On 19 March 2018, White J of the Federal Court found that Heinz had engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law (ACL) (which is Sch 2 to the Competition and Consumer Act 2010 (Cth), and had made false or misleading representations to consumers in contravention of s 29(1)(g) of the ACL.
The conduct comprised representations on the packets in which Heinz sold three products, which were three flavours of "Little Kids fruit & veg SHREDZ". The representations were that the Products were a nutritious food and were beneficial to the health of children aged 1-3 years (“toddlers”). The representations were not express but had been conveyed by the words and imagery on the packets. By reason of the high sugar content and sticky texture of the products, this was not the case. A declaration to this effect was made on 10 April 2018. On 24 August 2018 White J published his decision and reasons in relation to the amount of the pecuniary penalty to be imposed on Heinz.
White J considered the following aspects in determining the pecuniary penalty to be imposed:
- The nature and extent of the contraventions – Heinz provided evidence as to the sales of each product, and the revenue and gross profit thereby derived. The total number of sales (and therefore the minimum number of representations) was over 1.2 million.
- The effect of the conduct – these were an effect on consumer choice, which is a nonmonetary effect, and also the potential for toddlers to suffer harm (including obesity and dental cavities).
- It could not be shown that Heinz knew that each representation was false or misleading, but the court found that Heinz ought to have known it was making each representation and that each was false. However Heinz's conduct fell short of recklessness or wilful blindness.
- Nevertheless, Heinz's conduct was characterised as extensive and serious. It continued for a long period of time.
- It was also relevant that Heinz had no record of prior contraventions. The court did not accept submissions that Heinz's corporate culture marked by a lack of concern for compliance with the requirements of the ACL.
- The general and specific deterrent purposes of an appropriate pecuniary penalty were also relevant.
- It was also relevant that Heinz is a major company with substantial resources and a capacity to pay a substantial penalty.
The aggregate of the penalties imposed was $2.25 million. This was much more than the figure of $400,000 for which Heinz contended, but much less than the penalties totalling $10 million, for which the ACCC contended.
The court considered that it would not be appropriate to fix the aggregate of penalties at an amount which does no more than negate the profit Heinz derived from the sale of the products, which would not reflect the purposes for which the penalties are imposed.
Corrective publication orders were not considered to be appropriate in this case, given the long period which had elapsed since Heinz ceased making the products, and the fact that the litigation had been the subject of publicity.
A compliance and training program for Heinz was also sought by the ACCC, was not opposed, and was ordered.