Misleading or deceptive conduct, trademark infringement, or just clever business strategy? Which case won?
Company launches prestige brand of argan oil haircare products in Australia
Upon having a hair treatment at an Israeli hairdressing salon, a Canadian tourist liked the treatment so much that she purchased all the salon’s bottles and started distributing the product in North America.
She later acquired the worldwide rights to the product, and in October 2007 set up a new company selling its range of hair care products in several countries.
The company launched its products in Australia in September 2009.
These products were part of a “salon-only professional high-end prestige brand”, and the principal ingredient was argan oil.
Retailer starts selling discounted version of company’s products
The company’s products were a huge success in Australia, and by September 2010 had created a buzz in the hair care industry. They were seen as “on trend” and were reportedly “flying off the shelves”.
In 2011, this prompted a prominent discount retailer to produce and sell its own range of hair care products. It marketed these under its house brand “Protane Naturals”.
The retailer’s Protane Naturals products were consistent with its development strategy of identifying popular products and creating its own cheaper version.
The Protane Naturals products were heavily discounted, offered for sale for a limited time with limited stock and were displayed for sale in a dedicated wire discount bin across the retailer’s network of stores.
In prominent text on the front label of each of these products were the words “Moroccan Argan Oil”.
The packaging also stated that the performance benefits of the products included strengthening hair, making it shiny and healthy and protecting it from styling, heat and UV damage.
Retailer’s discount version causes confusion for company’s customers
Over the next several years, the company received feedback that its customers were confused, mistakenly purchasing the retailer’s products, thinking that they were the company’s products.
For example, one post on a product review website said:
This is a great shampoo & conditioner & if you are lucky enough to get it when it is in special at the [Retailer] grab plenty. It is a real bargain. I got some today & should keep me going until the next catalogue. It really does make a difference to your hair, but I couldn’t afford to pay the top dollars. The [Retailer’s] is the same product but quarter the price. Thanks [Retailer].
+ It makes my hair feel thick and shiny
Company commences legal proceedings against retailer
The company commenced legal proceedings against the retailer on several points, including that it misled consumers by making misrepresentations about its Protane Naturals brand.
The trial judge ruled in favour of the company, finding that the retailer had engaged in misleading and deceptive conduct in relation to the claims it made about argan oil and the performance benefits of the product.
The retailer appealed the trial judge’s ruling to the Full Court of the Federal Court of Australia.