How will this cookie Crumbl? Unboxing the legal issues around Sydney's viral cookie pop-up

What you need to know 

• On Sunday 29 September, a "Crumbl" pop-up store in Bondi sold cookies to consumers that the operators claim to have purchased and imported from the popular US cookie chain "Crumbl", which does not yet have an "on the ground" presence in Australia.
• The pop-up store did not have any affiliation with, or authorisation from Crumbl, but promoted the event using social media accounts featuring the name "Crumbl" and used Crumbl trade marks, videos and packaging to promote the sale of the cookies for a significant mark-up. 
• The organisers stated on social media that they never claimed to be an official Crumbl pop-up and have denied any wrongdoing on the basis the cookies were genuine Crumbl "parallel imports". Nevertheless, consumers complained they were misled.
• While Crumbl has recently indicated it does not intend to take any action against the organisers, the scenario raises some interesting legal issues, both for brand owners wanting to control the use of their valuable brands in Australia and for businesses importing and selling food or beverage products from overseas.

What you need to do

• Ensure that your business has adequate protection for its trade marks in countries where you conduct or intend to conduct business. This is particularly important in Australia, not just for enforcing trade mark rights but also to avoid ownership disputes that may arise if someone else uses your trade mark in Australia first.
• As part of your brand protection programme, monitor for unauthorised use of your trade mark and be prepared to take quick action to enforce your intellectual property rights. For online infringements, utilising the "take down" procedures of the relevant social media platform can be a quick and cost effective solution to put a stop to unauthorised use of trade marks or copyright.
• Businesses importing and selling food and beverage products from overseas should beware of suggesting an affiliation with, or approval from, the Australian brand owner where none exists. Even if the products are "genuine" parallel imports, promoting and selling them in Australia without the brand owner's approval could still be misleading or deceptive.
• Businesses also need to ensure the products they're importing and selling comply with Australia's strict food standards and labelling requirements which may differ from the country of origin. Merely "following customs protocols" as the pop-up organisers claim to have done won't necessarily meet these requirements, and failure to do so may lead to food recalls, financial and other penalties, in addition to potential consumer health risks (particularly in the case of undeclared allergens).

What happened?

It is not uncommon for brands that are popular overseas, but which are not yet available in Australia, to organise pop-ups to test the Australian market. If you have TikTok, you're likely to have seen footage of people lining up in Bondi on Sunday 29 September 2024 to try and get their hands on a viral Crumbl cookie.

Crumbl is a popular US dessert company famous worldwide for its cookies. On Instagram alone Crumbl boasts almost 6 million followers. Crumbl's products are currently only available in the US and Canada, although it has expressed an intention to "accelerate" expansion into the Australian market.

Pop-up stores, long lines and viral desserts are not new. However, what is unique in this situation is that the organisers of the pop-up store had no affiliation with, or approval from, Crumbl. According to social media statements made by the pop-up organisers, they simply flew to the US, purchased the cookies from Crumbl in their original packaging and then imported them back to Sydney for resale.
With many consumers reportedly expressing their disappointment with the experience, and some even claiming to have been deceived by the pop-up for paying $17.50 (compared with the US price of around A$7) for a stale cookie, the pop-up venture seems to have crumbled, leaving some consumers and possibly the organisers with a not so sweet taste in their mouths.

In the aftermath, the organisers stated that they had never claimed to be an official Crumbl pop-up and that the cookies were legal parallel imports.

But is this enough to protect the organisers? And what are Crumbl's options for taking action against the organisers or managing similar scenarios in future? This article considers some of the potential legal issues that arise from the pop-up organisers' conduct.

Did the pop-up organisers infringe Crumbl's trade mark rights?

In short, probably not.

Crumbl has two trade mark registrations in Australia for the Chef Logo and the CRUMBL COOKIES & Chef Logo covering "bakery goods, namely, cookies" and related services, which is a strong starting point.  In addition, Crumbl has a pending trade mark application for the word "CRUMBL" and may also own copyright in the Chef Logo as an artistic work.

Under the Australian Trade Marks Act 1995 (Cth), Crumbl has the exclusive right to use, or authorise another person to use, its registered trade marks in Australia in relation to cookies.

This means Crumbl could bring a trade mark infringement action against someone who uses Crumbl's registered trade marks, or a substantially identical or deceptively similar trade mark, to sell cookies in Australia without Crumbl's permission. 

If the pop-up organisers used Crumbl's registered trade marks to promote and sell cookies that did not come from Crumbl, such use is likely to infringe Crumbl's trade mark registrations. 

But…

What about the organisers' claim that they purchased genuine Crumbl cookies from Crumbl in the US and legally imported and sold these cookies in Australia?

If the organisers were selling genuine Crumbl cookies bearing Crumbl's registered trade marks which were purchased direct from Crumbl overseas, they may have a defence to a trade mark infringement claim.

Under section 122A of the Trade Marks Act, a person does not infringe a registered trade mark in relation to goods if, having made reasonable enquiries, the person would have concluded that the trade mark was applied to, or in relation to, the goods by or with the consent of the trade mark owner (or authorised or permitted user or associated entity). Parallel imports are the most obvious example of this. Similar provisions apply in relation to copyright in trade marks on labels and packaging for parallel imported goods.

In the Crumbl scenario, if the organisers purchased the cookies via Crumbl's website, they could reasonably assume that the trade marks were applied to the cookies by Crumbl. Therefore, the organisers probably have a defence to a trade mark infringement claim, even though Crumbl applied its trade marks to the cookies in the US and didn't authorise the organisers to import and sell those cookies in Australia.

However, although the organisers may be able to rely on this defence, that doesn't mean they're necessarily in the clear.

Was the organisers' conduct misleading or deceptive?

Even if trade mark infringement doesn't arise, use of a trade mark in relation to genuine goods can still be misleading or deceptive, especially if the use has not been authorised or controlled by the trade mark owner.

The Australian Consumer Law (ACL) prohibits misleading or deceptive conduct, or conduct that is likely to mislead or deceive, in trade or commerce. The ACL also prohibits the making of false or misleading representations that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular affiliation or approval. In addition, similar to an ACL claim, the tort of passing off prohibits a business from misrepresenting its goods/services as those of another business to benefit from its goodwill or reputation.

To succeed in an ACL or passing off claim, Crumbl would need to establish that there is a real possibility that an average consumer of the relevant target audience, being consumers who are familiar with the Crumbl brand and wanting to try its products, are likely to be misled or deceived as a result of the pop-up organisers' conduct.

In promoting the pop-up store, the organisers used social media handles such as "@crumblsydney" to post videos of Crumbl cookies and the distinctive pink Crumbl packaging, accompanied by messages such as "Crumbl is coming to Australia" and "Crumbl is landing in Australia".  The posts also featured images and videos that were reportedly taken from Crumbl's social media platforms.  The organisers' messages have been viewed by millions of people since late September. The cookies sold were also genuine Crumbl cookies in their authentic packaging. 

The effect of this conduct was that consumers purchased the cookies believing the pop-up was a Crumbl venture and felt misled when it transpired Crumbl was not affiliated with the organisers.

Disclaimer statements

While the organisers of the pop-up have since claimed they never represented that they or the pop-up were affiliated with Crumbl, and that they had made statements online to this effect, it was reported that several consumers who lined up to purchase the cookies felt misled or deceived upon subsequently learning that Crumbl was not connected to the organisers.

For a disclaimer statement (ie, disclaiming an association with the trade mark owner) to be effective, it needs to be sufficiently clear and prominent so that consumers see it and have an opportunity to read and understand it prior to purchase. Merely posting a statement on social media, particularly if it's hidden in the comments or in the "bio", will not necessarily be sufficient to bring the disclaimer to the attention of consumers. In the context of a pop-up store, it would be reasonable to expect a clear and prominent statement at the point of sale as well.

Cookie quality and cost

Given the cookies were not made fresh in Australia, but rather were purchased in the US and flown back to Australia for resale, consumers may also have been misled about the quality of the cookies. A consumer attending a pop-up store purchasing cookies at a $17.50 price point would reasonably expect the cookies to be fresh.

Both the lack of freshness and the high price of the pop-up cookies have the potential to damage Crumbl's reputation and goodwill in its brand in Australia. Having said that, judging by Crumbl's recent announcement of its intention to "accelerate" its expansion into Australia, the pop-up downfall seems to have had the opposite effect of actually enhancing Crumbl's brand recognition and reputation here.

Potential copyright issue

Issues of copyright infringement may also arise in circumstances where some of the posts made by the organisers of the pop-up appear to reproduce and broadcast still images and videos taken from the official Crumbl account.

Breach of contract

In circumstances where the organisers of the pop-up claim to have purchased the cookies from Crumbl online, and have shown receipts for the purchase of the cookies on social media, they may be required to comply with Crumbl's terms and conditions of sale. Purchasers are required to acknowledge the terms and conditions when purchasing products through Crumbl's website.

Clause 8 of the terms and conditions provides that Crumbl's products may be used for personal, non-commercial use only, and that use of its products for any commercial purposes is expressly prohibited. Clause 10 also provides that customers agree not to impersonate or attempt to impersonate Crumbl. Consequently, the pop-up organisers may have breached Crumbl's terms and conditions by reselling the Crumbl cookies. 

Food law 

Finally, while the details about how the cookies were imported into Australia are scarce, there is the potential for breaches of the Australian New Zealand Food Standards Code and the Food Act 2003 (NSW) to arise depending on how the cookies were imported and subsequently sold in Australia, including the conditions of their transit and whether they were correctly labelled.
Just because a food or beverage product complies with the food standards applicable in the country of origin does not mean it will automatically comply with Australia's strict food standards and requirements which often differ from other countries.

Businesses importing food and beverage products for sale in Australia are responsible for ensuring the products are compliant. Getting this wrong may lead to product recalls, financial or other penalties, as well as risk consumer health (especially where undeclared allergens are concerned). In the last 12 months, there have been approximately 40 food recalls in Australia due to undeclared allergens or incorrect labelling of allergens. While this issue did not arise in the Crumbl cookie case, the organisers do not appear to have turned their minds to the broader responsibilities of importing and selling the Crumbl cookies in Australia.

What steps can your business take to prevent the "pop-up cookies" scenario from happening to you? 

• Be Prepared – Make sure you have adequate trade mark protection and be aware of the legal enforcement mechanisms available to enforce your intellectual property rights. Have a plan for managing infringements when they arise and be prepared to act quickly. For online infringements, utilising the "take down" procedures of the relevant social media platform can be a quick and cost effective solution to put a stop to unauthorised use of trade marks or copyright.
• Customs Programmes - Trade mark owners should consider establishing a customs programme in Australia which enables Australian Customs to seize counterfeit goods imported into Australia. Businesses may provide direct training to Customs officers in relation to their brand and the identification of counterfeit products, for example, by providing details of its authorised importers.