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False claims of virus protection result in a fine for Lorna Jane

What better time to market “anti-virus activewear” than in the midst of a COVID-19 pandemic?

Lorna Jane is a leading Australian women’s activewear brand which sells a range of sports bras, tights, leggings, tank tops and gym clothes.

It made three virus protection claims:

  • Its “anti-virus activewear” prevented and protected against infectious diseases.
     
  • It launched its “LJ Shield exclusive technology”.
     
  • It had worked for two years to develop a “chemical-free treatment that when applied to activewear, protects wearers against viruses and bacteria”.

Advertising activewear with virus protection gives the garments a therapeutic use. According to the Therapeutic Goods Administration (the TGA), this make the garments a therapeutic good. Therapeutic goods are subject to the Therapeutic Goods Act 1989 (the Act) and the Therapeutic Goods Advertising Code (No. 2) 2018 (the Code).

How Lorna Jane breached the Therapeutic Goods Act and the Advertising Code

In its media release, the TGA relied upon three breaches of the Act and the Code as reasons to issue three infringement notices totalling $39,960 to Lorna Jane. They were:

  1. “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.”
  2. “Under the Therapeutic Goods Act 1989, 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.”
  3. “It is also a breach of the Therapeutic Goods Advertising Code (No. 2) 2018 to promote a therapeutic good as being safe, harmless or without side-effects.”

The TGA concluded: “These advertisements are of significant concern given the current pandemic.”

The TGA had warned advertisers about illegal advertising relating to COVID-19 on 24 March 2020. This is the full text of the warning:

TGA issues warning about illegal advertising relating to COVID-19

Warning to consumers
As a consumer, it is important to be aware of false and misleading advertising. Unfortunately, some people are taking advantage of the current situation by advertising products that claim to prevent or cure COVID-19.

Claims being made include unregistered products that 'kill COVID-19', air purifiers that help fight the coronavirus, complementary medicines that prevent the virus, and a medical device that treats a number of serious diseases including COVID-19, HIV AIDs and cancer.

In Australia, the advertising of therapeutic goods is regulated by the TGA and must meet certain requirements.

If you are suspicious of the claims being made about a product, including those advertised as preventing or curing COVID-19, you can provide information to us via the online advertising complaint form.

Warning to advertisers
The TGA will take action in relation to the illegal advertising of therapeutic products. Advertisers are reminded that:

  • products which are represented to be for therapeutic use are regulated as therapeutic goods (with a few limited exceptions)
     
  • therapeutic goods must be included in the Australian Register of Therapeutic Goods, unless they are subject to an exemption, approval or authority under therapeutic goods legislation
     
  • criminal offence and civil penalty provisions apply to illegal advertising of therapeutic goods
     
  • the TGA is monitoring non-compliance, particularly in relation to the advertising of products that claim to prevent or cure COVID-19 and will take action in relation to any advertisements that do not meet the requirements, including those that seek to mislead consumers
     
  • this is in line with the previous warning about advertising and the novel coronavirus.

Consequences of breaking the law
The Therapeutic Goods Act 1989 provides for a range of criminal offences, some of which are punishable by up to 5 years’ imprisonment and attract fines of up to $840,000 for an individual or $4.2 million for a body corporate. Further, the legislation provides for civil penalties involving a penalty amount of up to $1.05 million for an individual or $10.5 million for a body corporate. In a civil penalty case brought by the TGA (Secretary, Department of Health v Peptide Clinics Australia Pty Ltd [2019] FCA 1107) the Federal Court of Australia awarded $10 million in civil penalties in relation to contraventions of the advertising provisions under the Act.

About the TGA
The TGA is part of the Australian Government Department of Health and is responsible for regulating the advertising of therapeutic goods by administrating the Therapeutic Goods Act 1989, the Therapeutic Goods Regulations 1990 and the Therapeutic Goods Advertising Code (No.2) 2018.


Conclusions

The Therapeutic Goods Advertising Code is specific legislation that applies to the advertising of therapeutic goods over and above the Australian Consumer Law, which regulates advertising generally.

The TGA takes seriously any claims about diseases, conditions, ailments or defects that require diagnosis or treatment or supervision by a suitably qualified health professional. These claims are called restricted representations and require formal approval by the TGA before they can be used in advertising, on labels, and so forth. Approval will be given only if the claims are evidence based.

And if the claims are for products, they must be registered as therapeutic goods before the products can be advertised or labelled.

The Code has specific requirements for the advertising of particular therapeutic goods, namely complementary medicines, analgesics, vitamins and minerals, weight management products and sunscreens. The fact that garments are not specifically mentioned may explain why Lorna Jane did not receive a more substantial fine.

Marketing Commentary By Michael Field from EvettField Partners

Any new marketing campaign or product development, particularly where expansive claims are being made must be verified and pass an internal regulatory review process and approval prior to the launch to protect both the company and the consumer.

In this instance, the internal review process looks like it went missing!

No–one pointed out that it was not allowed for garments to be advertised as virus-free without approval by the TGA, the health authority.

Lorna Jane may have got off lightly, as a ~$40,000 penalty is small fry when it comes to marketing budgets and tiny compared to the likely financial benefit Lorna Jane obtained by deceiving their customers into thinking they were protecting against COVID-19 by wearing its activewear when they were not.

It makes me wonder if companies are being deliberately lax on their processes when it comes to making product claims, as the penalties like this are relatively low compared to the potential upside of a successful marketing campaign.

But what consideration is given to loss of brand equity and the resulting loss in consumer confidence regarding the brand’s claims when held to account by a regulatory authority for breaching the law?

Business leaders and marketing managers need to step up and behave more responsibly when it comes to making product claims, particularly where unsubstantiated health claims are being made without any evidence or regard for the consumer.

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