Australian Regulators Crack Down on Companies Promoting Goods Purported to Prevent COVID-19

Madeleine McCarthy and Mark Giddings

Since COVID-19 was declared a pandemic in March 2020, Australian regulators have been targeting companies that advertise or sell products with purported but unproven preventative or curative effects with respect to the COVID-19 virus. In a notable example, the Therapeutic Goods Administration (TGA) issued fines totalling over $100,000 against a company associated with celebrity chef Pete Evans for promoting and selling the “BioCharger NG Subtle Energy Platform”, which Evans claimed could be used to treat COVID-19 without any scientific or technological basis.[1] Other companies have been fined by the TGA for their unsubstantiated claims in relation to COVID-19 preventative nasal sprays, disinfectants and rapid test kits.

Recently, activewear retailer Lorna Jane has been both fined by the TGA and had proceedings brought against it by the Australian Competition and Consumer Commission (ACCC) for claims the company made regarding its LJ Shield Activewear line of clothing.

In July 2020, amidst a time of considerable uncertainty and concern about the consequences and spread of COVID-19, Lorna Jane launched a marketing campaign to promote its new range. The marketing campaign, conducted through various social media platforms, direct emails to customers and in-store advertisements, made a series of representations that LJ Shield Activewear, coated with LJ Shield, could eliminate pathogens and viruses, protect against COVID-19 and stop the spread. Further, Lorna Jane represented that it had a reasonable scientific and technological basis for making such representations.

TGA infringement notices against Lorna Jane

On 17 July 2020, the TGA issued Lorna Jane with three infringement notices totalling $39,960 for alleged unlawful advertising in relation to COVID-19.[2] According to the TGA, by advertising LJ Shield Activewear for therapeutic use, it was a therapeutic good within the meaning of the Therapeutic Goods Act 1989 (Cth) and was therefore subject to the Therapeutic Goods Regulations 1990 (Cth) and the Therapeutic Goods Advertising Code (No 2).

As a therapeutic good, LJ Shield Activewear was required to be registered in the Australian Register of Therapeutic Goods before it could be lawfully supplied or advertised in Australia. Additionally, any references to COVID-19 in the promotion of therapeutic goods was a “restricted representation” that is unlawful unless prior formal approval has been obtained from the TGA. Lorna Jane had taken neither of these steps.

ACCC court proceedings against Lorna Jane

Following this, the ACCC commenced proceedings against Lorna Jane on 21 December 2020, alleging that the company had engaged in misleading or deceptive conduct, made false or misleading representations and engaged in conduct that was likely to mislead the public, in contravention of sections 18, 29(1)(g) and 33 of the Australian Consumer Law.

Shortly before the hearing, Lorna Jane admitted the contraventions and the parties made joint submissions on the proposed penalty and orders. The parties sought orders that Lorna Jane pay a penalty of $5 million, be restrained from using the phrase “anti-virus” or other similar phrases for three years and publish a corrective notice on its website, in-store and to be emailed to customers.

Because Lorna Jane consented to the orders, all that was left for the Court to decide was whether the proposed penalty and other orders were appropriate in the circumstances. With this in mind, Rangiah J noted that:

Lorna Jane sought to exploit the fear and concern of the public through the use of misleading, deceptive, and untrue representations about the properties of LJ Shield Activewear. The behaviour of Lorna Jane can only be described as exploitative, predatory, and potentially dangerous … There is a need to impose a substantial penalty to reflect the seriousness of the conduct and to demonstrate that exploitative conduct of this kind will not pay.

His Honour also noted that the ACCC had not alleged that Lorna Jane knew that the representations were false, had actually profited from its conduct or that the contraventions caused harm to consumers. In the circumstances, his Honour was satisfied that the proposed penalty of $5 million was appropriate.

In a statement published on Lorna Jane’s website, CEO Bill Clarkson commented that the company “had been let down by a trusted supplier” who led them to believe “the technology behind LJ Shield was being sold elsewhere in Australia, the USA, China, and Taiwan and that it was both anti-bacterial and anti-viral.[3]

Comment

In light of the heightened public concern around COVID-19, this decision demonstrates that the TGA is closely monitoring and taking action against companies that advertise therapeutic goods which purportedly prevent or cure COVID-19 or other viruses. Additionally, the decision shows that such companies may be targeted by more than one regulator and face significant penalties if their representations are capable of creating a false impression that their claims are backed by scientific or technological evidence.

For companies, the ACCC case against Lorna Jane is a reminder of the responsibility not to make false or misleading representations about products or services. It makes no difference if a statement was intended to be misleading or not. What is determinative is whether the statement is objectively misleading. It is also a message to consumers to exercise caution, while processing and navigating the “new normal” that is COVID-19, around products marketed as preventing or curing COVID-19, even when they are advertised by large, well-established companies with a global following.

[1] TGA, “Pete Evans’ company fined for alleged COVID-19 advertising breaches” (24 April 2020): https://www.tga.gov.au/media-release/pete-evans-company-fined-alleged-covid-19-advertising-breaches; TGA, “Peter Evans Chef Pty Ltd fined $79,920 for alleged unlawful advertising (25 May 2021): https://www.tga.gov.au/media-release/peter-evans-chef-pty-ltd-fined-79920-alleged-unlawful-advertising

[2] TGA, “Lorna Jane fined almost $40,000 for alleged advertising breaches in relation to COVID-19 and ‘anti-virus activewear’” (17 July 2020): https://www.tga.gov.au/media-release/lorna-jane-fined-almost-40000-alleged-advertising-breaches-relation-covid-19-and-anti-virus-activewear

[3] Lorna Jane, “Media Statement” (23 July 2021): https://www.lornajane.com.au/lorna-jane-media.html

Share

Email | Linkedin | Print

Australia

LK Law Pty Ltd
Level 23
25 Grenfell Street
Adelaide 5000
Australia
Visit us | Email us
Telephone: +61 8 8239 4600

London

LK Law LLP
Holborn Gate
26 Southampton Buildings
London WC2A 1AN
United Kingdom
Visit us | Email us
Telephone: +44 20 7400 2180
Back to top