It’s only ‘natural’

In brief 7 min read

While considering hair oils, cosmetics and trade marks, Justice Katzmann may have inadvertently given the food industry something to worry about by proposing that natural ingredients cannot be labelled 'natural' if they have been chemically altered. This could undermine the common market practice of complying with EU standards when labelling natural ingredients and shows, yet again, that the ACCC's 2006 food labelling guidance is in desperate need of an update. Associate Adrian Chang and Lawyer David Bennett report.

How does it affect you?

• Under Justice Katzmann's formulation of 'natural', ingredients that are derived from natural sources, but are 'chemically altered' would cease to be natural.¹
• That principle appears to allow extraction or separation techniques to be applied to natural ingredients, but, on one view, would preclude any process that causes a chemical alteration of the source material such as cooking, fermentation, pH adjustment or salification.
• By extension, using the term 'natural' to describe natural flavourings made in accordance with EU standards is, in most circumstances, likely to be misleading, which is contrary to current market practice.

Background

Extracted from the nut of the argan tree, a native species of Morocco, argan oil is reputedly rich in antioxidants, vitamin E and essential fatty acids. Since 2009, Moroccanoil Israel Ltd (MIL) has sold hair care products (including oils, shampoos and conditioners) containing argan oil, under the brand 'Moroccanoil'. In 2012, Aldi Foods Pty Ltd began selling a range of hair care products under the brands 'Protane' and 'Protane Naturals', including shampoos and oils which contained 'Moroccan Argan Oil'. In 2015, MIL brought actions against Aldi, including for trade mark infringement and breaches of sections 18 and 29 of the Australian Consumer Law in relation to Aldi's argan oil products. This article focuses on one particular limb of MIL's consumer law argument as it relates to the use of the word 'naturals'.

It's only natural?

Among the s18 claims made by MIL, was the allegation that Aldi's use of the word 'naturals' on its Protane Naturals Moroccan Argan Oil range represented that those products contain only, or substantially natural ingredients.

For its part, Aldi argued that the word 'naturals' did not convey anything about the nature or composition of the products, as it was part of the brand name. In the alternative, if the word 'natural' did convey this meaning, Aldi submitted that it only indicated that at least one natural ingredient was present.

Justice Katzmann accepted that 'naturals' was part of the trade mark, but said this was beside the point as Aldi had admitted in its defence that the word 'naturals' on the products in question is intended to convey to consumers that these products contain one or more ingredients derived from a plant or animal source.

Both parties adduced significant amounts of evidence from scientists as to the meaning of the word 'natural'. However, her Honour noted that in an action for misleading and deceptive conduct, the relevant question is what the word means to the ordinary consumer, not to a scientist. Accordingly, Justice Katzmann considered the ordinary English meaning of the term. Based on this, her Honour rejected Aldi's submission that the name 'naturals' only conveyed to consumers that at least one ingredient was natural. Justice Katzmann held:

… the ordinary or reasonable consumer shopping for hair care products, seeing the reference to 'naturals' on the bottles or their containers, would consider that they were made, either wholly or substantially from natural ingredients. There is no logical reason why a trader would choose to call a product line 'naturals' unless it intended to convey to the consumer that the product was 'natural' or was comprised of substantially natural ingredients. (Emphasis added)

Further, in determining whether the majority of ingredients in each product at issue were 'natural', her Honour considered arguments raised by the expert witnesses as to how to classify ingredients as either 'natural' or 'chemically synthetic'. One expert put forward the view that the term 'naturally occurring' was itself misleading as it did not reflect the complexity involved in manufacturing those ingredients.

That expert preferred the term 'naturally derived with synthetic modification'. In response to that evidence, Justice Katzmann said:

the ordinary or reasonable consumer would not consider a product that has been chemically altered to be a natural product. 'Naturally derived with synthetic modification' is not a synonym for 'natural'. (Emphasis added)

A continuing dearth of practical guidance

In its Food Descriptors Guidelines 2006 (the Guide), the ACCC set out its view on the meaning conveyed by the word 'natural'. The ACCC's view was, and we presume still is, that consumers may view what is 'natural' differently to manufacturers and food technologists. The Guide referred to the Macquarie Dictionary definition of 'natural' – being something that existed in or was formed by nature (ie. not artificial) – before stating that 'natural' claims imply that the product is made up of natural ingredients, ie. ingredients that nature has produced, not man made or interfered with by man.

We've always taken the view that the Guide's stance is overly simplistic. Consumers are well versed in food products that would never be found in nature, but are nevertheless entirely made of natural ingredients such as many fermented foods. The Guide's position would also apparently preclude the use of the word 'natural' to describe foods that include highly concentrated forms of natural essences, such as vanilla essence or natural flavouring substances that are produced after substantial processing (eg. distillation and solvent extraction).

If that is correct – and we do not believe that it is – then a very large number of foods now available in supermarkets that use the word 'natural', either in their brand name, or through on-pack claims, would be untenable.

Against that backdrop, we consider Justice Katzmann's comment raises more questions than it answers.

If we take her Honour's words at face value, then her Honour would say that any substance that is derived from a natural source would cease to be 'natural' after it has been chemically altered. The test would therefore contemplate that extractive techniques, such as solvent extraction or distillation, even if highly artificial, would allow the resultant product to be called 'natural' because that process does not result in a chemical change to the substance. But many other common, 'traditional' techniques for processing ingredients such as cooking, pickling, or fermenting inevitably result in chemical changes to the natural substance and therefore would not be 'natural' according to this test. Even if one were to interpret her Honour's comments as meaning 'alteration by use of chemical reagents', that is still unhelpful when considered against the backdrop of market practice. For example, adjusting the pH of a naturally derived substance arguably results in a chemical change in the substance in question. Does that mean that adding lemon juice to an ingredient will cause that ingredient to cease to be natural?

Her Honour's interpretation of the meaning of 'natural ingredients' is out of step with the EU's Regulation EC 1334/2008 which regulates European standards for labelling natural food flavourings. This is unfortunate, given that food manufacturers have tended to default to the EU standards (which are much more permissive of processing than the ACCC) when labelling natural ingredients despite the ACCC's Guide suggesting that flavourings labelled in accordance with those standards could be misleading.

By drawing the line at chemical alteration, her Honour has provided a murky test that appears to cut out processes that are (at least in our opinion) natural and in common usage today. While Justice Katzmann was not asked to consider food scenarios, her comments nevertheless could be deployed in an action against food producers. Producers therefore have yet another reason to tread carefully around the word 'natural', when it is high time for there to be some clarity.