In a strongly-worded statement, prosecuting counsel Tom Duggan deemed Heinz’s actions as ‘egregious’, ‘willfully blind’ and ‘reckless’ as it involved the health of young children.
The original amount called for by the prosecution was US$7.31 million (AU$ 10 million). The hefty amount was imposed in the hope of deterring the company and other food firms from further misconduct.
“If it’s not big enough in the end it simply doesn’t represent a sufficient deterrent,” said Duggan to the court.
Heinz argued for a lower penalty of US$292,500 (AU$400,000), claiming it to be more appropriate as it was the profit it had made from Shredz throughout its sales period.
The final penalty was imposed earlier this month. Justice Richard White also directed the food giant to establish a consumer protection compliance programme.
The judgement has led to calls from consumer groups in New Zealand to follow suit.
"The Heinz case is a classic example of a food company using claims to make its products look like healthier choices. These claims are becoming increasingly common in supermarket aisles," said Consumer NZ head of research Jessica Wilson.
The New Zealand Commerce Commission has stated it has ‘no plans to follow suit’.
Heinz’s Little Kids Shredz case development
Legal action over the toddler snack was first launched against Heinz by consumer watchdog Australian Competition and Consumer Commission (ACCC) in June 2017. This was in response to a complaint by the Obesity Policy Coalition.
Shredz product packaging had prominently featured fruits and vegetables, as well as a ‘99% fruit and veg’ statement’.
It also contained sugar levels that flouted Heinz’s own health guidelines.
"The ‘berries, apple and veg’ variety [of Shredz] contains 68.7 grams of sugar per 100 grams. […] Heinz's internal guide specifies that the less than 30 per cent [sugar] guide includes the use of fruit juice and fruit paste," said Duggan.
At the time, Heinz had repealed the ACCC accusations, stating that: “The Shredz products were snack foods available in small individually packaged serves appropriate for children aged one to three [with a] similar nutrition profile to dried apple or sultanas.”
"Heinz stands behind the Shredz products and their packaging," it added. In a statement, it also dismissed the claims to be “without merit”.
However, Justice White ruled in March 2018 that Heinz had made a misleading health claim over Little Kids Shredz back in March this year.
“I am satisfied that each of the Heinz nutritionists ought to have known that a representation that a product containing approximately two-thirds sugar was beneficial to the health of children aged one to three years was misleading,” he said.
The decision was met with approval by consumer organisations. According to ACCC acting chair Delia Rickard: “We welcome the court’s decision, which shows that businesses that make false or misleading claims about the health benefits of products face serious consequences.”
H. J. Heinz Company Australia managing director Bruno Lino responded that: “Heinz is disappointed with the outcome but respects the decision that has been made.”
More than one million Shredz products were sold before it was removed from Australian shelves in May 2016.
Other food firms fined for misleading health claims
Other companies in Australia have also been penalised by the ACCC over similar issues in the past.
In 2016, Unilever was slapped with a US$ 7,898 (AU$10,800) penalty over its Paddle Pop ice cream labelling.
This was in relation to the company having placed a "School canteen approved" logo with a tick on the front, back and side of the product, which contained 20% sugar.
The Smith's Snackfood Company was fined the same amount for attaching a "Meets school canteen guidelines" logo featuring a lunchbox with a sandwich and fruit on its Sakata rice snacks.
A National Healthy School Canteens (NHSC) ‘amber’ rating disclaimer was attached to both products. This suggests a product be "selected carefully" instead of eaten regularly/in large amounts.
However, these were written in small font and on a different side of the packet from the logos.
ACCC commissioner Sarah Court said: "The ACCC believes both companies were using logos to claim that these products were a healthy option for school canteens to supply to children, when they were not."