The ACCC to come after false 'green' claims

One of the Australian Competition and Consumer Commission’s (ACCC) compliance and enforcement aims for 2022-23 is to identify deceptive advertising and marketing practices by businesses or industries. To this end, it is carrying out a “green sweep” of websites to identify potentially misleading environmental and sustainability marketing claims.

ACCC Deputy Chair Delia Rickard said in a speech at the recent Sydney Morning Herald Sustainability Summit that “[b]road terms like ‘environmentally friendly’, ‘green’, or ‘sustainable’ have limited value and may mislead consumers, as they rarely provide enough information about what that exactly means in terms of the product or service consumers are considering purchasing […] and while businesses may look to use short and snappy slogans and claims, rather than lengthy explanations of measures underway, it is important to convey accurate information to consumers. Businesses in these positions need to be careful to not overstate the status of their transition through the claims they make.[1]’

What is the ACCC doing?

The ACCC is currently carrying out two internet sweeps to identify misleading environmental and sustainability marketing claims and fake or misleading online business reviews. These sweeps will be the first of a series of smaller-scale sweeps focusing on deceptive practices in the digital marketplace.

At least 200 websites will be reviewed for misleading environmental claims across a range of targeted sectors, including energy, vehicles, household products and appliances, food and drink packaging, cosmetics, clothing and footwear.

Concurrently, at least 100 businesses will also be reviewed for misleading testimonials, targeting areas in which consumers most commonly rely on reviews, including household appliances, electronics, fashion, beauty products, food and restaurants, travel services, sport, home improvement, kitchenware, health products, as well as furniture and bedding.

The ACCC warned that those found making false environmental or sustainability claims could face enforcement action if it believes consumers are being deceived. Conduct of this type can constitute a breach of the Australian Consumer Law, which prohibits making misleading or deceptive statements.

How does this impact your business?

The Chair of the ACCC, Ms Gina Cass-Gottlieb, indicated that if the ACCC identifies any instances of misleading statements, it may consider issuing a substantiation notice requiring the business to give information or produce documents to the ACCC that could be capable of substantiating or supporting a claim[2]. Substantiation notices are a preliminary investigative tool that helps the ACCC determine whether further investigation is warranted, and do not require a person to prove that a claim or representation is true or is not misleading. A person served with a substantiation notice must comply with the notice within 21 days.

What happens if your business is found to have carried out greenwashing?

If the ACCC believes a business has made false or misleading representations about goods or services, the ACCC can commence court proceedings against that business. If the court finds the business has contravened the law, significant penalties can be imposed. Currently, penalties are the larger of:

• $10 million; or
• three times the benefit received from the contravention; or
• 10% of the businesses annual turnover.

There are proposals on foot to allow the court to impose even larger penalties than those currently in place, for example, increasing $10 million as referred to above to $50 million. See our earlier article explaining these proposed amendments.

The risk of a fine or court penalty being issued by a regulator for greenwashing is a very real risk. On 27 October 2022, the Australian Securities and Investments Commission (ASIC) fined listed company Tlou Energy Ltd $53,280 for alleged false or misleading sustainability-related statements made to the ASX in October 2021. The statements were to the effect that the electricity it produced at its Lesedi power station would produce carbon-neutral energy from its commencement, when ASIC had reasonable grounds to believe the company had not carried out any substantive modelling of the likely carbon dioxide emissions. This is the first fine issued by ASIC for greenwashing related conduct, and gives a clear message to business that regulators such as ASIC and the ACCC are willing to take action on this issue.

Taking action

The ACCC’s probe into greenwashing is a good reminder for all businesses to review their websites, advertising and other customer-facing materials to ensure they are not at risk of greenwashing. Businesses can avoid greenwashing by ensuring their green or sustainability claims are transparent and accountable by:

• making evidence publicly available on their website to back up claims made;
• ensuring there is a reasonable basis for any statements, promises or targets announced in relation to environmental measures;
• being specific and narrow in claims made, rather than broad and potentially vague which can be open to misinterpretation;
• making fair and meaningful comparisons, such as by using the same verifiable and identical metrics for each comparison;
• not unnecessarily hiding or failing to disclose negative environmental impacts.

DMAW Lawyers can assist businesses in reviewing new or existing material to determine whether it may be at risk of falling foul to the Australian Consumer Law

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice

The author thanks Harry Yous for his assistance in preparing this article

[1] ACCC Deputy Chair Delia Rickard, speech to the Sydney Morning Herald Sustainability Summit, 20 September 2022.

[2] ACCC Chair, Ms Gina Cass-Gottlieb, Opening Address on 9 September 2022 to the Law Council Annual Competition and Consumer Law Workshop.