12 October, 2019
Australian Competition and Consumer Commission v Kimberly-Clark Australia Pty Ltd [2019] FCA 992
What you need to know
- The ACCC brought proceedings against Kimberly-Clark for misleading or deceptive conduct over its representations to consumers that its Kleenex Cottonelle wipes were "flushable".
- The Federal Court found that Kimberly-Clark's "flushable" claims were not false or misleading due to insufficient evidence that the wipes caused damage to sewerage systems and compliance by Kimberly–Clark with international "flushability" standards.
- The ACCC has appealed the decision to the Full Federal Court. The hearing date is yet to be set.
What you need to do
Despite the fact that Kimberly-Clarke was not found liable, the decision highlights the importance of ensuring that a business is able to substantiate any claim and representation made in relation to its advertising. We recommend that all businesses ensure:
- All claims made must be capable of being substantiated: Ensure that the business retains records regarding the evidence to verify any claims made.
- Industry standards must be complied with in case you need evidentiary support: Although the ACCC criticised the reliance on international guidelines, the standards were accepted by the Federal Court as "conscientious" and "scientific". This demonstrates that manufacturers should comply with the relevant guidelines as a minimum and additionally test their products outside the guidelines as an extra measure.
- Internal review process for marketing materials be established: Businesses should establish systems for reviewing all marketing materials for compliance with the Australian Consumer Law.
- Potential prosecuting parties are considered: Remember that when it comes to advertising it is not only consumers and competitors who can challenge the veracity of your marketing claims but also consumer advocacy groups including Choice and the ACCC.
- Country of Origin Claims are correct: Ensure that any country of origin claims included in marketing collateral complies with the Australian Consumer Law.
In July of this year the Australian Competition and Consumer Commission (ACCC) filed an appeal against the Federal Court's decision to dismiss the case regarding Kimberly-Clark Australia Pty Ltd's "flushable" wipes claims. The ACCC had contended that the description of the wipes as "flushable" lacked substantiation and falsely led consumers to believe that their wipes would disintegrate like toilet paper. The initial proceedings brought against Kimberly-Clark in December 2016 focused on its range of Kleenex Cottonelle wipe products which had been promoted from May 2013 to May 2016 as "flushable", "completely flushable", "able to be flushed in the toilet" and able to "breakdown in a sewerage system or septic tank".
Due to increasing problems reported by Australian water authorities, the ACCC decided to pursue this case, claiming that the "flushable" claims were misleading or deceptive to consumers, contravening sections 18, 29 (1) and 33 of the Australian Consumer Law.
First Instance
In June of this year, Justice Gleeson dismissed the case put forward by the ACCC. The ACCC had argued that the "flushability" representation implied that the wipes were compatible with sewerage systems and did not pose a risk of harm to household or municipal sewerage systems. It also argued that guidelines relied upon by Kimberley-Clark to demonstrate compliance with "flushability" standards, were not established by an independent testing regime but rather by manufacturers of "flushable" products without any input or accreditation from water authorities. In other words, they were not credible standards.
It was also contended that the flushable representations related to a future matter (within the meaning of s 4 of the ACL) given that the wipes would only fully disintegrate after having been flushed and entering the sewerage system. This would mean that Kimberley-Clarke would be required to satisfy the evidentiary burden of this section, which holds that it must be shown that Kimberley-Clarke had reasonable grounds to make such a representation.
Kimberly-Clarke defended its position by arguing that the wipes were in fact flushable, that it had complied with all possible international standards for "flushability" and that it was difficult to isolate the impact of their particular brand of wipes on the sewerage system.
The Court found in favour of Kimberly-Clarke based on the following points:
- Insufficient Evidence: Although the Court agreed that the wipes had infe
- rior properties of breakdown and dispersion than toilet paper when flushed, the Court found that there was a lack of evidence in relation to the risk of harm that this posed to household and municipal sewerage systems. The evidence had demonstrated that blockages in sewerage systems have many causes including faecal matter, defects in sewerage infrastructure, paper towels and other brand wipes (baby wipes and household cleaning wipes), and therefore it could not be determined that Kimberly-Clark wipes were the sole cause of blockages and damage.
- The evidence was also found to be inferior. Evidence was presented in the form of 28 consumer complaints regarding household system blockages which was considered to be minimal given the millions of packets which were sold during the relevant period.
- Compliance with guidelines: The Court held that the currently available international guidelines, "represent a conscientious and scientific effort to establish an appropriate framework for assessing flushability", which had been complied with by Kimberly-Clark.
- Future matter: The Court found that "flushability" was not used as an expression of a future matter but rather as a characteristic of the wipes as manufactured. The representation was not couched in conditional terms and did not depend upon the occurrence of an uncertain event.
However, the ACCC was successful on one ground, which was the misleading nature of the "made in Australia" representation. It was found that rather than being made in Australia as claimed, the products were manufactured in Germany, South Korea and the UK which both parties agreed was false and misleading.
The Appeal
The ACCC announced that it had appealed the decision on 29 July, with a statement which argued that the Court had erred in requiring evidence that the Kimberly-Clark wipes had caused actual harm, and rather should have given greater weight to the evidence showing the risk of harm these wipes posed to the sewerage system.
It will be interesting to see whether the Full Court upholds the decision which would increase the evidentiary burden on the ACCC to make similar claims against other parties and allow businesses to rely on guidelines developed by industry (not even within Australia) as opposed to authorities.
Such a decision would seem to sit somewhat at odds with the Federal Court's decision last year in April, where the ACCC brought proceedings against Pental Ltd in relation to its flushability claims on its white king flushable toilet and bathroom wipes. Pental had marketed the wipes as being able to "disintegrate in the sewage system when flushed, just like toilet paper”. In that judgment, Pental was required to pay $700,000 in penalties and ordered to implement a Competition and Consumer Compliance Program. However, the facts of this case are distinguished from the current one because Pental conceded the allegations made against it.
It is unlikely that Kimberley-Clarke would concede to such allegations given its successful outcome at first instance, however, whatever the outcome of the appeal, the decision will remain a timely reminder of the importance of maintaining substantiating evidence in relation to any representations on file and establishing internal review processes for marketing materials.
For further information, please contact:
Anita Cade, Partner, Ashurst
anita.cade@ashurst.com
