Using trademarks to mislead customers: Farmers, eggs and the ACCC


On November 2, the Australian Competition and Consumer Commission (ACCC) issued an initial assessment knocking back a certified trademark application by the Australian Egg Corporation Limited (AECL) . The decision is here.

The key element of the trademark relates to the use of the term ‘free range’ for eggs. The supporters of the trademark have been fighting back. An example is here. In my view, the ACCC is right and the AECL is wrong.

There are currently a range of uses of the term ‘free range’ for advertising eggs to customers. The words mean something. The benchmarks used by the ACCC were the dictionary definition of the words, existing standards put up in both legislation and by other farming bodies, and the submissions to the assessment. Let’s ignore the latter and assume (as The Land article does) that these are all biased chook-huggers.

The standard of stocking in the AECL trademark is given in paragraph 46 of the ACCC initial assessment:

Outdoor stocking density can be up to 20,000 birds per hectare

This number is significantly more than other approaches to the term ‘free range’. There is a model code of practice that has the stocking density at 1,500 birds per hectare. There is Queensland legislation that states:

A person must not keep more than 1500 laying fowl in a hectare in the outdoor range of a free range system.

The same stocking density for free range eggs is incorporated into legislation currently before the NSW and SA parliaments. There are other standards set by bodies such as the RSPCA and the Victorian farmers federation as well as overseas bodies. Indeed, of twelve other comparisons, the highest number for stocking density reported by the ACCC is 2,500 hens per hectare for ‘free range’. So the AECL is out by a factor of eight!

The ACCC concludes at paragraph 142:

The ACCC is therefore concerned that the AECL Standards governing free range egg production …  has the potential to mislead or deceive consumers.

Damn right!

The AECL attempt to weaken the meaning of the term ‘free range’ is just one example of an all-too-common practice. Individually, sellers have an incentive to devalue words in their promotions in order to raise sales. This can lead to a race to the bottom – where the meaning of the words gets reduced until they are meaningless. But this harms all sellers as devaluing language reduces the ability to communicate with customers. That is why we have standards and these standards benefit sellers as a whole (even if individually they would like to ‘cut corners’ on language).

So the party that should really feel aggrieved by the AECL attempt to devalue the term ‘free range’ is the egg farmers themselves. If the AECL standard is approved then it simply means that the term ‘free range’ is devalued. Egg producers who want to distinguish their product will have less ability to do so and there will be a race to the bottom in terms of production quality and price. And turning eggs back into a commodity product does not benefit egg farmers.

So egg producers should be thanking the ACCC for protecting their standards. And they should be telling the AECL in no uncertain terms to ‘back off’ from devaluing their ability to differentiate their product.


3 Responses to "Using trademarks to mislead customers: Farmers, eggs and the ACCC"
  1. Stephen, great piece. Four square metres per chook sounds like a reasonable amount of space for a chook. Half a square metre does not.

    An additional if perhaps minor aspect of this issue is that by pushing the meaning of words like this, the AECL is disseminating the message: “Australian egg marketers will happily push the meaning of words beyond what reasonable people would think they mean, so you should not trust us.” For me, a clear message from these facts is to put the most suspicious possible interpretation on everything I read on an egg carton.

    It’s good to see the ACCC enforcing the reasonable meaning of language. I’d be interested in your views on the potential and limits of this approach. Alan Kohler once argued, very sensibly, that most of the people calling themselves “financial planners” were actually salespeople, and that one approach to regulation of the industry would be for the ACCC to simply pursue them for misleading conduct. This seems an attractive approach, but it could have posed some problems.

  2. Stephen
    So the ACCC has to save the AECL from itself! I think the chook producers should do more than tell the AECL to back off! Surely this is a sackable offence? I do however wonder how far the ACCC should reach into influencing market conduct. Yes it’s deceptive conduct.. bordering on stupidity.. but with so many consumer groups focused on the issue (and so many opposed to the AECL standards) surely its possible to imagine the market resolving this?

    As John Freebairn said in 1967 “Grading as a Market Innovation” where he concluded …”Often the quality characteristics by which firms differentiate their products with brand names are spurious tending at first to confuse buyers and providing them with no real added satisfaction. In the long run such a brand will pass from the market scene”

  3. I buy the eggs marked with the RSPCA’s approval because I don’t know what exactly constitutes humane treatment of hens – free range and/or stocking ratios can’t be the only important characteristic! But this lack of understanding seems to lend a ‘credence’ characteristic to this good. Like ‘fairtrade’ coffee, consumers can never truly know whether such goods have been produced the preferred way. This gives producers the incentive to employ a third-party to certify. So purely from an economic perspective, I wonder how deep a meaning consumers attach to the term ‘free range’. Is this a question the AECL standard may have tested in the market place?

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