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Which case won?

casea
The case for the hair care company
  • The retailer has misled consumers by implying that the performance benefits of its products are due to the presence of argan oil, when they are not. The retailer knows that the amount of argan oil in its products is so small that argan oil could not possibly contribute to the products’ performance.
  • Notwithstanding this, the retailer prominently displayed the words “Moroccan Argan Oil” in close proximity to the performance benefits listed on its Protane Naturals packaging. The retailer clearly intended to convey the impression that the two were linked, which is deceptive.
  • The retailer’s internal product documentation also intends to convey to consumers that argan oil was responsible for its products’ performance benefits. For example, the documentation substantiates the retailer’s claim that its product “helps strengthen hair” with the statement that “Argan oil is known to have hair strengthening properties”.
  • In so far as the product does deliver the stated performance benefits to consumers, this has nothing to do with the inclusion of argan oil in the product. No reasonable consumer would read the labels so carefully that they would tease out how much benefit is due to argan oil and how much is due to other properties, such as it being sulphate-free and alcohol-free. This is especially true given that the products were under fluorescent light in the bargain bin area of the retailer’s stores.
  • The retailer should be permanently restrained from advertising and selling its Protane Naturals argon oil hair care products in Australia.
caseb
The case for the retailer
  • The words “Moroccan Argan Oil” are just one feature of the product packaging and it makes no sense to look at this feature in isolation. When the packaging is viewed as a whole, it is clear that the reference to performance benefits was a reference to the capabilities of the product as a whole, rather than because of the use of the Moroccan argan oil.
  • Argan oil is very expensive and our products are sold in the discount bin at a very low price. No reasonable consumer would be misled into thinking that our products had sufficient argan oil in them to be the reason for the performance benefits.
  • The performance benefits listed on our products include that the products are sulphate-free and alcohol-free. These are obviously not qualities of argan oil and so we are clearly not saying that argan oil is responsible for the products’ performance benefits.
  • We should be allowed to continue to advertise and sell our Protane Naturals argon oil hair care products in Australia.

So, which case won?

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Case A won. You were right!

How people voted
a55%
b45%

Expert commentary on the court's decision

“Aldi contravened the law by misleading consumers that argan oil was responsible for the performance benefits of its argan oil hair care products.

However, overall, this case reinforces the legitimacy of a business strategy, such as Aldi’s, of identifying “on trend” products and implementing one’s own much cheaper version of them.”
Full Court upholds finding of misleading or deceptive conduct

On 22 June 2018, The Full Court of the Federal Court of Australia, in the matter of Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93agreed with the trial judge that Aldi Foods Pty Ltd had engaged in misleading or deceptive conduct by representing that argan oil was responsible for the performance benefits of its Protane Naturals argan oil hair care products.  

However, on several other grounds Moroccanoil Israel Ltd was not so lucky, and the big discount supermarket chain, Aldi, prevailed.

Aldi’s representation that argan oil is responsible for performance benefits is misleading

The Full Court agreed with the trial judge’s conclusion that in relation to Aldi’s Protane Naturals products, the relevant class of consumer would infer from the product name that it is argan oil which is wholly or largely responsible for the touted benefits. 

The Full Court accepted the trial judge’s characterisation of the relevant class of consumer as “a person attracted to buying abargain prices, most likely a woman and shopping at [Aldi’s] supermarkets frequently, infrequently or for the first time”. 

The Full Court pointed out that it was not entirely clear what the nature of Aldi’s challenge was in relation to the performance benefit claims. 

If it was a failure by the trial judge to take context into account, the Full Court disagreed with this assertion. The court said that it did “not accept that the trial judge did not consider the packaging of the products, or how they were sold in the stores or the prominence of the Performance Benefits claims. Throughout her judgment her Honour was obviously aware of these matters.

If it was that the trial judge made actual errors, no such errors were made.

If it was an attempt to invite the court to arrive at a different opinion to the trial judge, any difference of opinion that might be reached would not rise to the level of error, and if no error was made, then the appeal must be dismissed.

Therefore, the order stood that Aldi be permanently restrained from advertising and selling any Protane Naturals argon oil hair care products that include the misleading performance benefit claims.

Legal proceedings not a total win for Moroccanoil Israel

Although Moroccanoil Israel was successful on the performance benefits claim, Aldi successfully argued two additional points before the Full Court. 

Aldi succeeded in challenging the argument that its Protane Naturals brand misled by implying that the products were made from natural ingredients. 

Aldi also succeeded in challenging Moroccanoil Israel’s application to register the word Moroccanoil as a trade mark.

The trial judge also made several rulings in favour of Aldi that were not the subject of this appeal. These include dismissing an argument that Aldi tried to pass off its products as Moroccanoil Israel’s products and dismissing an argument that Aldi breached Moroccanoil Israel’s registered trademarks. 

Aldi successfully challenges trial judge’s finding that packaging was misleading

At the trial, Moroccanoil Israel argued that by using the word Naturals” on its packaging, Aldi had represented to consumers that the products were made either wholly or substantially from natural ingredients. The trial judge agreed and found that Aldi has engaged in misleading or deceptive conduct. Aldi appealed this ruling.  

On appeal, the Full Court concluded that the trial judge had erred by asking the wrong question.

After looking at the dictionary definition of the word “natural”, the trial judge focused on whether the ingredients in the products could be described as “natural”. 

According to the Full Court, the correct question to ask was what did the use of the word “Naturals” on the packaging convey to ordinary reasonable consumers. 

The Full Court concluded that the word “Naturals” did not convey to the ordinary reasonable consumer that the products were comprised substantially of natural ingredients. 

The Full Court noted that the word “Naturals”  was in smaller font than the word Protane and off to the right on the next line. The word was a sub-line of the Protane products and not a statement about the quantity of natural ingredients in the products. 

The court also pointed out that these products were sold from the discount bin at a price between $4.99 and $9.99. More specifically, “the ordinary reasonable consumer would approach the packaging on the basis that they were in the cheapest part of one of the cheapest stores. This is not where one expects to find hair care products made substantially from boutique natural ingredients such as argan oil. This is an Aldi supermarket.

Aldi successfully challenges registration of “Moroccanoil” as a trademark

In late 2011, Moroccanoil Israel lodged an application with the Register of Trade Marks to register the word Moroccanoil as a trademark.

Aldi filed a notice of opposition to the registration of this trademark. Subsequently the Registrar refused registration of the mark on the basis that it was not inherently adapted to distinguish Moroccanoil Israels goods.

Moroccanoil Israel appealed this decision, and the trial judge ruled that its trademark should be registered. 

Aldi appealed the trial judge’s decision to the Full Court of the Federal Court at the same time it appealed the misleading or deceptive conduct claims. The Full Court found in favour of Aldi, ordering that Moroccanoil Israel’s Moroccanoil trade mark not proceed to registration.

Section 41 of Trade Marks Act specifies when trade mark application must be rejected

According to section 41 of the Trade Marks Act 1995an application for the registration of a trademark must be rejected if the trademark is not capable of distinguishing the applicant’s goods or services, in respect of which the trademark is sought to be registered, from the goods or services of other persons.

Section 41 specifies when a trademark is taken as not capable of distinguishing the designated goods or services. One of those reasons is when: 

  • the trademark is not to any extent inherently adapted to distinguish the designated goods or services from the goods or services of other persons; and 
  • the applicant has not used the trademark to such an extent that the trademark does in fact distinguish the designated goods or services as being those of the applicant. 

Based on the facts of the case and section 41 of the Act, the Full Court identified that there were two questions to consider. 

The first question was whether Moroccanoil really just means oil from Morocco”, so that it does not distinguish Moroccanoil Israel’s goods from the goods of other traders selling argan oil-based hair care products. 

The second question was whether, despite such concerns, Moroccanoil Israel’s use of the word Moroccanoil meant that the word had become distinctive of its products, even if it was not originally so.  

In relation to the first question, the Full Court concluded that Moroccan oil means an oil from Morocco in ordinary English, that argan oil was an oil associated with Morocco and many traders were using the words Moroccan and oil to describe their argan oil hair care products. Therefore, the trademark Morrocanoil did not distinguish Moroccanoil Israel’s goods.  

In relation to the second question, the Full Court did not think that Moroccanoil Israel’s marketing activities came close to having the effect that the plain word Moroccanoil identified the company’s hair care products.  

Most of Moroccanoil Israel’s marketing activities were directed towards members of the hairdressing trade, not consumers. Also, the time between the company’s product launch in Australia and its application in to register Moroccanoil as a trademark was simply too short for the public mind to have come to associate the word exclusively with Moroccanoil Israel.  

Accordingly, the Full Court allowed Aldi’s appeal, concluding that the company’s mark, Moroccanoil, could not proceed to registration.

Aldi not liable for tort of passing off

Moroccanoil Israel also argued before the trial judge that Aldi wrongly tried to pass off its products as having connection in the course of trade with Moroccanoil Israel’s products. 

However, the trial judge rejected this argument, finding that Aldi’s products were not deceptively similar to Moroccanoil Israel’s products.

This finding was not challenged in the appeal to the Full Court.

Aldi did not infringe Moroccanoil Israel’s registered trademarks

At the time that proceedings were brought before the trial judge, Moroccanoil Israel had two trade marks registered in relation to its Moroccan oil hair care products. 

The trial judge had to consider whether Aldi infringed upon these registered trademarks, and concluded that it did not.

The trial judge stated that she did not believe that the hypothetical consumer would mistake Aldi’s “Moroccan Argan Oil” mark for Moroccanoil Israel’s registered trademarks. Nor did she think that consumer would wonder whether the Aldi product was made by Moroccanoil Israel.

This finding was not challenged in the appeal to the Full Court. 

Case reinforces legitimacy of Aldi’s business strategy

Articulating what was at the heart of the proceedings between Moroccanoil Israel and Aldi, the trial judge remarked: 

“Like brands, only cheaper” is both an advertising slogan used by the German supermarket giant, Aldi, and its business model. This proceeding brings these business practices into sharp focus, as its genesis lies in concerns that some of Aldi’s products are not just “like brands” but deceptively like a particular brand and so contravene Australian trade mark and consumer protection laws 

Aldi contravened the law by misleading consumers that argan oil was responsible for the performance benefits of its argan oil hair care products. 

However, overall, this case reinforces the legitimacy of a business strategy, such as Aldi’s, of identifying “on trend” products and creating a much cheaper version of them. 

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.
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