Lorna Jane admits misleading COVID-19 ‘eliminate spread’ claims

Sportswear giant Lorna Jane will pay a $5m fine after admitting claims that its clothing could eliminate COVID-19 were false and not backed by scientific evidence. A judge has said the punishment must show this kind of conduct will not pay.

A judge has slammed the “exploitative, predatory and potentially dangerous” behaviour of women’s sportswear retailer LornaJane and fined it $5m for trying to profit from COVID-19 fears by making false claims that its clothing could eliminate andprevent its spread.

Federal Court Justice Darryl Rangiah today ordered that the Brisbane-based global sportswear retailer pay the “substantial” fine for “very serious” breaches of consumer laws which mandate that retailers cant make false claims about product uses orbenefits.

Justice Rangiah said that there was a need to show that “exploitative conduct of this kind will not pay”.

The company had claimed that its LJ Shield technology is “a water-based, non toxic mist” which is sprayed onto its clothingand that viruses that come into contact with the activewear are eradicated.

Lorna Jane shop in Toowong Village Shopping Centre

Justice Rangiah noted that company founder and the face of the company Lorna Jane Clarkson directed the making of the falserepresentations so that the conduct “emanated from a very high managerial level within the company”.

The court earlier heard that Ms Clarkson authorised and personally made some of the untrue statements about virus eliminationand stopping the spread, and that she was involved in crafting some of the wording of the false marketing.

The consumer watchdog, the Australian Competition and Consumer Commission, which brought the legal action in court, did notallege that Lorna Jane actually knew at the time that the claims it was making were false, or that the company profited fromthe false claims, or that the false claims hurt consumers.

Ms Clarkson was a defendant in the lawsuit but the claim against her has been dropped as part of the agreement by her companyto pay the fine and admit breaking consumer laws.

The company’s admission of liability came at the eleventh hour, with the company due to face a five day court hearing whichhad been set down to start last Monday and the ACCC had been due to call evidence from a scientist from South Australia.

Lorna Jane admits it broke consumer law in July last year when it made false claims that its activewear containing LJ Shieldwould protect wearers against and stop the spread of and eliminate viruses including COVID-19.

Queensland-based activewear company Lorna Jane’s marketing material

It admitted it had misled consumers in 32 representations across various platforms including via two stories on social mediasite Instagram, advertisements on its website, by direct emails to customers, media releases and in-store advertising.

Promotional slogans included “Cure for the Spread of COVID-19? Lorna Jane Thinks So”, “With Lorna Jane Shield on our garmentsit meant that we were completely eliminating the possibility of spreading any deadly viruses”, and “LJ Shield – Protectingyou with anti-virus activewear”.

Roger Traves QC, counsel for the ACCC, told the hearing in Brisbane this morning - heard via remote technology due to theCOVID-19 pandemic - that the company had broken the law so many times that it could not be quantified, because each contraventionis each time a consumer is misled.

Justice Rangiah noted that the company faced a potential maximum fine for each contravention of $10m, or could be fined threetimes the value of the benefit obtained, or 10pc of the company’s annual turnover.

“Lorna Jane sought to exploit that fear and concern of the public through the use of misleading and deceptive and untrue representationsabout the properties of Lorna Jane Shield activewear,” Justice Rangiah said today.

“Lorna Jane sought to profit from the fear and concerns of the public in a way that involved unlawful conduct and contraventionsof relevant provisions of the consumer law.

“The behaviour of Lorna Jane can only be described as exploitative, predatory and potentially dangerous,” he said.

Lorna Jane Clarkson.

He said that the false advertising campaign ran for three weeks in July last year “at a time of considerable uncertainty,fear and concern amongst the public about the consequences and spread of COVID-19”.

“At that time there had been at least 8000 reported cases and 104 deaths in Australia and on 16 July 2020 there were 315 newcases of COVID-19 reported in Australia,” he said.

The company has admitted that when it launched the marketing campaign it had no concluded test results from any scientifictesting and the company had not hired anyone to do testing on their clothes ability to stop the spread of viruses.

The $5m fine equates to gross profit for the company for two weeks, Mr Traves said.

The company posted gross revenue last financial year of $15.7m per month and gross profit of $10.6m a month.

Counsel for Lorna Jane submitted to the court that the $5m fine represented one third of the company’s pre-tax earnings forthe 2020 financial year or the entire pre-tax earnings for 2019.

Lorna Jane submitted that there was no evidence to show sales increased due to the COVID-19 claims of its wares.