The Facts

Company launches prestige brand of argon 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.

case a - The case for the hair care company

case b - The case for the retailer
  • 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.
  • 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?

Cast your judgment below to find out

George Koimanos
Business disputes and litigation
Stacks Champion

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