Chapter 4
Views on the bill
Support for the bill
Consumer support for 'buying
Australian'
4.1
In 2007, the Australian Made, Australian Grown Campaign
commissioned Roy Morgan Research to conduct a survey of Australian consumer
sentiment on 'buying Australian'. Key findings included:
-
89 per cent of consumers believe it to be 'very important' or
'important' that the fresh food they buy is Australian;
-
82 per cent of consumers believe it is 'very important' or
'important' that the processed food they buy is Australian;
-
74 per cent of consumers say that one of the reasons for buying
Australian Grown is to 'support local farmers, fishermen and businesses'; and
-
the most common reason for buying imported rather than Australian
is 'Australian produce not available' (46 per cent).[1]
4.2
A 2005 Auspoll survey found that 89 per cent of consumers believed that
a food product labelled "Made in Australia" with most of the food
grown overseas but packaged in Australia was misleading. 84 per cent also
believed the label "Made in Australia from local and imported
ingredients" was misleading when most of the food was grown overseas.[2]
4.3
The Horticulture Australia Council quoted a 2009 survey showing that
82.5 per cent of shoppers checked 'most of the time' whether fruit and
vegetables in supermarkets were Australian grown.[3]
4.4
Some consumers may also be motivated to buy locally grown and produced
food, recognising the environmental (or 'carbon footprint') impact of the
transportation of imported food.[4]
Others may have concerns about the safety of imported food.[5]
4.5
The sponsors of the bill argue that consumers have a right to clear,
unambiguous labelling as to the origin of a food product:
The first issue Australians want to know is whether the food
comes from an Australian farm or what proportion comes from an Australian
farm. Secondly, was the product fully manufactured in Australia or what
proportion was manufactured in Australia? Australians want the choice, but they
can't make the choice without clear information to identify the origin of the
products we purchase and consume and what portion of that product is attributed
to Australian processing.
Currently we have the capacity to advise expiry dates and
daily price changes which is appropriate. We are bombarded with a myriad of
information about the nutritive content of products and their relative
ingredients, but what we want to know is whether the product came from
Australia, which is not clear.[6]
4.6
At a public hearing, Riverina Citrus brought to the attention of the
committee a Goulburn Valley orange juice, showing an FJ Holden ute on the front
of the label, but with the statement "made in Australia from premium
imported concentrates" on the back:
Senator JOYCE—When people stick an FJ ute on the
label, do you think they are cognisant of the fact that people want to buy
Australian, that they want to support Australia?
Mr MacDonald—I think that is a very good point. A
couple of submissions ... make this very peculiar point. They bring up some polls
from research from years gone by saying that it does not make any difference if
something is Australian made ... But then you see that manufacturers very
obviously think it is important. You would not put an FJ Holden on the front of
an orange juice bottle if you did not think it was going to change behaviour.[7]
Need for greater transparency in
labelling laws
4.7
The consumer group, CHOICE, argued that the current array of labelling
claims on food products is extremely confusing. Consumers are faced with claims
such as "Manufactured in Australia", "Made in Australia from
local and imported ingredients", "Made in Australia from imported and
local ingredients" and "Australian owned"—each referring to a
different aspect and degree of "Australian-ness." CHOICE notes there
are also endorsement campaigns and logos such as "Australian Grown"
and "Ausbuy" and that many consumers do not fully understand the
fundamental differences between these claims.[8]
4.8
The Horticulture Australia Council gave the example of macadamia nuts to
demonstrate the current ambiguity of labelling standards:
Most Australians know macadamia nuts are indigenous to this
country. A “reasonable person” would assume that a packet of macadamia nuts
with a ‘Made in Australia’ label means that the nuts were grown here, and
packaged here. Indeed the previous Australian HomeGrown campaign highlighted
that the large majority of consumers in fact assume
that the majority of foods (fruit, nuts, vegetables, and meats) are
currently grown in Australia.
Under the current standards, however, it is entirely possible
that the nuts were imported from Hawaii (the Chinese know macadamias as ‘Hawaii
nuts’), and it was only the value‐add of more than 50% (eg
fancy packaging), undertaken in Australia which entitled the end product to be
labelled ‘Made in Australia’.[9]
4.9
AUSVEG asserted that existing laws currently undermine key economic
principles, including that which states that the closer the consumer gets to
having perfect knowledge, the more efficiently the market will operate:
... Inadequate or inaccurate labelling has resulted in market
failure and distorted signals from consumers to producers ... The true nature of
demand is unclear, producers misallocate resources, consumer economic utility
is denied, and ... the economic efficiency of the market is undermined.[10]
4.10
Mr Richard Mulcahy, CEO of AUSVEG, told the committee that ultimately,
consumers have a certain belief about what "Made in Australia" should
mean:
Mr Mulcahy—...Consumers are not ... at all comfortable
with the idea that ‘made in Australia’ should mean most of it is made in
Australia ... I think it tends to reinforce the strength of the amendment—that
this is what a reasonable person would assume. I think that for manufacturers
to say that consumers do not understand these things underrates the
perceptiveness of consumers.
Senator XENOPHON—It is a bit disingenuous.
Mr Mulcahy—Yes. I think they, more than anyone, know
that with new product launches and the like consumers are extremely discerning
in terms of a product’s taste, flavour and so forth. There is a suggestion that
they simply may not understand what ‘made in Australia’ means. I think they may
not understand the way it is being applied, but I think they would be very
clear on what they assume the intent of that statement on a can or package
would mean.[11]
4.11
AUSVEG and Riverina Citrus also rejected any suggestion that their calls
for greater transparency in food labelling are really a disguised form of trade
protection.[12]
They did not suggest that consumers should be forced to buy Australian produce:
Rather, what AUSVEG strongly supports is a greater degree of
clarity, accuracy, and transparency ... so that consumers are able to make
informed decisions as to whether they want to buy Australian grown products or
not ...[13]
4.12
Riverina Citrus commented that requiring a percentage of imported and
local juice to be clearly shown on a label:
...will not have grocery executives and processor executives
leaping out of tall buildings or leaving Australia on leaky boats. It is still
doable and simple.[14]
Views of unions
4.13
Although not making a submission to this inquiry, the Australian
Manufacturing Workers' Union (AMWU) has in the past called for an overhaul of
country of origin food labelling, arguing that local food industry workers are
disadvantaged by the current misleading and confusing system. Tougher labelling
requirements should include:
...the capacity for customers to clearly understand the origin
of the goods purchased and whether the goods have been manufactured in an
environmentally acceptable manner and that the workers producing the goods have
been treated fairly and equitably and, at least, in a manner consistent with
International Labour Organisation conventions.[15]
Supermarket house brands
4.14
The AMWU has also suggested that supermarkets are using loopholes to
label produce as being packaged in Australia, despite the contents coming from
overseas.[16]
4.15
AUSBUY, which represents Australian-owned companies, also highlighted
the trend towards house brands in supermarkets:
Increasingly we see house brands replace Australian owned
products ... These say "Made in Australia" e.g. tins of fruit, but do
no indicate whether the fruit is local or imported. The company name is usually
the local retailer with no reference to the source of the ingredients.
Currently local growers and manufacturers who supply the
product and contract manufacture are being increasingly excluded from house
brand business with no changes made to the labels to show changes in source of
supply.[17]
4.16
CHOICE's submission put forward similar concerns from consumers:
My supermarket carries far too many house brands, many of
which are sourced from overseas, and insufficient Australian brands ...
Generic products are very low priced and therefore tempting
to purchase rather than usual brand ... especially Australian made ...[18]
Foreign ownership
4.17
AUSBUY, while supportive of the bill's intent, called for it to go
further, with a requirement for food labelling to indicate Australian
ownership. AUSBUY's submission drew attention to the diminished strategic
position of the food industry in Australia, with increasing acquisition of
major brands by foreign companies and consequently more profits going offshore.
Deceptive labelling allows companies to maximise profit while hiding true
ownership, AUSBUY argued.[19]
4.18
Ms Lynne Wilkinson, the CEO of AUSBUY, cited the recent example of
National Foods, owned by Japanese company Kirin, selling Dairy Farmers branded
products with the misleading labels 'Australian made and owned' when this was
no longer the case. She also mentioned the US company Heinz, which recently
acquired Golden Circle; AUSBUY claimed that 'Australian made and owned' still
appears on Golden Circle products.[20]
Criticism of the bill
4.19
The Australian Food and Grocery Council (AFGC) has led food
manufacturers' opposition to the bill, asserting that the proposed reforms
could make it more difficult for "Australian Made" products to
compete and that the calls for stricter labelling were short-sighted and unnecessary.
Little consumer demand
4.20
Several submitters argued that there is no evidence of market or
regulatory failure in the area of food labelling. The Australian Dairy Industry
Council, the AFGC and Coles all argued that consumers' primary concern is the price
and quality of a product, not its provenance, suggesting that consumers are not
willing to pay a premium price for Australian products over imported products.
Coles quoted from a 2006 Centre for Economics Consumer Research Cost Benefit
Analysis:
...which found that only "10 per cent of consumers value
[country of origin labelling] information as highly important."
In addition, our internal Customer Care data has shown that
our [country of origin labelling] is not a significant issue of concern for our
customers with less than 0.3% of all customer enquiries received over the past
12 months about [those] issues and even less about the use of "Australian
Made" on products with imported content.[21]
4.21
Similarly, Nestle stated that 0.25 per cent ('a very small number of
consumers') of the 100 000 calls and inquiries to its consumer care line
over the last 12 months related to country of origin labelling.[22]
4.22
(In response, Riverina Citrus argued that the argument put forward by
opponents of the Bill's intent is contradictory – on the one hand it is said
that changes to labelling will have little impact on buyer behaviour, while on
the other, it is also argued that the suggested changes to labels will cause
significant job losses.)[23]
4.23
The AFGC also argued that the proposed bill would 'totally destroy
Australian manufacturing' because it would prevent acknowledgement on labels of
processing undertaken in local factories by Australian workers:
Coca-Cola import concentrate but they employ 4,000
Australians in a range of different manufacturing facilities. Bottles and a
whole range of things are made in Australia. I hope we are not going to suggest
that, because Coke concentrate is made centrally—it is made in only a few
places in the world—Coca-Cola cannot be ‘made in Australia’. That is my view.[24]
Consumer education
4.24
While stating that 'from an industry perspective, the current laws are
workable'[25],
the AFGC did acknowledge that consumer understanding of the meaning of current
country of origin food labels was low. Instead of making further changes to
labelling rules through legislation, manufacturers argued that the best way to
address consumer confusion was through community education campaigns.[26]
Seasonality and compliance costs
4.25
The AFGC, National Foods, the Australian National Retailers Association
and the Australian Dairy Industry Council all argued that the Bill, if passed,
would place an additional compliance burden on industry, the costs of which
would necessarily be passed on to consumers.
4.26
To ensure a constant supply of a processed product, it is often
necessary to import certain ingredients when they are out of season in
Australia. The Australian Beverages Council gave evidence that Australian
consumers drink more orange juice than can be supplied by Australian orchards.
The Council stated that the current juice labels which state "Made in
Australia from local and imported ingredients" allowed producers to
account for seasonal produce and demand that was greater than supply.[27]
4.27
Nestle stated that it recently imported its oat supply for one season
from Canada for its Uncle Toby's oats because of local drought conditions. It
was argued that any requirement to change labelling to accommodate such
unforeseen seasonal variations in supply would be burdensome. Having around
2 500 packs in its product range, Nestle said that the cost of changing
each of those packs, depending on materials used, would be between $200 and
$1 000.[28]
4.28
Manufacturers asserted that the requirement in the bill to state whether
or not there are imported ingredients in a food product would require multiple
labels for different times of the year. With such complications, manufacturers
and retailers argued that there would be greater scope for accidental mislabelling
and an escalation in the risk of product recalls.[29]
4.29
The suggestion that a label showing the average percentage content of
imported juice in a product over a whole year was rejected by the AFGC, which
stated that:
This is effectively defeating the purpose of [the bill] which
is intended to provide more accurate information to the consumer about the
content. In effect the only way that the juice industry would be able to comply
with this requirement is to source imported content to ensure it can comply.[30]
4.30
Growcom and the National Farmers' Federation (NFF) also expressed
concern about the increased regulatory burdens of a stricter labelling regime,
which could in turn have negative effects on growers. As price takers, fresh
food producers may have to accept a lower price from manufacturers. Growcom
suggested that the costs of any new scheme should be shared equally throughout
the supply chain and that government could assist with funding if required.[31]
4.31
The NFF told the committee that it was broadly supportive of efforts to
improve truth in labelling:
Indeed, we believe that Australian farmers should have every
opportunity to capitalise on their reputation as being one of the world's best
suppliers of clean, green and quality food produce, and generate premiums for
this reputation wherever possible.[32]
4.32
However, the NFF remained cautious about the proposed legislation,
noting that any requirement to modify labels on a seasonal basis may:
...provide a disincentive to utilise any form of Australian
labelling and, in doing so, devalue some of the benefits of striving for an
Australian grown point of difference.[33]
Response to the 'cost burdens'
argument
4.33
However, the Horticulture Australia Council and AUSVEG found the cost argument
unconvincing. They argued that changes to labels were simply an ongoing cost of
doing business:
It must be borne in mind that manufacturers seem very willing
to undergo the 'pain' of such re-printing/re-tooling where they perceive a
benefit (for example, adding claims such as 'Good source of folate', 'NEW!!',
'20% more FREE!' or 'GI of x' to labels.[34]
4.34
AUSVEG also described to the committee the raft of overheads with which
Australian producers are required to comply, including: occupational health and
safety requirements; the award structure; quality assurance programs and
certifications; regulations around the use of chemicals; and inspection
processes—noting that offshore competitors would not be required to adhere to
such strict regimes:
Senator JOYCE—It must be frustrating, then, when
someone says they have a big concern about the increase in overheads they would
have if they changed their artwork to represent on the packaging of their
product what proportion comes from Australia—the country that puts all those
overheads on you, apparently for the betterment of the Australian people—you
cannot represent on products sold to the Australian consumer how much of it is
actually from Australia.
Mr Mulcahy—Yes, I think it is a fallacious defence.[35]
4.35
Riverina Citrus also suggested that it was disingenuous for
manufacturers to claim that changing labels would be too difficult, given the
stringent compliance requirements currently demanded by processors of primary
producers:
We as a packer are required to put on it exactly how much is
packed and where it is from, and we must have traceability. When our fruit
arrives in the US market, they will be able to quote us the number or the bar
code on the box, and we must have the traceability all the way back to be able
to find out which grower that fruit in the box came from—and his spray diary
has to be kept at hand. We have to follow such strict guidelines, and we cannot
see why the manufacturers seem to say that it is too difficult, when they are
the ones pushing us to have such a high degree of traceability. We find that
very unusual. All our labels have to be printed with all that information, so I
cannot see why they have difficulty doing in it.[36]
4.36
AUSBUY also found the compliance cost argument to be a 'lame excuse'.
Referring to a bottle of flavoured milk, Ms Wilkinson commented:
It is a fast-moving consumer good. You have got volumes in
labelling. Given the volumes in which they are produced, the labels would cost
no more than 5c to produce. It is a brand. Brands are sacred. Marketing
departments really push brands. You have only got to see what Dairy Farmers
have done. Dairy Farmers changed their ‘owned and made’ packaging over to
‘National Foods’. They have now got a huge campaign showing the cows and the
farmers walking along. They have spent more money on their advertising
campaign, repositioning the brand of Dairy Farmers without even a mention of
who owns them, than they would have spent on redoing the artwork.[37]
The bill's inconsistency with food
standards setting process
4.37
A number of submitters pointed out that the bill is inconsistent with
food standards setting arrangements in Australia. The Department of
Agriculture, Fisheries and Forestry noted that the bill does not appear to
align with the provisions of the Food Standards Australia New Zealand Act
1991 (FSANZ Act):
Draft food standards developed or amended by FSANZ must be
assessed against the objectives contained in section 18 of the FSANZ Act,
subject to a cost-benefit analysis in the form of a regulatory impact statement
and notified for public consultation. They must also take into consideration
any matters relevant to stakeholders. Once the assessment and consultation
process is complete and a draft food standard is approved by the FSANZ Board,
it is reviewed by the Australia and New Zealand Food Regulation Ministerial
Council.[38]
4.38
The AFGC, National Foods and the Australian Dairy Industry Council have
also criticised the bill on these grounds. The bill's intent appears to be the
insertion of a clause into the Act which mandates that FSANZ develop and approve
a new food standard on labelling. This essentially bypasses the established
role of the FSANZ Board and the authority of the Ministerial Council in
approving new food standards.[39]
4.39
FSANZ itself told the committee that a standard developed in accordance
with the proposed bill would be unlikely to become law, as states and
territories were not bound to adopt something developed outside of the current
standards development arrangements:
The FSANZ Act, the Food Regulation Agreement and our treaty
with New Zealand do not contemplate a process whereby the Commonwealth can
unilaterally impose a law on the states, territories and New Zealand. This
would require significant referral of powers from the states and territories
and New Zealand.[40]
4.40
The Consumers' Federation of Australia, while largely supportive of the
bill's intent, stated that attempting to amend the FSANZ Act in this manner was
not the best vehicle for effecting change:
Basically, the country of origin issues are very broad and
complex. We suggest that they are taken up in the current food-labelling
review. The provisions relating to juice are both valid and very specific.
Those issues will probably be fairly mobile over time. My experience working on
the standards project is that it is a good idea to consider the full range of
regulatory responses when you are trying to resolve very specific consumer,
producer and supplier concerns. By that I mean regulation and its important
provisions; co-regulation through codes and standards that support or are
called up in specific legislation, such as the Trade Practices Act; and
voluntary and guidance standards, such as those that are produced by Standards
Australia and Standards New Zealand.
The benefit of standards is that, with the right processes
and support, they can enable good, strong consumer participation from the very
outset in a consensus oriented approach.[41]
Inconsistency with the Trade
Practices Act 1974
4.41
The ACCC told the committee that the bill, if passed, could create an
unusual circumstance, with a requirement for food labelling to meet a very
specific threshold for an 'Australian' qualification, but without any changes
to the TPA:
Mr Weymouth—...You could end up with a scenario where
the ACCC would look through the trade practices prism and ask, ‘Is this package
being labelled in a manner that is misleading or deceptive?’ The safe harbour
tests say you are not in breach of misleading conduct if the product has been
substantially altered in Australia—50 per cent. So you might pass the ACCC
trade practices test but in fact not have complied with the potentially new
requirement that is being spoken about here for food only.
Senator HANSON-YOUNG—So are you suggesting that, if we
were going to be talking about, as the bill suggests, redefining what those
definitions are, it would be simpler and clearer to ensure that that happened
across the board for all products? I am not necessarily saying you are
endorsing the idea. Is your point that the Trade Practices Act would have to
adopt a new definition as well?
Mr Weymouth—For consistency, there are two ways
forward. One would be that you would have a rule for food. The Trade Practices
Act would then have a very unusual, quite product-specific rule in it, which is
not typical of the act’s structure. Or you would change the whole safe harbour
provision in the Trade Practices Act, which could have consequences that have
not been thought of at all in terms of general manufactured goods.[42]
Committee view
4.42
The committee is of the view that the primary and insurmountable problem
with this bill is its inconsistency with the current food standards setting arrangements.
In recognition of the highly complex issues involved in food regulation, the
committee recognises that the development of any new food standard relies on an
open and transparent process involving broad public consultation, undertaken by
Food Standards Australia New Zealand and overseen by the Ministerial Council. Therefore,
the committee believes that such a bill is not the correct vehicle by which to
effect any changes to food labelling laws, as it effectively short-circuits
established processes, which have been nationally agreed through the Council of
Australian Governments.
Other issues
4.43
A number of submitters to this inquiry have also proposed that the bill
should be specifically amended to include the mandatory labelling of palm oil
in the ingredients list on food products. It is claimed that palm oil
production (often labelled as vegetable oil) contributes to significant
deforestation and destruction of orang-utan habitat in Indonesia and Malaysia.[43]
4.44
On 23 November 2009, Senators Xenophon, Joyce and Brown introduced into
the parliament the Food Standards Amendment (Truth in Labelling – Palm Oil)
Bill 2009 in response to these particular concerns.
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