Litigation Update - Lorna Jane

On 23 July 2021, the Federal Court of Australia (Brisbane) fined Australian fitness company Lorna Jane Pty Ltd (Lorna Jane) $5million for various breaches of the Australian Consumer Law (ACL).

Background

In July 2020, Lorna Jane brought out a range of fitness wear known as “LJ Shield Activewear” which Lorna Jane claimed protected its wearers from contracting COVID-19.  During this period, Lorna Jane advertised through its in-store signs, its website, Instagram, emails and media releases, and made a variety of claims including:

“LJ SHIELD is a groundbreaking technology that makes transferal of all pathogens to your Activewear (and let’s face it, the one we’re all thinking about is Covid-19) impossible by eliminating the virus on contact with the fabric”.

On 17 July 2020, the Therapeutic Good Administration (TGA), part of the Department of Health, issued three infringement notices to Lorna Jane for alleged unlawful advertising in relation to the COVID-19 claims, and penalised them close to $40,000. The TGA claimed that Lorna Jane had represented that its ‘anti-virus activewear’ was for therapeutic use and therefore was a ‘therapeutic good’ within the Therapeutic Goods Act 1989 and accordingly, subject to the TGA’s regulation.  The TGA claimed that Lorna Jane:

• failed to register the goods on the Australian register of therapeutic goods;
• breached the advertising code; and
• failed to seek TGA approval before making certain claims.

Despite the TGA’s infringement notices, Lorna Jane continued to represent on clothing tags that the item protected the wearer against pathogens.

In December 2020, the Australia Competition and Consumer Commission (ACCC) commenced proceedings against Lorna Jane in the Federal Court of Australia, claiming that during part of July 2020:

• engaged in various conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s18 of the ACL;
• made false or misleading representations with respect to the LJ Shield Activewear, in contravention of s29(1)(g) of the ACL; and
• engaged in conduct that was liable to mislead the public as to the nature, characteristics and suitability for the purpose of the LJ Shield Activewear in contravention of s 33 of the ACL.

By consent, the Court made various orders including that Lorna Jane pay a pecuniary penalty in the amount of $5million, publish a corrective notice, and engage a suitably qualified person with experience in Australia consumer law to establish a program which would ensure Lorna Jane’s compliance with the ACL.

The claims against Lorna Jane CEO, Mr Clarkson, were dismissed.  A media statement released by Lorna Jane states:

“CEO of Lorna Jane Pty Ltd Bill Clarkson said the company had been let down by a trusted supplier. “A trusted supplier sold us a product that did not perform as promised. They led us to believe the technology behind LJ Shield was being sold elsewhere in Australia, the USA, China, and Taiwan and that it was both anti-bacterial and anti-viral…We believed we were passing on a benefit to our customers at no extra cost to them. We did not increase the retail price of the product.”

Lavan comment

This case is a pertinent reminder that compliance with the ACL is an issue taken very seriously by the courts, and that penalties imposed for breaches of the ACL can be onerous.  It is also a reminder that reliance on representations made by suppliers can result in significant issues for companies and that companies should conduct their own enquiries where it is possible that representations made by a supplier may not be true.  If you have any concerns about whether representations being made are in compliance with the ACL, please do not hesitate to contact Iain Freeman or Cinzia Donald