Representations on Packaging and in Advertising – the Full Federal Court finds that Kimberley-Clark has not Engaged in Misleading Conduct by using "Flushable".

The Australian Competition and Consumer Commission (ACCC) has lost its Full Court appeal that Kimberly-Clark Australia (KCA) had misled and deceived consumers, by representing on its website www.kleenex-cottonelle.com.au and on product packaging, that its Kleenex Cottonelle Flushable wipes (KCFC wipes) were suitable for flushing down toilets.

The full decision can be found here.

Background

Earlier Federal Court Proceedings

In 2006 the ACCC commenced Federal Court proceedings against KCA alleging that KCA had, by its advertising and marketing of the KCFC wipes during May 2013 and May 2016:

(1) engaged in conduct in trade or commerce which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the Australian Consumer Law, being Sch 2 of the Competition and Consumer Act 2010 (ACL);

(2) made false or misleading representations that its KCFC wipes had a particular quality in contravention of s 29(1)(a) of the ACL and/or had particular performance characteristics, uses and/or benefits, in contravention of s 29(1)(g) of the ACL; and

(3) engaged in conduct in trade or commerce that was liable to mislead the public as to the nature, characteristics, and suitability for purpose of KCFC wipes, in contravention of s 33 of the ACL.

The ACC alleged that KCA's packaging and website represented that the KCFC wipes:

(1) "were suitable to be flushed down the toilet and into sewerage systems in Australia" (flushability representation);

(2) "had similar characteristics to toilet paper when flushed", as they would behave in a similar way to toilet paper when flushed in that they break up or disintegrate in a timeframe and manner similar to toilet paper" (characteristics representation); and

(3) "would break up or disintegrate in a timeframe and manner similar to toilet paper" (disintegration representation).

The representations included statements on the webpages of KCA's website www.kleenex-cottonelle.com.au , such as "Flushable Cleaning cloths" and "will break up in the sewerage or septic system like toilet paper", use on the product packaging of words, such as "flushable" and "Cloths break down in sewerage system or septic tank" and of the logo (depicted below).

At the time there was no legislation or generally accepted industry standards governing the characteristics of what could be marketed as "flushable", although KCA argued that the KFCF wipes met the tests for flushability under the "GD3 Guidelines for flushability", which had been developed by manufacturers, including Kimberley-Clarke Corporation.

KCA denied making the characteristics or disintegration representations but accepted that it made the flushability representation. However, it argued that the flushability representation was not false or misleading and was within the G3 Guidelines.

While accepting that the KCFC wipes do not break down as quickly or easily as toilet paper, Gleeson J found that the characteristics and disintegration representations had not been made. This was because in the website or packaging context in which the alleged representations appeared, they would not convey to an ordinary reasonable consumer anything about how the flushed KCFC wipes behaved, except that they might be "flushable" (although not equivalently flushable to toilet paper).

Having regard to the ACCC's concession and the evidence, Gleeson J found that the flushability representation had been made by KCA. However, her Honour found that the flushability representation was not false, misleading or deceptive because there was insufficient evidence that harm had actually eventuated to household plumbing and the sewer network to demonstrate that the KCFC wipes were unsuitable for flushing.

While there was disagreement over the G3 Guidelines being an acceptable standard, Gleeson J found that, in the absence of this evidence of harm, they were an "appropriate framework for assessing flushability" and a "reasonable benchmark for making a flushability claim".

The Appeal to the Full Federal Court

The ACCC unsuccessfully appealed Gleeson J's decision to the Full Federal Court on 8 appeal grounds, all of which were dismissed. Appeal grounds 1 to 6 related to the flushability representation.

In the 1st ground of appeal, the ACCC argued that the trial judge, Gleeson J was in error because she "approached the question of 'harm' as might be done in a damage claim in negligence, elevating the inquiry to proof of causation as opposed to assessing falsifiability under the consumer law". The ACCC argued that her Honour should have considered the question of whether there was a real risk of harm or that the KC wipes had the potential to cause harm rather than that the KC wipes contributed to or caused actual harm (including blockages) to household plumbing (including septic tanks) or to the sewerage network.

The Full Court dismissed this ground of appeal for two reasons. First, there was no error in the primary judge's reasons because her Honour simply responded to the case argued by the ACCC at trial on the flushability representation, which was on the basis that the actual harm had been caused, not that flushing the KC wipes posed a risk of harm. The Full Court said "No such case was run at trial. It cannot be run now", as it was a different case.

Secondly, the Full Court found that Gleeson J had, in any event, considered and addressed the risk of harm but concluded that it was not shown to be materially greater than the risk posed by toilet paper, and that it was not erroneous to take into account, as the primary judge did, whether any harm in fact eventuated to household plumbing and the sewerage network, when assessing the level of risk posed by the KCFC wipes.

Related to this second issue, the ACCC argued in its 2nd and 3rd appeal grounds that Gleeson J's findings that the KCFC wipes did not present a risk of harm "over and above" or "materially greater" than that posed by toilet paper and her finding that flushing the KCFC wipes down the toilet would contribute to, or cause harm, were in error because they were inconsistent with and against the weight of the evidence.

In dismissing these grounds, the Full Court found that It was not erroneous (for the trial judge) to have regard to " the paucity of evidence of harm in reaching the conclusion that the risk posed by KCFC wipes was not materially greater than the risk posed by toilet paper".

Some of the problems identified by the primary judge in the evidence led by the ACCC were:

  • Most of the evidence was directed to how wipes in general caused blockages, but not that the KCFC wipes caused blockages. The ACCC had presented only very weak evidence of blockages in household drain lines and in the sewer (beyond the household drain line) caused by the KCFC wipes.
  • It was accepted, as a matter of logic, that the more quickly an item breaks down after flushing the less the risk of snagging or clumping in the sewerage system. The KCFC wipes were shown to break down and disperse more slowly than toilet paper but this did not support an inference that flushing KCFC wipes down the toilet led to a materially greater risk than toilet paper of causing blockages to the sewerage system, when there was a lack of evidence that KCFC wipes actually did cause blockages.
  • KCA's change of packaging in October 2015 to indicate that it did not recommend KCFC wipes be flushed into a domestic septic tank was insufficient to support the inference (contended for by the ACCC) that the KCFC wipes contributed to or caused harm to household plumbing or the sewer network.

In the 4th ground of appeal, the ACCC argued that the trial judge erred in finding that the evidence of 26 consumer complaints in KCA's business records (regarding how their household plumbing (including septic tanks) had been blocked by KCFC wipes) was "weak" and insufficient to support a finding that the KCFC wipes were not suitable to be flushed down toilets.

The Full Court said that the small number of consumer complaints (most of which related to blockages in septic tanks not the sewerage systems as argued by ACCC at trial) and the absence of evidence from any consumer or plumber to verify the facts in any of the complaints was "hardly a sound basis" for reaching the conclusion that KCA falsely representing that KCFC wipes were flushable, and "rather suggests that the KCFC wipes were suitable to be flushed into domestic drain lines".

In the 5th ground of appeal, the ACCC argued that the trial judge erred in finding that the GD3 Guidelines were an "appropriate framework for assessing flushability", because manufacturers, including KC had developed the guidelines themselves, "to avoid government regulation which might constrain their business".

The Full Court dismissed this ground. They found that the primary judge was "plainly aware that the manufacturers were developing their own guidelines" and their development had been informed by various "real world" tests.

The ACCC's 7th and 8th grounds of the appeal concerned the characteristics and disintegration representations.

The Full Court found that the primary judge was correct to conclude that the characteristics and disintegration representations were not made and so it was not necessary to consider then whether they were false and misleading.

The Full Court noted that of the 8 representations relied upon by the ACCC, 6 did not mention toilet paper at all or compare the KCFC wipes with the characteristics or performance of toilet paper. The 5th representation, that the KCFC wipes "will break up in the sewerage or septic system like toilet paper" (appearing on a webpage of the www.kleenex-cottonelle.com.au website) was the only statement which directly compared the KCFC wipes to toilet paper. However, the Full Court agreed with the judge at first instance that this representation had to be considered in the context of the immediately following sentience; "However, do not flush an excessive amount of wipes at one time (no more than two wipes per flush)" The Full Court said that in this context (i.e. the direction not to flush any more than two wipes), the reasonable consumer would not have understood that the KCFC wipes broke up in the same way as toilet paper .

Regarding the eighth representation, the image, the Full Court said that he image did not, of itself, or together with the other representations read in context, convey that KCFC wipes "had similar characteristics to toilet paper when flushed" or that they "would break up or disintegrate in a timeframe and manner similar to toilet paper".

Comment

The ACCC's case ultimately failed because it could not prove that KCA made the false and misleading statements that the ACCC alleged. The ACCC didn't help its own cause by arguing at first instance (which could not be changed on appeal) that the KFCF wipes were not suitable for flushing because they caused actual harm to the sewerage system. With this argument the ACCC gave itself a higher evidentiary burden to meet than the argument that the KCFC wipes posed only a risk of harm. It is worth noting that the ACCC's argument at first instance that the flushabiilty representation by KFA was in respect of a "future matter", and so within section 4 of the ACL, was not successful. If the ACCC had succeeded with this argument and section 4 found to apply, the evidentiary burden would instead have been on KCA to present evidence that it had "reasonable grounds" for making the flushability representation and so (for that reason) the representations could not be taken as misleading.

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