses need to know’.
Lorna Jane is an Australian-owned women’s activewear company, founded by co-director Lorna Jane Clarkson. Lorna Jane is a well-known brand in Australia, which was of particular concern to the ACCC who said ‘…consumers often trust well-known brands and assume that their marketing claims are backed by solid evidence’. This comment was made in relation to the ACCC’s allegation that ‘Lorna Jane represented that there was a scientific or technological basis for these claims [that the LF Shield range protected against viruses] at the time they were made, when no such testing had been carried out’.
The advertising campaign
The ACCC’s allegations against Lorna Jane were in relation to a specific advertising campaign – for the LJ Shield Activewear. Some of the messaging included phrases such as:
- LJSHIELD is a groundbreaking [sic] technology that makes transferal of all pathogens to your Activewear (and let’s face it, the one we’re all thinking about is Covid-19) impossible by eliminating the virus on contact with the fabric.
- Cure for Covid-19? Lorna Jane thinks so.
- After spending two years developing a chemical free treatment that when applied to Activewear protects wearers against lethal viruses and bacteria around gyms like Staph. We knew as people headed back to life and the gym post Covid-19 that we had to get this product to market ASAP because now more than ever we need to stop the spread of harmful bacteria and viruses.
- Any bacteria that comes in contact with the fabric is terminated when it comes in touch with the LJ Shield particles.
Lorna Jane founder Lorna Jane Clarkson also personally (via Instagram) made representations about the LJ Shield range on behalf of the company, such as:
- With Lorna Jane shield on our garments it meant that we were completely eliminating the possibility of spready any deadly viruses; and
- …know that you’re not bringing any virus or bacteria into your home.
The ACCC says that most of these ads were removed by July 2020, but that the tags on Lorna Jane garments still relayed the anti-virus message until ‘at least November 2020’.
The allegations
The ACCC is basing their allegations on four sections of the ACL, which are all explained below.
Misleading or deceptive conduct – section 18 ACL
The ACCC is alleging the advertising campaign for the LJ Shield range constituted misleading and deceptive conduct under section 18 of the ACL.
Section 18 of the ACL says “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.
The ACCC alleges Lorna Jane engaged in a range of misleading conduct, namely that the LJ Shield range had the ability to:
- eliminate or breakdown viruses;
- protect wearers against viruses; and
- stop the spread of viruses.
It further alleges that Lorna Jane made a representation that these claims were based on reliable scientific and/or technological evidence, which they were not.
Lynn & Brown has written articles about misleading and deceptive conduct previously, which you can look at via these links:
- Did Google mislead users?
- Beware of online booking portals as Trivago is found guilty of misleading consumers
False or misleading representations – section 29(1) ACL
The ACCC alleges that Lorna Jane engaged in false or misleading representations. Under section 29(1) of the ACL, a person or business must not make false or misleading representations about goods or services. Section 29(1) lists the types of things businesses cannot make false or misleading representations about. In this case, the ACCC narrowed it down to two sub-sections:
- False or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular previous use (s 29(1)(a));
- False or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits (s 29(1)g)).
The ACCC is arguing that the advertising campaign for the LJ Shield range misled consumers in regard to its standard and quality, and in relation to its performance characteristics, uses and/or benefits.
Misleading conduct as to nature of goods – section 33 ACL
Section 33 of the ACL says ‘a person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods’.
The ACCC is alleging the Lorna Jane advertising campaign for the LJ Shield range breached this section because the nature, characteristics and suitability for purpose of the goods described (ie. That they could protect against/eliminate/stop the spread of viruses, including COVID-19) was misleading.
Did Lorna Jane breach the ACL?
The ACCC filed their initial paperwork for their allegations with the Federal Court of Australia (called a Concise Statement). At this stage, the matter has not been heard by the Court, so the allegations are just that – allegations. Until the matter has been heard and decided by the Court, we cannot say for sure whether Lorna Jane has breached any provisions of the ACL. However, looking at the Concise Statement lodged by the ACCC and the advertisements made by Lorna Jane the ability for Lorna Jane to successfully defend the claims will be, to say the least, difficult.
ACCC and COVID-19
The ACCC published a summary of their allegations against Lorna Jane, in which the ACCC Commissioner Sarah Court said ‘this year, the ACCC prioritised consumer and competition issues arising from the COVID-19 pandemic and we will continue to look closely at allegations relating to companies seeking to take advantage of the crisis by engaging in illegal conduct to enhance their commercial position or harm consumers’. This is a clear warning to all businesses to exercise care in your advertising campaigns, including what you post personally on social media about your business.
Online shopping and advertising
It probably comes as no surprise that rates of online shopping are increasing, not only because of technological advances, but also due to COVID-19.
A report by Australia Post found that almost 9 million Australian households made an online purchase in 2020, which is an increase of 10% from 2019. Australia Post says ‘online shopper engagement is at an all-time high, presenting great opportunity for retailers as we head into 2021’.
An increase in online shopping inevitably brings with it an increase in online advertising. The need for online advertising is clear when you look at statistics such as these from the HubSpot (2019):
- 60% of smartphone users have contacted a business directly using search results such as a ‘click to call’ option;
- 39% of smartphone users are more likely to browse or shop a company or brand’s mobile app because it’s easer or faster to make a purchase;
- 51% of shoppers say they use Google to research a purchase they plan to make; and
- 59% of shoppers say being able to shop on mobile is important when deciding which brand or retailer to buy from.
In relation to social media advertising specifically, Hubspot has released the following statistics:
- In 2018, there were over 80 million small businesses using Facebook’s free business tools;
- Facebook was the primary content distribution channel for marketers in 2020;
- In 2020, Instagram was the social media platform with the second-highest return on investment among marketers; and
- In 2018, there were 3.7 million brand-sponsored influencer posts on Instagram.
With online shopping and online advertising on the rise, it is important that individuals and businesses engaging in online advertising understand their legal obligations. The allegations brought by the ACCC against Lorna Jane provide an example of what can happen if online advertising goes wrong.
If you currently advertise your product or service online, or you plan to, we recommend seeking legal advice to ensure you are complying with all relevant consumer law provisions. If you would like any advice about online advertising, or about any other matter relating to the ACL, don’t hesitate to contact Lynn & Brown Lawyers for expert legal advice.
About the authors:
This article has been co-authored by Chelsea McNeill and Steven Brown at Lynn & Brown Lawyers. Chelsea is in her fifth year of studying Law at Murdoch University. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
