Lorna Jane Feels the Burn: Watch outs for your next marketing campaign

On 23 July 2021, the Federal Court declared by consent that Lorna Jane Pty Ltd (Lorna Jane), a women’s activewear retailer, had made false and misleading claims in breach of the Australian Consumer Law in connection with the promotion and supply of its LJ Shield Activewear during July 2020.

The claims were made via in-store signage, on the Lorna Jane website and Instagram page, in emails to consumers, and in media releases.

The Federal Court observed that Lorna Jane had “sought to exploit the fear and concern of the public” in respect of the COVID-19 pandemic through its LJ Shield Activewear marketing campaign and described the company’s behaviour as “exploitative, predatory, and potentially dangerous”.

Lorna Jane was required to pay a pecuniary penalty of $5 million. In addition, the Federal Court made orders that Lorna Jane refrain from making any “anti-virus” or similar claims in connection with its activewear clothing unless it had a reasonable basis for doing so, publish corrective advertising both in-store and online (including via its Facebook and Instagram pages), establish and maintain a compliance program for a period of three years, and pay the ACCC’s legal costs of $370k.

Notably, the Federal Court’s decision marks the second round of successful challenge by an Australian regulator against Lorna Jane’s LJ Shield Activewear campaign. On 17 July 2020, the Therapeutic Goods Administration (TGA) took the view that Lorna Jane had contravened various provisions of the Therapeutic Goods Act 1989 and related advertising code, and fined Lorna Jane $39,960 in connection with its campaign.

In short, this has turned out to be a very costly marketing campaign for Lorna Jane.

What did Lorna Jane do wrong according to the Federal Court?

The Federal Court found by consent that there were four categories of false and misleading representation made by Lorna Jane in connection with its LJ Shield Activewear. These were:

  • Elimination representations, being representations that LJ Shield eliminated or killed pathogens or viruses including COVID-19. Examples included “…activewear that stops harmful pathogens in their tracks” and “completely eliminating the possibility of spreading any deadly viruses”;
  • Protection representations, being representations that Anti-Virus Activewear protected wearers against COVID-19. For example, “[LJ Shield] protects against bacteria, viruses, mould and fungus”;
  • Stop the spread representations, being representations that LJ Shield stopped the spread of COVID-19. For example, “[LJ Shield] makes transferal of all pathogens to your Activewear (and let’s face it, the one we’re all thinking about is Covid-19) impossible” and “Cure for the spread of COVID-19? Lorna Jane Thinks So”; and
  • Reasonable basis representations, being representations that Lorna Jane had a reasonable scientific or technological basis upon which to make the above representations.

What did the Federal Court take into account in determining penalties?

The Federal Court noted that the most significant factors to consider when determining penalties were the nature and seriousness of the contraventions, the need for deterrence, and the degree of cooperation provided by Lorna Jane in the proceedings. In particular, the Federal Court was highly critical of the fact that Lorna Jane had conducted its LJ Shield Activewear campaign at a time of considerable public fear and uncertainty, during the emergence of the second wave of the COVID-19 pandemic in Australia. The Federal Court therefore noted that it was necessary “to impose a substantial penalty to reflect the seriousness of the conduct and to demonstrate that exploitative conduct of this kind will not pay”.

What does this mean for you and your next marketing campaign?

It’s all about the evidence – don’t let marketing over-run the facts

You should always undertake a critical examination of the evidence when preparing or reviewing any marketing claims, especially marketing claims which rely on scientific or technological grounds for support. This is because such claims cannot be easily fact-checked by consumers. Examples of these types of claims include “Kills 99.9% of germs”, “Clinically proven to eliminate XX”, and “free from” claims (e.g. “Gluten free, “Soy free”). Key questions to ask yourself include: whether the evidence is statistically significant, whether there are any additional findings or authorities which contradict or call into question the evidence on which you are relying, and whether the evidence supports every reasonable interpretation of your claim.

If you are not able to substantiate every reasonable interpretation of your claim, then you must pare back the claim. For instance, unless you have successfully tested your product against every type of virus or bacteria, then instead of saying “Kills 99.9% of germs”, you may need to specify the particular type of “germs” covered by your testing results (e.g. “common household germs” or “germs which cause the common cold and virus”). The specific wording of your claim needs to be carefully tailored to the evidence to support it.

Think twice before using someone else’s words

You are responsible under the Australian Consumer Law for ensuring the truthfulness of all claims which you make in trade or commerce. This applies to all original claims created by you as well as claims which you have adopted from other persons, such as a supplier or testing partner.

Here, Lorna Jane appeared to be under the genuine impression that it had a reasonable basis for its claims, relying on representations by its overseas supplier about the nature and effects of its LJ Shield technology. Unfortunately for Lorna Jane however, those representations by its supplier failed to stand up to examination by the Federal Court. As a result, the “elimination representations”, “protection representations”, and “stop the spread representations” made by Lorna Jane were all found to be false and misleading. More than this, the fact that Lorna Jane had cited its supplier as authority for making these representations was held to be a further, stand-alone category of false and misleading claim, being the “reasonable basis representations”.

At the end of the day, it is not good enough just to rely on representations made by another person about your products, or the ingredients used in your products, without taking any further steps to independently verify those claims. Remember, it is ultimately your reputation on the line.

Get to know the regulatory landscape – be careful when making certain types of health or therapeutic claims

The Australian Consumer Law is the most important piece of legislation to keep in mind when you are marketing or supplying goods or services to consumers in Australia. However, it is not the only piece of legislation that may apply to you. In particular, you should be aware that certain types of health or therapeutic claims pose a particularly high level of legal risk in Australia and may also need to comply with other strict regulatory standards such as those administered by the TGA.

Here, the claims by Lorna Jane about the ability of its LJ Shield Activewear to “prevent” and “protect against” infectious diseases such as COVID-19 were considered by the TGA to be claims for therapeutic use, which brought its activewear (and non-compliant advertising practices) squarely within the TGA’s regulatory domain. Lorna Jane suffered a double whammy of regulatory attention as a result.

The Addisons Competition and Antitrust team are experts in Australian Consumer Law. Please contact us if you have any questions relating to this topic.

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