Skincare brand Biologi breached the ACL – ordered to publish 5 corrective notices

In a recent decision of the Federal Court in Native Extracts Pty Ltd v Plant Extracts Pty Ltd [2023] FCA 1265 Downes J issued an initial judgement and made orders for declaratory relief and the publication of eight (8) corrective notices by Plant Extracts Pty Ltd ACN 613 551 349 (Plant Extracts) and skincare brand Biologi Pty Ltd ACN 618 697 297 (Biologi).  The Court declared that various representations made by both Plant Extracts and Biologi in relation to their products on their websites, on social media and on various third party websites were misleading and deceptive and were false and misleading.

This article discusses the misleading and deceptive conduct and false and misleading representations that Biologi has admitted and the corrective notices it has been ordered to publish.  Dundas Lawyers a Brisbane based commercial law firm with expertise in intellectual property and technology law proudly acted for the Applicants in these proceedings.

See what A Current Affair had to say about the decision as it related to Biologi and Ross Macdougald

Commencement of the proceedings in 2020

In July 2020 Native Extracts Pty Ltd ACN 161 185 913 (Native Extracts) led by Ms Lisa Carroll (Carroll) initiated proceedings in the Federal Court of Australia against Mr Ross Macdougald (Macdougald), Plant Extracts Pty Ltd ACN 613 551 349, Phytoverse Pty Ltd ACN 603 360 112, FPI Oceania Pty Ltd 089 947 482, Biologi Pty Ltd ACN 618 697 297 (Macdougald Respondents) and Mr Jordan Macdougald (Ross Macdougald’s son) alleging:

• breach of contract;
• breach of a contractual restraint of trade;
• breach of confidence;
• breach of contractual and statutory duty of confidence;
• breach of statutory duty of confidence;
• breach of fiduciary duties;
• breach of fiduciary duties as trustee;
• breach of equitable duty of confidence;
• copyright infringement;
• various acts of misleading and deceptive conduct; and
• various false and misleading statements.

Carroll along with Macdougald founded and operated Native Extracts between 2012 and 2016.

The dispute stemmed from an agreement for the sale of Macdougald’s interest in Native Extracts (and related parties) the terms of which were embodied in a deed of settlement (Deed of Settlement) signed on 31 March 2016.  The Deed of Settlement contained various commercial terms including a contractual restraint of trade.

For those not familiar with the language of the Federal Court, the “Plaintiff” is referred to as the “Applicant” and a “Defendant” is referred to as the “Respondent”.  Justice Downes conveniently summarised the allegations against the Respondents at paragraph 6 of the judgement as:

“By this proceeding and in summary, the applicants’ case against the respondents (other than the fifth respondent) was that:

(1) the restraint of trade clause and confidentiality clause in the deed of settlement had been breached;

(2) Mr Ross Macdougald also breached his statutory and equitable duties of confidence which arose by reason of his position as a director of Native Extracts and a trustee of the Native Extracts Holding Trust;

(3) Plant Extracts had infringed Native Extracts’ copyright in circumstances where Plant Extracts modified scientific documents that belonged to Native Extracts before sending them to customers;

(4) Plant Extracts and the sixth respondent had engaged in misleading or deceptive conduct.”

During the trial the Macdougald Respondents amended their defence and admitted many of the allegations against them resulting in expedited orders being made on 19 October 2023 and amended on 23 October 2023 by consent.

Misleading & deceptive conduct and false and misleading statements 

Engaging in misleading and deceptive conduct is prohibited by section 18 of the Australian Consumer Law (ACL).  Businesses are also prohibited from making various classes of “false and misleading statements” about their goods and services pursuant to section 29(1)(a) to 29(1)(n) of the ACL.

False and misleading Vitamin C Representations by Biologi about its Bk and the Bf Serums

Biologi, described as a ‘cult brand’ in many circles had published on its website, on numerous third party websites and its social media channels represented to the public that:

• its Bk Rejuvenating Eye Serum (made from Kakadu Plum) contains high levels of Vitamin C, when it did not contain any Vitamin C; and
• its Biologi Bf Hydration Body Serum (made from Finger Lime) contains Vitamin C, when in fact it contained none.

By making these false representations the Court declared at paragraph 10 of the judgement, that Biologi had:

• engaged in misleading and deceptive conduct in breach of section 18 of the ACL; and
• made false or misleading statements that its Bk and Bf serums were of a particular standard, quality, grade or composition in breach of section 29(1)(a) of the ACL.

The Court ordered Biologi to publish a total of five (5) corrective notices

The corrective notices ordered to be published by Biologi on its website and on various social media channels resulted from the following misleading and deceptive conduct and false and misleading representations that were made:

• between 24 April 2017 and 21 December 2018, Biologi represented that it was organically certified by OFC, when in fact it was not (OFC Representations);
• its Bf and Bk serums contained Vitamin C or high levels of Vitamin C when in fact they contained none (Vitamin C Representations);
• its products contained only “one ingredient”, “contain only pure plant”, “do not contain any additives” and are “not diluted” when in fact they did not contain only one ingredient, did not contain only pure plant, contained additives and were diluted (Pure Plant Representations);
• that it had, for the first time, developed a method to stabilise natural Vitamin C and its products are the “only skin care products in the world” that contain natural Vitamin C (Only Supplier Representations); and
• that its Biologi Bf Hydration Body Serum contains Byangelicin that reduces the appearance of ageing, when in fact, Byangelicin does not exist (Byangelicin Representations).

Ross Macdougald was knowingly concerned with the actions of Biologi

Order 5 of the judgement also declared that the Second Respondent (Ross Macdougald) was directly or indirectly knowingly concerned in, or a party to, each of the Plant Extracts and Biologi’s contraventions of sections 18 and 29(1)(a) and (g) of the Australian Consumer Law.

Corrective notices ordered to be published by Biologi

Downes J said at paragraph 9 of the judgement that:

“As third parties (namely existing and potential customers) were likely being misled by the impugned conduct, I made this order at the conclusion of the trial rather than waiting for the final judgment to be handed down. I was particularly concerned that the injunctions be issued and that the corrective advertising occur as soon as possible. I am grateful to the parties for reaching agreement about the form of orders.“

(Bold is our emphasis)

Order 23 of the Court requires that Biologi publish the following corrective notices about its misleading and deceptive conduct and false and misleading claims on the home page of its website at www.biologi.com.au and various social media pages, as shown at Annexures E – I of the orders that are reproduced below:

Interestingly in an article by Aaron Patrick, in the Australian Financial Review of 9 November 2023, about this decision, Byangelicin was referred to as a “fake compound”.

Whilst the case is not a “World First” it is somewhat unusual to see Corrective Notices being ordered where two rival businesses are parties to the proceedings.

Despite the trial in this matter being over and the opportunity for any party to adduce further evidence is past a further decision of the Federal Court regarding the quantum (amount) of the Applicants’ loss and damage because of the Respondents’ conduct is pending.

Read the full initial judgement of the Federal Court and the complete list of corrective notices here: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2023/2023fca1265

Links and further references

Other related insights

Entrepreneur proves ex-boyfriend faked ‘natural’ cosmetics range – by Aaron Patrick, Australian Financial Review, 9 November 2023.

Byron cosmetics baron found to be spruiking fake ingredient – by Byron News, 13 November 2023.

Useful links

Home page of the Biologi website: https://www.biologi.com.au/

Home page of the Plant Extracts website: https://plantextracts.com.au/

Legislation

Competition and Consumer Act 2010 (Cth) – Schedule 2

Competition and Consumer Act 2010 (Cth)

Competition and Consumer Regulations 2010 (Cth)

See this matter on the Federal Court website at: QUD215/2020

Cases

Native Extracts Pty Ltd v Plant Extracts Pty Ltd [2023] FCA 1265

Further information about misleading and deceptive conduct

If your business needs advice on whether the actions of competitors are misleading and deceptive or whether statements made are false and misleading, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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