The Mark of Milk and Money: a2 vs Lion

In brief 9 min read

The widely reported dispute between The a2 Milk Company and Lion about their milk advertising is proving to be a frothy fight, providing food manufacturers with valuable lessons, even before a judgment has been handed down.

Back in June 2016, a proceeding was commenced in the NSW registry of the Federal Court between The a2 Milk Company Australia Pty Ltd (a2 Milk Co) and Lion – Dairy and Drinks Pty Limited, with a2 Milk Co alleging that Lion's statements that PURA and Dairy Farmers milk 'naturally contains A2 Protein', constitute misleading or deceptive conduct.¹ In August, Lion brought a cross‑claim, throwing the accusation of misleading or deceptive conduct back at a2 Milk Co.

What's the fuss? Milk that won't make you moo.

As explained on The a2 Milk Company website, the majority of the protein found in cow's milk is casein protein, and a significant portion of that is beta‑casein. Originally cow's milk contained a single variant of beta‑casein, called 'A2', but during the domestication process, a genetic mutation became common among European dairy cows, causing the affected cows to produce the 'A1' beta‑casein variant.² Depending on genetic makeup, each cow produces milk either containing either only one of the beta‑casein variants, or a mixture of both.³ The founder of The a2 Milk Company, Dr Corran McLachlan, believed that A1 beta‑casein was the reason some people felt discomfort when drinking milk. Hence the premise behind a2 milk: it does not contain any A1 beta‑casein.

Scientific studies have reached differing conclusions as to whether the consumption of A1 beta‑casein is the cause of any adverse symptoms in humans. The ABC product review program 'The Checkout' aired a segment questioning the scientific basis of the health‑benefit claims of The a2 Milk Company back in April 2015, which also prompted legal action from a2 Milk Co.⁴ The action was later withdrawn but showed that The a2 Milk Company was willing to fight to protect its claims of superiority. Some studies have shown statistically significant benefits of a2 milk,⁵ so a2 Milk Co will have at least these as the basis for its claims, although whether this will be sufficient to satisfy an Australian court remains to be seen. While the difference between A1 and A2 beta‑casein is very small (a single amino acid substitution), it has been posited that as a result the variants are metabolised differently; when A1 beta‑casein is broken down by the body, a peptide called 'BCM‑7' is formed which is allegedly associated with negative gastrointestinal effects.⁶

Who keeps the cow

The claimed benefits of a2 milk arise not from the presence of the A2 protein, but from the absence of the A1 variant. Lion's claims that its milk 'naturally contains A2 Protein' may be factually correct, as most commercial milk contains a mixture of A1 and A2 beta‑casein. However, the question the court will consider is not whether the advertising claims made by Lion are literally false; it is whether they will lead consumers into drawing a false conclusion.

In its statement of claim, a2 Milk Co states that customers perceive a2 milk as having benefits over normal milk, being a distinctive taste and less digestive discomfort. a2 Milk Co points to the front labels of some PURA and Dairy Farmers' milk products, which included a banner saying 'NATURALLY contains A2 Protein'. The back labels of the PURA products stated that the milk 'naturally contains the A2 Beta Casein Protein, amongst other milk proteins',⁷ while the back labels of the Dairy Farmers' products set out that the milk 'naturally contains A2 protein, as well as A1 protein.' a2 Milk Co alleges that Lion has contravened ss18 and 29 of the Australian Consumer Law,⁸ by misleadingly representing that its milk is:

• different from normal milk due to the presence, or amount of, A2 protein in the milk; and
• the same or similar to a2 milk, including in terms of protein composition and benefit.

These arguments bring to mind the recent action brought by the ACCC against Reckitt Benckiser (Australia) in relation to its marketing of various types of 'targeted' ibuprofen products (Nurofen Back Pain, Nurofen Migraine Pain, Nurofen Period Pain, and Nurofen Tension Headache), which in actuality all contained the exact same active ingredient.⁹ In a December 2015 judgment, Justice Edelman had no trouble concluding that Reckitt Benckiser had misleadingly represented that these Nuforen products were 'specifically formulated to treat the particular type of pain specified on the packaging',¹⁰ despite there not being an express statement on the packaging to that effect. The same sort of argument can be raised against Lion; it might be concluded that customers would see the express reference to A2 protein on the front labels as a representation that this is a differentiating factor of the advertised milk from other milk.

Lion may attempt to argue that at least the language used on the back of its Dairy Farmers' products gave enough information to consumers for them to properly understand what the labels were saying. However, Lion will have to face the firm position put forth by the majority judgment of the Australian High Court in Australian Competition and Consumer Commission v TPG Internet Pty Ltd:¹¹ where it was established that it is the 'dominant message' of an advertisement that is of crucial importance,¹² as, in the hustle and bustle of their daily lives, consumers may only pay 'perfunctory' attention to advertisements¹³ (and by analogy, labels). It will not assist a party accused of misleading conduct to argue that consumers would eventually be able to logically work their way through the information presented to them to grasp at the nuanced message residing below. The truth of the matter needs to be readily apparent, with important qualifiers as emphasised and clear as the attractively rendered words designed to attract and titillate.¹⁴

a2 Milk Co has further alleged Lion has, through its labelling, engaged in passing‑off, by representing that the products in question are the same or similar to a2 milk, or are similar in terms of protein composition or benefit. While s18 and s29 of the Australian Consumer Law are designed to protect consumers, the law of passing‑off is designed to protect a party's reputation and goodwill. Passing‑off can protect more than a company's trade marks; it can extend to protect other descriptive material, if it can be shown 'the product has derived, from the advertising, a distinctive character which the market recognises'.¹⁵ Further, a passing‑off action can be founded on the basis that an alleged infringer's conduct creates the impression that its goods have an association, quality or endorsement which belongs to the goods of another.¹⁶ However, merely imitating the goods or trading style of another trader will not alone be enough to constitute passing‑off, and a trader can legitimately make use of a market created by the advertising campaign of another.¹⁷ If successful in its passing‑off action, the a2 Milk Co may be able to stop competitors from making particular reference to the A2 protein on their packaging or advertising. However, a2 Milk Co may find it challenging to convince the court that such references are not legitimate conduct; after all, a2 Milk Co does not have a monopoly over A2‑containing milk.

The cross‑claim brought by Lion focusses on whether a2 Milk Co has a basis for the claims it has made regarding the benefits of its milk, and the issues associated with the A1 protein. To avoid being found to have contravened the Australian Consumer Law itself, a2 Milk Co will need to be able to point to scientific research that can support the backbone of its marketing strategy. Australian judges do not shy away from critically analysing evidence put forth as a basis for commercial claims. For example, data that does not provide a statistically significant result has been held to not be a sufficient basis for a claim.¹⁸ If this matter proceeds to judgment, it will likely provide invaluable guidance on the extent to which a party can rely on emerging or contentious scientific theories as a basis for advertising statements.

Under the Food Standards Australia New Zealand (FSANZ) Food Standards Code,¹⁹ those seeking to make a 'general level' health claim regarding their food product are required to notify FSANZ that the claim is supported by the findings of a systematic review.²⁰ a2 Milk Co has made such a notification, stating that dairy products containing approximately 50 per cent A1 beta‑casein are associated with 'intestinal bloating and digestive pain or discomfort'. This shows a2 is confident that it now has the research it needs to back up its claims, but whether the Federal Court will be convinced remains to be seen.

It may appear odd that Lion is disputing the claimed benefits associated with A2 beta‑casein in milk, after seeking to capitalise on the consumer interest in the product. To reconcile these positions, Lion may seek to argue that it never claimed A2 protein had any associated benefit, and instead added the references to A2 protein on its labels because it saw this as something currently in vogue. Lion may compare its use of references to A2 on its products to the common practice of using pictures of celebrities in consumer advertising: nothing more than an attempt to draw upon consumers' natural tendency to gravitate to that which is, rightly or wrongly, fashionable at the time. Alternatively, Lion may attempt to reconcile these positions by saying that it accepts there may be some benefit associated with the A2 protein, which increases in accordance with the proportion of the beta‑casein in milk that is of the A2 variant. Lion may argue that the science simply does not stretch to the extent of showing that milk must be entirely A1 free in order for these benefits to be felt.

Lessons to take back to the barn

Consumer industries where scientifically grounded comparative claims are often used tend to create litigious environments, where companies aggressively seek to attack the claims of their opponents while validating their own. The highly competitive Australian dairy industry is a prime example of this. a2 Milk Co has successfully established itself in this market and sought to cordon off its own niche, but it was inevitable that other players would want a part of the action.

This dispute is an important reminder to all commercial enterprises in such sectors: when it comes to checking and validating claims made in advertising, any risky gaps will be used against you sooner or later. Issues that are not clear or egregious examples of misleading advertising, easily overlooked, can provide competitors with enough leverage to undermine your market position. As this case shows, this can often occur in circumstances where a company challenges the behaviour of its competitor; the competitor will invariably respond by pointing to any issues with the advertising of the complaining party.

Regularly and proactively checking your advertising claims to ensure they remain accurate, scientifically justified, and compliant with the ever‑evolving law is more than merely a risk mitigation exercise. It is essential to ensuring that your organisation is able to stop others from improperly disparaging or trading off your brand. As the saying teaches us, those who live in glass houses shouldn't throw stones. Ask yourself: how much glass will come falling when your stones come flying back?

Inevitably, the case will evolve over time, and the arguments will be refined in due course. We note that, at the time of publishing this article, Lion has filed an amended notice and statement of cross‑claim, to which a2 Milk Co has filed a new defence. The parties have also exchanged requests for further particulars. We will be monitoring this case for further significant developments.