Thinking | 20 October 2021

Health & Community Law Alert: the dangers of making therapeutic claims in retail products: Lorna Jane and Peptide Clinics cases

By Alison Choy Flannigan

Manufacturers, retailers and advertising companies must exercise care when making claims in relation to products which are ‘therapeutic claims’ under the Therapeutic Goods Act 1989 (Cth) (Therapeutic Goods Act) and which may be misleading and deceptive under the Therapeutic Goods Advertising Code and the Australian Consumer Law.

Making ‘therapeutic claims’ can made a product a ‘therapeutic good’ and therefore subject to registration or listing on the Australian Register of Therapeutic Goods if not exempt.

Regulatory framework

In Australia, the marketing and labelling of ‘therapeutic goods’ are regulated by legislation including:

  • Therapeutic Goods Act 1989 (Cth) (‘the Therapeutic Goods Act’);
  • Therapeutic Goods Regulations 1990 (Cth) (‘the Regulations’); and
  • Therapeutic Goods Advertising Code (No. 2) 2018 (Cth) (‘the Therapeutic Goods Advertising Code’).

The Therapeutic Goods Advertising Code ensures that the marketing and advertising of therapeutic goods to consumers is conducted in a manner that promotes the quality use of the product and does not mislead or deceive the consumer.

Additionally, any claims in relation to COVID-19 will also be subject to the Therapeutic Goods (Prohibited Representations-Disinfectants) (COVID-19) Permission 2020. Under this instrument, the Secretary of the Department of Health must approve any advertisement or representation that a therapeutic good has a ‘virucidal effect’ against the COVID-19 virus.

Under the Therapeutic Goods Act, ‘therapeutic goods’ means goods that are (inter alia):

  '(a)  represented in any way to be, or that are, whether because of the way in which the goods are presented or for any other reason, likely to be taken to be:

                              (i)  for therapeutic use; or

                             (ii)  for use as an ingredient or component in the manufacture of therapeutic goods; or

                            (iii)  for use as a container or part of a container for goods of the kind referred to in subparagraph (i) or (ii);..'

‘therapeutic use’ means ‘use in or in connection with:

                     (a)  preventing, diagnosing, curing or alleviating a disease, ailment, defect or injury in persons; or

                     (b)  influencing, inhibiting or modifying a physiological process in persons; or

                     (c)  testing the susceptibility of persons to a disease or ailment; or

                     (d)  influencing, controlling or preventing conception in persons; or

                     (e)  testing for pregnancy in persons; or

                      (f)  the replacement or modification of parts of the anatomy in persons.’

The definition is very broad.

Further, even if therapeutic goods are registered or listed on the Australian Register of Therapeutic Goods (ARTG), certain representations are restricted.

The Lorna Jane case

Lorna Jane is an Australian-owned company that manufactures and retails women’s activewear, founded by its co-director Lorna Jane Clarkson. It has 108 stores in Australia, as well as a number of international stores, including in the USA and New Zealand.

Lorna Jane allegedly claimed, on its website, that its 'anti-virus activewear' prevents and protects against infectious diseases, implying it is effective against COVID-19.

The promotion included the following image:

Lorna Jane anti-virus activewear shield

TGA action

On 17 July 2020, the Australian Therapeutic Good Administration (TGA) issued three infringement notices to Lorna Jane, totalling $39,960 for alleged unlawful advertising in relation to COVID-19.

The TGA alleged that Lorna Jane represented its 'anti-virus activewear' for therapeutic use and therefore believe that it is a therapeutic good within the meaning of the Therapeutic Goods Act.

The advertisement referred to therapeutic goods that were not included in the Australian Register of Therapeutic Goods (ARTG). This is required before they can be lawfully supplied or advertised in Australia.

Under the Therapeutic Goods Act, any references to COVID-19 (and related terms) in the promotion of these types of goods are restricted representations. A restricted representation refers to a serious form of a disease, condition, ailment or defect. The use of restricted representations in advertisements for therapeutic goods is unlawful without a prior formal approval or permission from the TGA.

It is also a breach of the Therapeutic Goods Advertising Code to promote a therapeutic good as being safe, harmless or without side-effects.

ACCC action

On 23 July 2021, in the Federal Court case of Australian Competition and Consumer Commission v Lorna Jane Pty Limited [2021] FCA 852 the Federal Court ordered Lorna Jane Pty Limited (‘Lorna Jane’) to pay $5 million in penalties for engaging in conduct liable to mislead the public and making false and misleading representations to consumers about its ‘LJ Shield Anti-virus Activewear’. This conduct was in breach of Australian Consumer Law, namely engaging in misleading and deceptive conduct.

Between 2 July 2020 and 16 July 2020, Lorna Jane made the following elimination representations:

 (a)    LJ Shield makes the transfer of all pathogens, including COVID-19 to your activewear, impossible by eliminating the virus on contact with the fabric;

 (b)    LJ Shield Activewear stops you from transferring viruses, including COVID-19 from the outside world, to home and beyond;

 (c)    LJ Shield Activewear breaks through the membrane shell of any toxic diseases or germs, including COVID-19 that come into contact with it, not only killing that microbe but preventing it from multiplying into anymore;

 (d)    with LJ Shield, infectious diseases like COVID-19 cannot be transferred to your activewear;

 (e)    viruses that come into contact with LJ Shield particles on LJ Shield Activewear have their outer shells pierced such that they are eradicated;

 (f)    with LJ Shield, infectious diseases like COVID-19 cannot be transferred to your activewear;

 (g)    viruses that come into contact with LJ Shield particles on LJ Shield Activewear have their outer shells pierced such that they die;

 (h)    viruses, including COVID-19, would be unable to adhere or transfer to or would otherwise be eliminated on contact with LJ Shield Activewear,

Between 2 July 2020 and 23 July 2020, Lorna Jane made the following protection representations:

 (a)    LJ Shield Activewear protects you from COVID-19;

 (b)    LJ Shield Activewear protects against viruses, including COVID-19;

 (c)    LJ Shield Activewear protects wearers against lethal viruses, including COVID-19;

 (d)    LJ Shield keeps you protected against viruses, like COVID-19;

(e)    LJ Shield Activewear provides anti-virus protection;

 (f)    LJ Shield protects you, including from COVID-19, with anti-virus activewear;

 (g)    LJ Shield Activewear protects wearers against viruses, including COVID-19;

 (h)    LJ Shield is a step you can take for further protection from spreading germs, including COVID-19;

 (i)    LJ Shield is a step you can take for further protection from spreading germs, including COVID-19;

 (j)    LJ Shield Activewear protected wearers against viruses, including COVID-19.

Between 2 July 2020 and 23 July 2020, by making each of the Elimination Representations, the Protection Representations and the Stop the Spread Representations, Lorna Jane represented to consumers that it had a reasonable scientific or technological basis to make each of the Elimination Representations, the Protection Representations and the Stop the Spread Representations at the time they were made (the Reasonable Basis Representations), in circumstances where Lorna Jane did not in fact have a reasonable basis to make such representations.

Lorna Jane admitted that, between 2 and 23 July 2020, it made false representations to consumers that its LJ Shield Activewear ‘eliminated’ the spread of viruses, including COVID-19. Until at least November 2020, Lorna Jane continued to represent on garment tags that its active wear permanently protected the wearers against pathogens.

ACCC Chair Rod Sims asserted that the $5 million penalty reflects the seriousness of Lorna Jane’s conduct, which Justice Rangiah described as ‘exploitative, predatory and potentially dangerous’.

‘The advertising campaign was conducted in July 2020, at a time of considerable uncertainty, fear and concern amongst the public about the consequences and spread of COVID-19,’ Justice Rangiah said.

The Federal Court held that Lorna Jane:

  • engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the Australian Consumer Law (ACL) (contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth));
  • made false or misleading representations that LJ Shield Activewear had a standard or quality which it did not have, in contravention of section 29(1)(a) of the ACL;
  • made false or misleading representations that LJ Shield Activewear had performance characteristics, uses and/or benefits which it did not have, in contravention of section 29(1)(g) of the ACL; and
  • engaged in conduct liable to mislead the public as to the nature, characteristics and/or suitability for purpose of LJ Shield Activewear, in contravention of section 33 of the ACL.

Lorna Jane also admitted that its director and Chief Creative Officer, Lorna Jane Clarkson, authorised and approved the LJ Shield Activewear promotional material. Ms Clarkson also personally made false or misleading claims about ‘LJ Shield’ in a media release and a video posted on Lorna Jane’s Instagram account.

Ms Clarkson was a party to or knowingly concerned in Lorna Jane's contraventions of sections 18, 29 and 33 of the ACL, for the purposes of section 224(1).

Lastly, Lorna Jane admitted that it had falsely represented that LJ Shield had a scientific or technological basis, when no such testing had been carried out.

In addition to the penalty, the Court ordered that Lorna Jane:

  • is restrained from making any ‘anti-virus’ claims about its active wear for three years, unless it has a reasonable basis for doing so,
  • must publish corrective notices across all platforms used for the LJ Shield marketing campaign including its website, social media and customer emails,
  • must establish a consumer law compliance program, and
  • pay the ACCC’s costs of $370,000.

Peptide Clinics case

Similarly, in 2018-19, the TGA investigated one company (Peptide Clinics Pty Ltd) for breaches of the advertising rules for medicines, including the ban on advertising prescription-only medicines to the public and the Federal Court of Australia and ordered a $10 million penalty against the company.

The contraventions included advertising Schedule 4 substances on the website and on social media channels, advertisements using the word 'peptides', advertising prohibited and restricted representations, and more.

The Court found Peptide Clinics contravened the Act and the Advertising Codes each day the advertisements appeared on the website and on social media channels.

The website advertising peptides also included references to inappropriate and misleading uses, such as for anxiety, anti-ageing, body building, tanning, weight loss, premature ejaculation, hair loss and insomnia relief. The TGA advised that interfaces that allow consumers to review and self-select prescription-only medicines for subsequent prescribing and supply, and websites that promote general classes of prescription-only medicines, will generally be considered in contravention of the Act.

Commentary

Since the onset of the pandemic, there have been a plethora new technologies and innovations brought to market. Particularly, ‘antibacterial’ and ‘antiviral’ consumer products.

The substantial penalties imposed reflect the very real dangers to public health and safety and demonstrate the dangers of making therapeutic goods in relation to retail products.

The maximum penalties per breach of the ACL including unconscionable conduct, making false or misleading representations, and supplying consumer goods or certain services that do not comply with safety standards or which are banned:

  • For corporations, this will be the greater of:
    • $10,000,000
    • three times the value of the benefit received, or
    • 10% of annual turnover in preceding 12 months, if the court cannot determine benefit obtained from the offence.
  • For individuals:  $500,000.

This article was written with the assistance of Lauren Krejci, Paralegal.


This article was first published in Australasian BioTechnology journal (October 2021 | Volume 31 | Number 2).

Contact

Alison Choy Flannigan

Alison Choy Flannigan

Partner & Leader, Health & Community

With over 25 years of corporate, commercial and regulatory experience, Alison has specialised in advising clients in the health,...

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