Woolworths (ASX:WOW) beats ACCC in court

Supermarket giant, Woolworths, successfully fights off the consumer watchdog after a 2-year legal battle over disposable cutlery and plates.

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Woolworths win in court represented by scales, judges hammer and wooden blocks spelling the word win

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The Full Federal Court has handed Woolworths Group Ltd (ASX: WOW) a win against the Australian Competition and Consumer Commission (ACCC).

The consumer watchdog started legal action two years ago alleging that the supermarket was misleading customers. The accusation involved a range of house-brand disposable cutlery, plates and bowls that were labelled “biodegradable and compostable”.

The ACCC lost the original Federal Court case last year but immediately appealed.

But the Full Federal Court’s dismissal of the appeal on Tuesday gives Woolworths a decisive victory.

The ACCC had argued that labelling the W Select Eco products with environmentally friendly words like “biodegradable and compostable” without supporting evidence should not be allowed.

“We appealed this case because we believe that businesses should be able to support claims they make about their products, especially when consumers are likely to pay more for the product because of the claims made,” said ACCC Chair, Rod Sims.

“Consumers may select products based on the claims made by the seller or manufacturer, and should be able to rely on environmental claims made by businesses about their products.”

A Woolworths spokesperson told The Motley Fool that the company was pleased with the court’s decision.

“We treat our obligations under the Australian Consumer Law very seriously, and understand how important it is that our customers can trust the environmental claims we make.”

How did Woolworths win?

The ACCC’s case was that the offending words gave the impression to customers that the picnic crockery would rot in “a reasonable time” in compost or landfill.

Australian Consumer Law dictates that product claims about “future matters” are misleading unless the merchant has “reasonable grounds”.

The judge, however, found that Woolworths’ claims were not about future characteristics but “biodegradable and compostable” described the items’ inherent state.

The appeal hearing found that the supermarket never represented the W Select Eco products would decompose within a certain amount of time.

The disposable plates are made of waste products extracted from sugarcane. The cutlery consists mostly of chemicals derived from corn starch.

The Motley Fool understands “independent certification” was published in 2014 when the range was launched.

The Woolworths share price was down 0.53% on Tuesday, to close the day at $37.32.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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