Are you ready for the next regulatory storm?
The findings of the ACCC’s internet sweep of environmental and sustainability claims in October 2022 have been released and the results are grim. Over half of the 247 businesses surveyed were flagged by the ACCC as making “concerning claims” which warrant further investigation.
The worst offenders were in:
- Cosmetics and personal care (73% of the businesses surveyed made concerning claims);
- Textiles, garments, and shoes (70% of the businesses surveyed made concerning claims); and
- Food and beverages (67% of the businesses surveyed made concerning claims).
Other industries included in the sweep were household and cleaning products, electronics and home appliances, motor vehicles, takeaway packaging, and energy.
Green claim? …or red flag?
The key issues identified by the ACCC in its report were:
- Using vague and unqualified claims: Examples of vague claims include “green”, “kind to the planet”, “eco-friendly”, “responsible”, and “sustainable”. The problem with using vague claims is that they can have a broader range of meanings than what you intend. You must be able to substantiate every reasonable interpretation of a claim, otherwise you will be running a risk of being misleading and deceptive. Examples of unqualified claims include statements like “Made with recycled plastic” or “Sustainably sourced”. These will be interpreted as applying to the product as a whole. If you cannot verify such a claim in respect of every component of the finished product (e.g. a recycled plastic drink bottle but with a cap made from virgin plastic), then you need to make that limitation clear upfront to the consumer.
- Failing to adequately substantiate claims upfront: There is no legal requirement to provide the substantiation for a claim upfront or as part of your claim. However, failing to reference any substantiation in connection with your claim can raise your risk profile because it may increase the risk of the ACCC issuing you with a substantiation notice if they suspect you may not be able to fully support the claim or it may increase the risk of your headline claim being interpreted more broadly than can be justified by your supporting evidence.
- Using aspirational claims: There has been a trend towards businesses using aspirational statements about environmental and sustainability goals in annual reports, presentations, and other investor materials, such as “Moving towards Net Zero”. These types of claims may seem like a relatively easy way to establish yourself as one of the “good guys” and gain instant credibility from investors. However, you should bear in mind that if challenged in the Federal Court, claims about future matters need to have a reasonable basis. Furthermore, provided that the ACCC (or any other challenger) can establish that you have in fact made a representation with respect to a future matter (e.g. that your business will be carbon neutral by 2040), then the evidentiary burden will shift to you to establish that you had reasonable grounds for making that representation.
- Using certification symbols in a confusing manner: Another trend observed by the ACCC is the frequent use by businesses of certification trade marks (CTMs) issued by third party schemes, which may include organic certification, carbon neutral certification, or industry specific certification (e.g. cocoa, seafood, or aquaculture). Whilst achieving third party certification can be a practical way of measuring and demonstrating your commitment to certain environmental standards, such certification is not in any way a safe harbour from the Australian Consumer Law. You should consider the credibility of the certifying organisation and its familiarity with local laws and regulations in countries where your products are supplied, the scope and currency of the standards for certification, and whether the certification has been issued in respect of your business as a whole or whether it applies more directly to individual products within your range or to particular manufacturing facilities. Above all, you should communicate clearly to consumers the significance of any CTMs displayed in your marketing materials in a clear and accurate manner so that they are not misled into believing that such marks evidence a broader range of qualities in your products or business than can be justified.
The new ACCC Deputy Chair, Ms Catriona Lowe, has flagged upfront the ACCC’s intention to engage actively with businesses in the coming months in relation to their use of environmental and sustainability claims. In particular, Ms Lowe has warned that, “Where we have concerns, we will be asking businesses to substantiate their claims.”1
Ms Lowe referred to “several active investigations” in industries which include packaging, consumer goods, and food manufacturing for alleged misleading claims. That number will likely grow as the ACCC sharpens its focus on specific industries and claims. What’s more, according to Ms Lowe, “We will take enforcement action where it is appropriate to do so as it is critical that consumer trust in green claims is not undermined.”
That reference to enforcement action should send alarm bells ringing across businesses in Australia.
In a recent article by the Australian Financial Review, Ms Lowe made very clear her intention to adopt a tough approach to litigation. “Regulators, in my view, have a duty to establish what the boundaries of the law are,” Ms Lowe stated.2
This means that you can expect to see the ACCC taking on more tough cases to clarify the limits of the law in “grey areas”. So, just because a claim has been in place for a long time, doesn’t necessarily mean it won’t get caught by the ACCC’s latest crackdown.
If your business needs help getting their house in order, contact the Addisons Competition, Consumer & Antitrust team.
1 ACCC, ‘ACCC ‘greenwashing’ internet sweep unearths widespread concerning claims’ (Media Release 17/23, 2 March 2023)
2 Burton, T. (2023, March 3). ‘ACCC’s deputy to test law’s limits’. The Australian Financial Review, p.9.