While imported fish oil and Vitamin D were encapsulated in Australia, this was not enough to justify referring to the product as “Made in Australia,” according to a court ruling

A Federal Court has ruled in favour of the Australian Made Campaign and Australian Competition and Consumer Commission, that Nature’s Care Manufacture Pty Ltd was not permitted to label the product “Made in Australia” under the Australian Consumer Law’s Country of Origin labelling provisions.

A soft gel capsule marketed as “Fish Oil + Vitamin D” had packaging which bore the “Australian made and owned” kangaroo logo.

Earlier this year, Nature’s Care applied to renew its licence from the Australian Made Campaign so it could continue to use the ‘Made in Australia’ kangaroo logo for its Fish Oil 1000 + Vitamin D3 soft gel capsule product.

It had been licensed to use the mark in relation to several of its products since 2012, including the fish oil and Vitamin D product.

The ACCC had given guidance to the industry which was released in response to new laws passed by the Parliament. This legislation changed the criteria for companies to claim ‘Made in Australia’ status.

The AMCL rejected Nature’s Care’s licence renewal application so that it would accord with the views expressed by the ACCC in its industry guide on complementary healthcare products and Country of Origin labelling.

Nature’s Care instituted proceedings in the Federal Court for a declaration its Fish Oil 1000 + Vitamin D3 product was last ‘substantially transformed’ in Australia, which would have permitted it to be labelled ‘Made in Australia’ despite containing primarily imported ingredients.

The Court heard that the company imported fish oil in 200kg drums from Chile; vitamin D3 or Coleralciferol from China in 25kg or 1kg drums; and the soft gel capsules into which the ingredients were packed from Indonesia in 220kg drums.

Water and gelatine powder involved in the encapsulation process were sourced in Australia.

The Court noted that the central issue in the case was whether it was accurate to say that the capsules were made in Australia.

Judge Perram noted that there was no change in any of the qualities of the fish oil as a result of its mixing with vitamin D, and that properties of the fish oil indicated that it was “not entirely correct” to say that the fish oil’s nature had been changed by encapsulation so that its odour was no longer present.

“I was provided with a sample of this fish oil as Exhibit MX-3 and have smelt it. It is smells like a cross between stale fish and vinyl,” he said.

“My associate thinks it smells like semi-fermented grass cuttings revealing his more sophisticated nose.

“I have not tasted it but I am prepared to infer that it would be very unpleasant to consume even in small doses. I also accept that placing the fish oil in the soft-gel capsules has the effect of making palatable and flavourless a product which is essentially very unpleasant.

“It has another benefit too. By sealing the fish oil in the capsules the speed of oxidation is reduced and, along with that, the rate of deterioration in the fish oil caused by exposure to light.”

One expert had drawn his attention to the issue of “burp-back,” he said.

“‘Burp-back’ occurs when a soft-gel capsule containing something malodorous such as fish oil is consumed. Once the capsule descends into the digestive depths of the stomach the soft-gel dissolves releasing its noxious payload the odour of which, thus liberated, rises up the gullet to the mouth where, unsought and unwelcome, it presents itself as a salutary warning against the perils of belching.

“Just because the soft-gel fails in the inhospitable regions of the upper reaches of the alimentary canal does not mean that for many people the capsule is not effective to protect them from the smell of the fish oil.

“It does mean, however, that it cannot be entirely correct to say that encapsulation has changed the nature of the fish oil so that its odour is no longer present.”

However he also suggested that the capsules were a means by which a precisely measured dose of fish oil and vitamin D3 could be delivered.

The ACCC provided evidence to support its view that, consistent with its published guidance, encapsulation and the addition of a vitamin should not be considered a ‘substantial transformation’ of the imported ingredients.

The Court accepted the ACCC’s position.

ACCC Deputy Chair Mick Keogh said that the ACCC was pleased by the decision and that the approach of the Federal Court was consistent with its guidance.

“What constitutes ‘substantial transformation’ under the law will vary depending on the product,” he said.

“Because of this, the ‘substantial transformation’ test can be complex and, at times, technical to apply.

“We are pleased that the court has clarified this aspect of the law so that businesses can more confidently determine whether they can make country of origin claims about their products,” Mr Keogh said.

“Country of origin representations can be a powerful marketing tool for businesses, as many consumers are willing to pay extra for Australian made products.

“The ACCC will take action to maintain consumer confidence in labels claiming that products are Australian made.”

While Nature’s Care’s action was against AMCL, the ACCC said it intervened in the case as a matter of public importance and to assist the Court by providing expert evidence.