November 2009

Legal Update: Green Marketing and Other Industry Codes

Overview

Industry codes play an important role in the regulation of business practices by setting standards of conduct for industry members. Consequences of non-compliance with an industry code may result in contravention of the Trade Practices Act 1974 (Cth) and/or the Fair Trading Act 1999 (Vic). Further the organisation responsible for the administration of the code can also take action such as requesting that the contravening conduct be ceased or modified. Recent developments in industry codes which will affect businesses include:

1) Green Marketing Code introduced

On 14 September 2009, the Australian Association of National Advertisers (" AANA") introduced the Environmental Claims in Advertising and Marketing Code, [1] to establish a benchmark for acceptable marketing techniques in relation to green claims. Green marketing can be a highly effective advertising tool in an environmentally-aware consumer market. However, the dramatic increase in litigation by the ACCC targeting false and misleading green claims has prompted tighter regulation of environmental marketing practices.

The new Code forms part of the AANA's self-regulatory framework for monitoring Australian advertising practices. As the Code is voluntary, and is not prescribed under the Trade Practices Act, it is administered by the industry body, the AANA (as opposed to the ACCC). Complaints under the Code will be adjudicated by the Advertising Standards Board from 1 January 2010 [2] and if upheld will result in a request to remove or amend the advertisement. [3] AANA CEO Scott McClellan believes that the Code 'gives consumers a simple, transparent mechanism to assess the environmental merits of a product or service, and provides the means for them to easily make a complaint in the event that they believe that they've been mislead'. [4]

Under the Code, "environmental claims" made about a product must be:

1) Truthful and factual;

2) Relevant to the product or service and its actual environmental impacts; and

3) Able to be substantiated and verified. [5]

These principles will apply to any representation relating to 'any element of a product, component or packaging or service…which interacts with or influences the Environment'. The Code defines "environment" as including: 'ecosystems and the constituent parts, including people and communities; natural and physical resources; and the qualities and characteristics of locations, places and areas.' [6]

The Code also includes provisions which overlap with current consumer legislation under the Trade Practices Act, by requiring that claims about the environment 'shall not be misleading or deceptive or likely to mislead or deceive'.

The AANA will be undertaking compliance programs with industry members to ensure that advertisers are aware of the Code and its operation.

2) Government to amend Franchising Code of Conduct

On 5 November 2009, the Government announced plans to reform the Franchising Code of Conduct, to provide greater protections to franchisees from unscrupulous franchisor conduct. [7] The proposal comes in response to the Commonwealth Parliamentary Joint Committee on Corporations and Financial Services 2008 inquiry into improving franchising conduct in Australia.

The Franchising Code of Conduct is a mandatory industry code, prescribed under the Trade Practices Act 1974, and is administered by the ACCC. [8] The code regulates all participants in the franchising industry by ensuring that:

  • franchisors disclose relevant information and documents to prospective-franchisees;
  • franchisees are aware of their rights under franchise agreements; and
  • appropriate and cost-effective dispute resolution mechanisms are available to franchisees and franchisors. [9]

As the Code forms part of the Trade Practices Act, failure to comply with the Code, amounts to a breach of the Act under section 51AD and could result in substantial penalties, including injunctions to stop conduct, orders to provide compensation and damages, or orders setting aside relevant contracts. [10]

The proposed amendments will enhance the ACCC's powers to randomly audit franchisors to encourage compliance with the Code, make public warnings or announcements of breaches to the Code to warn franchisees of "rouge" franchisors, and seek redress on behalf of franchisees. [11] The Government has acknowledged the relevance of good faith obligations in preventing appropriate conduct in franchising, and will include a new provision in the Code stating that nothing in the Code limits any common law requirements of good faith in relation to franchise agreements.

Further amendments will expand the disclosure requirements, forcing franchisors to provide franchisees with at least 6 months notice regarding the renewal of franchise agreements. New provisions will also provide guidance on the types of behaviour which is expected when parties engage in dispute resolution processes. [12]

The Government also plans to establish an expert panel which will inquire and report on whether it is necessary to include a list of behaviours that should be prohibited in franchising arrangements. [13] The panel is due to report in January 2010.

3)ACCC gives preliminary authorisation to revised Medicines Australia Code of Conduct

The ACCC has flagged its intention to grant authorisation for the next five years to the sixteenth edition of Medicines Australia's Code of Conduct. The Code sets the standards for the ethical marketing and promotion of pharmaceutical products in Australia, and is a self-regulatory scheme which complements the legislative requirements of the Therapeutic Goods Regulations and the Therapeutic Goods Act. [14]

Drug companies are only able to promote prescription medicines to health care professionals, as advertising to the general public is prohibited under the Therapeutic Goods Act. Promotion of all prescription medicines must comply with the requirements of the Medicines Australia Code, and complaints about advertisements are adjudicated by Medicines Australia Code of Conduct Committee. [15] The Committee has power to make orders that advertising in breach of the Code is to be modified or cease, and may impose fines of up to $200,000 for serious breaches. [16]

By granting authorisation of the Code, the ACCC offers Medicines Australia members protection from court action for conduct which might otherwise contravene the competition provisions of the Trade Practices Act. [17] This authorisation is conditional on the ACCC's satisfaction that the public benefit from the authorised conduct outweighs any public detriment.

Key amendments to the new edition of the Code relate to:

  • Tightening the standard requirements for medical and promotional claims;
  • Substantial increases in fines for breaches of the Code;
  • Increased consumer representation on the Code, Appeals and Monitoring Committees;
  • Absolute ban on advertising by Medicines Australian member companies in prescribing software; and
  • Increasing the transparency of the relationships between pharmaceutical companies and health consumer organisations by requiring publication on a company's website of the health consumer organisations that a company provides support to. [18]

The ACCC is yet to announce official authorisation of the Code as at 25 November 2009. A pre-decision conference chaired by ACCC Deputy Chair Peter Kell was held on 17 November 2009. [19]

Stephens Lawyers & Consultants have a high level of expertise in industry codes and compliance, with specific experience in trade practices, franchising and pharmaceutical/health law

Our lawyers represent leading companies in both litigious and commercial matters.

For further information contact:

Stephens Lawyers & Consultants
Level 3, 530 Lonsdale Street
Melbourne VIC 3000
Phone: (03) 8636 9100
Fax: (03) 8636 9199
Email: stephens@stephens.com.au
Website: www.stephens.com.au
All Correspondence to:
PO Box 13286
Melbourne Law Courts
Melbourne VIC 8010

To register for newsletter updates and to send your comments and feedback, please email stephens@stephens.com.au

Disclaimer: This newsletter is not intended to be a substitute for obtaining legal advice.

© Stephens Lawyers & Consultants. November 2009. Researched and written by Colette Downie, edited by Katarina Klaric.


[1] Full text of the Environmental Claims in Advertising and Marketing Code is available at: http://www.aana.com.au/codes.html .

[2] AANA, Media Release: 'AANA Publishes "Green Claims" Advertising and Marketing Code', 14 September 2009, at http://www.aana.com.au/GreenClaimsCodeMediaRelease.htm .

[3] 'The Advertising Standards Board' at http://www.adstandards.com.au/pages/page14.asp

[4] AANA, Media Release: 'AANA Publishes "Green Claims" Advertising and Marketing Code', 14 September 2009, at http://www.aana.com.au/GreenClaimsCodeMediaRelease.htm .

[5] AANA, Media Release: 'AANA Publishes "Green Claims" Advertising and Marketing Code', 14 September 2009, at http://www.aana.com.au/GreenClaimsCodeMediaRelease.htm .

[6]Environmental Claims in Advertising and Marketing Code.

[7] Minister for Innovation, Industry, Science and Research, Media Release, 'Government to Strengthen Franchising Code of Conduct and Unconscionable Law', 5 November 2009, at http://minister.innovation.gov.au/Emerson/Pages/GOVERNMENTTOSTRENGTHENFRANCHISINGCODEOFCONDUCTANDUNCONSCIONABLECONDUCTLAW.aspx .

[8] Section 51AE Trade Practices Act 1974.

[9] For more information on the operation of the Franchising Code of Conduct please visit ACCC website, 'Franchising Code' at http://www.accc.gov.au/content/index.phtml/itemId/6118/ .

[10] For more information on non-compliance with the Franchising Code of Conduct please visit ACCC website, 'Franchising Code: What if you don't comply?' at http://www.accc.gov.au/content/index.phtml/itemId/816436 .

[11] Minister for Innovation, Industry, Science and Research, Media Release, 'Government to Strengthen Franchising Code of Conduct and Unconscionable Law', 5 November 2009, at http://minister.innovation.gov.au/Emerson/Pages/GOVERNMENTTOSTRENGTHENFRANCHISINGCODEOFCONDUCTANDUNCONSCIONABLECONDUCTLAW.aspx .

[12] ' Additional Information on Franchising Code and Unconscionable Conduct reforms', November 2009, available at: http://minister.innovation.gov.au/Emerson/Documents/Additional%20information%20on%20Franchising%20Code%20and%20Unconscionable%20Conduct%20reforms.pdf

[13] ' Additional Information on Franchising Code and Unconscionable Conduct reforms', November 2009, available at: http://minister.innovation.gov.au/Emerson/Documents/Additional%20information%20on%20Franchising%20Code%20and%20Unconscionable%20Conduct%20reforms.pdf

[14] Medicines Australia, Code of Conduct, at http://www.medicinesaustralia.com.au/pages/page5.asp.

[15] Therapeutic Goods Administration, ' Regulation of Advertising of Therapeutic Goods in Australia', at http://www.tga.gov.au/docs/html/advreg.htm .

[16] Medicines Australia, Code of Conduct, http://www.medicinesaustralia.com.au/pages/images/Code%20of%20Conduct%20-%20PDF%20for%20website.pdf

[17] ACCC, Media Release: 'Transparency is key for drug industry relationships', 16 October 2009, at http://www.accc.gov.au/content/index.phtml/itemId/897620 .

[18] ACCC, ' Draft Determination - Application for authorisation lodged by Medicines Australia in respect of Medicines Australia Code of Conduct Edition 16'. 16 October 2009; pg 18.

[19]Minutes of the pre-decision conference are available at: http://www.accc.gov.au/content/trimFile.phtml?trimFileName=D09+186519.pdf&trimFileTitle=D09+186519.pdf&trimFileFromVersionId=902980 .

Subscribe/Unsubscribe