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06 February 2020
Pursuant to a complaint by Nestlé Pakistan Limited, the Competition Commission of Pakistan (CCP) initiated an inquiry into Engro Foods Limited for misleading consumers and engaging in deceptive marketing practices under the Competition Act 2010.
Nestlé Pakistan engages in, among other things, the processing, packaging, manufacture and sale of food and beverage items, including packaged milk, UHT standardised milk and dairy-based formula. Nestlé Pakistan's milk substitute products include Nestlé Nido FortiGrow.
Engro Foods competes in the milk products market, including the milk formulas market through its product Olper's Full Cream Milk Powder.
Nestlé Pakistan alleged that Engro Foods had launched a marketing campaign to promote its newly launched product Olper's Full Cream Milk Powder, wherein it made claims relating to the quality, efficacy and nutritional value of Nestlé Pakistan's product Nestlé Nido FortiGrow. Further, a TV ad for Olper's Full Cream Milk Powder had, among other things, shown a pack of yellow dairy-based formula, pictorially identical to the well-recognised pack of Nestlé Pakistan's Nido FortiGrow, and made deceptive, false and misleading assertions by:
The CCP Inquiry Committee investigated each allegation raised by Nestlé Pakistan and observed as follows.
Presenting false information about Nestlé Pakistan's Nido product range by undermining its nutritional value
In its reference to Nestlé Pakistan's product, Engro Foods suggested that the product is a mixture of oil and whitener. The overall net general impression of the TV ad suggested that Nestlé Pakistan's Nido product range has no nutritional value.
By relying on the various documents submitted by Nestlé Pakistan, including reports from the food standards maintenance authority, Punjab Food Authority, and other scientific laboratories, it was concluded that Nestlé Nido FortiGrow is in line with the applicable food standards. Further, it was noted that the Punjab Food Authority has ordered Nestlé Pakistan to label its Nido product range as a 'formula product' and not milk.
Therefore, the CCP established that Nestlé Nido FortiGrow has nutritional qualities which may be beneficial for children's wellbeing and fulfils relevant food standard requirements. To infer otherwise (ie, to suggest that Nestlé Nido FortiGrow has absolutely no nutritional value and is merely a combination of oil and whitener) amounts to distribution of false and misleading information to consumers without a reasonable basis relating to the characteristics, properties, suitability for use and quality of Nestlé Pakistan's Nido product range by Engro Foods in violation of Section 10(2)(b) of the Competition Act (ie, the distribution of deceptive information that lacks a reasonable basis).
Presenting false information about Nestlé Pakistan's product by creating a false impression that vegetable oil is not a permitted or usual ingredient of formula products
The overall impression of the TV commercial suggested that the vegetable oil present in Nestlé Pakistan's Nido product range is not legally permissible. However, Nido FortiGrow is categorised as a 'blend of skimmed milk and vegetable fat in powdered form' and said products comply with the relevant Codex Alimentarius standards, as well as the relevant standards issued by the Pakistan Standards and Quality Control Authority (PSQCA) and the Food Regulations.
Hence, to show that Nestlé Pakistan is doing something wrong or illegal by adding vegetable oil to its products amounts to a distribution of false and misleading information to consumers without a reasonable basis relating to the characteristics, properties, suitability for use and quality of Nestlé Pakistan's Nido product range by Engro Foods in violation of Section 10(2)(b) of the Competition Act.
Presenting false information about Nestlé Pakistan's product by creating false perception in consumer market that it has been misleading and deceiving its consumers for years by making them believe that its Nido product range is natural milk
The TV ad showed, among other things, a child reading out a disclaimer on Nestlé Pakistan's product packaging that "this is not natural milk". This disclaimer complies with the directions of the Supreme Court and, as such, presenting it in a maligning manner could have a misleading impact on the general public.
Considering the overall marketing campaign of Nestlé Pakistan over the past 10 years in relation to its Nido product range, the CCP observed that it has misled the general public into believing that this product is milk. Therefore, the statements made by Engro Foods in its ad were found to be true and, as such, Engro Foods had not violated the provision of Section 10(2)(b) of the Competition Act.
Presence of fish oil in Olper's Full Cream Milk Powder
As Engro Foods' packaging includes the statement "*May contain traces of fish oil", Nestlé Pakistan alleged that Engro Foods adds fish oil instead of vegetable oil to its product. Engro Foods submitted that it does not use fish oil as an ingredient. However, it has been printed on the package as a precautionary allergen as fish oil may be present in traces, a practice which complies with the Codex Alimentarius labelling requirements. Therefore, Engro Foods had not violated Section 10 of the Competition Act.
False impression created by Engro Foods that Nestlé Nido FortiGrow is not natural milk, but Olper's Full Cream Milk Powder is
The CCP found that, while Engro Foods' products are labelled in line with the relevant laws and standards, the overall impression conveyed by the TV ad was that Nestlé Nido FortiGrow is not natural milk, but Engro Foods' Olper's Full Cream Milk Powder is. Such an impression is misleading as it suggests that the product is natural milk or its perfect substitute, which is prohibited by the Supreme Court.
Consequently, Engro Foods appears to have made false or misleading comparative claim regarding this matter and is therefore in violation of Sections 10(2)(b) (ie, the distribution of deceptive information that lacks a reasonable basis) and 10(2)(c) (ie, false or misleading comparison of goods in the process of advertising) of the Competition Act.
The CCP held that Engro Foods' conduct had created a false impression regarding Nestlé Pakistan's Nido product range and that such behaviour can affect the consumer decision-making process, which may give Engro Foods an unfair advantage and harm Nestlé Pakistan's business interests. Therefore, Engro Foods was found to have violated Section 10(2)(a) of Competition Act (ie, the distribution of false or misleading information that is capable of harming the business interests of another undertaking).
In view of the above, the CCP concluded that Engro Foods had been involved in deceptive marketing practices and, in the interest of the general public and other market players, recommended that proceedings be initiated against it.
For further information on this topic please contact Sanaya F Vachha at Vellani & Vellani by telephone (+92 21 3580 1000) or email (email@example.com). The Vellani & Vellani website can be accessed at www.vellani.com.
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Sanaya F Vachha