Coconut water business cops flak for false and misleading claims

Endorsed by celebrities from Lara Bingle to Madonna, coconut water is in the spotlight after Australian business H2Coco acknowledged making potentially misleading claims.

Coconut water is the clear liquid inside the immature green coconut and it’s big business thanks to its claimed health-giving properties.

But coconut water business H2Coco and its director and chief executive David Freeman have agreed to an enforceable undertaking after an investigation by Consumer Affairs Victoria.

Consumer Affairs asked the company to substantiate claims made about H2Coco water in advertising and promotional materials.

The claims included that the water “contains a complex blend of vitamins, minerals, amino acids, antioxidants, enzymes, health enhancing growth hormones and other phytonutrients”.

Consumer Affairs found this representation was false or misleading.

Freeman also acknowledged H2Coco may have unintentionally contravened the Australian Consumer Law by misrepresenting that H2Coco coconut water had a particular composition, when he was unable to substantiate this claim.

H2Coco agreed to ensure all claims and representations about its products are correct, factual and able to be substantiated upon demand, before publication. The coconut water business will also implement and maintain a compliance, education and training program to ensure it meets all legal requirements and ensure all sales staff are adequately trained.

Freeman also agreed to pay $2000 to the Australian Consumer Law Fund. 

David Freeman said in a statement to SmartCompany that H2Coco has always produced 100% natural coconut water and the business stands by the quality of its product.

“I happily agreed to sign an enforceable undertaking, which ensures that I stand by all the claims H2Coco currently makes about our products and I’m happy to be accountable to that.”

Freeman said there are some who like to target Coconut Water and H2Coco specifically due to company profile and the profile of some of its shareholders.

“We will tackle these groups and individuals head-on and remain professional, open, honest and transparent to all,” he said.

Melissa Monks, special counsel at law firm King & Wood Mallesons, told SmartCompany while consumer law enforcement action by state and territory regulators doesn’t hit the headlines as often as that by the Australian Competition and Consumer Commission, these regulators are still very active and have the same powers to investigate and enforce potential breaches of the Australian Consumer Law. 

“In this case Consumer Affairs has relied on a key weapon consumer regulators have at their disposal – substantiation notices which require a business to, within 21 days, provide evidence or information to support any marketing claims,” she says.

“H2Coco has acknowledged an unintentional contravention of the false and misleading conduct provisions, although this is irrelevant as an individual or company can still be found to breach the law whether the conduct was intended or not.” 

Monks says the state and territory regulators seem more willing to resolve breaches of consumer law in non-litigious, unique ways, as demonstrated here with H2Coco’s payment of $2000 to the Consumer Law Fund.

Monks says this is “relatively small” when compared to penalties of $1.1 million per breach for breaches of the false and misleading conduct provisions.