December 1, 2020

Avoiding common legal traps with the online sale of food and beverage

In the global COVID-19 environment, we have seen the growth of online sales of food and beverage products as Kiwis eat more local rather than imported product. As a result, a number of wholesalers have also been forced to change their business models to sell direct-to-consumer.

While the online sale of products is not new, the way in which businesses are engaging with consumers has also led to an increase in collaboration and innovation in the food and beverage sectors.  It will be important for businesses who are adapting in this way to also re-evaluate their legal obligations and compliance within the online environment. Where businesses are collaborating and/or innovating, it will be important from the outset to consider what Intellectual Property (IP) exists with the new product offering. For example, whether any new IP has been created in the collaboration or innovation and who will own this, what the product is going to be called and what steps you can take to protect this.

The sales and marketing strategy should also be reviewed for legal and regulatory compliance. When a product is sold via retail channels in a shop, it is required to display certain mandatory information on the label (under the Australia New Zealand Food Standards Code). However, when selling the product online, there is no similar proposition that the mandatory information likewise needs to be displayed – although it is becoming more common for businesses to do so. This means that in some cases consumers can’t ascertain the important information about a food product until they have received the physical product.

Our consumer laws still protect us from businesses misrepresenting their products to consumers when they are selling online. But with todays  conscious consumer wanting to know more about the nutritional content and country of origin of the products to make more informed choices, there is often a gap in this flow of information. For others, such as wholesalers selling direct to consumer, country of origin information may be at the forefront of their online marketing campaign.

Health claims about products are a particular area of concern in the online world, where businesses appear to take a less strict approach compared with the physical product labelling.

Lastly, good cybersecurity and data collection processes, including an up to date privacy policy on a business’s website is a must.  This is particularly important with the huge number of scams and cybersecurity breaches during COVID times. Recent changes to New Zealand  privacy laws with the Privacy Act 2020  coming into effect 1st December 2020, now require business to mandatorily report any breaches.

These things should be considered in the early stages of development, prior to the product being launched. It makes good business sense to both protect your investment and maximise its commercial value, or risk something going wrong in the process which could ultimately devalue the product or your businesses reputation.

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