The ACCC sets out best marketing practices and companies’ obligations under the Australian Consumer Law, including strict penalties that may follow.
By Paul A. Davies, Sophie J. Lamb KC, Michael D. Green, James Bee, and Aleksandra Dulska
In July 2023, the Australian Competition and Consumer Commission (ACCC) published draft guidance (Draft Guidance) to improve the integrity of environmental and sustainability claims made by businesses and protect consumers from greenwashing.[1]
Background
The ACCC has stated that it is prioritising consumer, product safety, fair-trading, and competition concerns in relation to environmental and sustainability claims as part of the 2023-24 Compliance and Enforcement Priorities.
The Draft Guidance aims to address conduct that the ACCC identified as concerning in its recent greenwashing “internet sweep”. The ACCC found that out of 247 businesses reviewed, 57% were making what it considered vague or unclear environmental and sustainability claims, not providing sufficient evidence for their claims, setting environmental and sustainability goals without clear plans for how they will be achieved, and/or using third-party certifications and symbols in a confusing way.[2] The ACCC stated that the conduct seemed especially prevalent in the food and beverages, takeaway packaging, and cosmetics sectors.
The publication of the Draft Guidance follows a string of high-profile enforcement actions from the Australian Securities and Investment Commission (ASIC) against greenwashing identified in the managed funds sector.[3]
The Draft Guidance
The ACCC specified a number of goals for the Draft Guidance, including encouragement of accuracy by businesses that choose to make environmental and sustainability claims and assisting consumers to make more informed choices if they want to make purchasing decisions based on such claims. The ACCC also explained the general approach it will take in investigating violations of the Australian Consumer Law (ACL) and potential enforcement outcomes.
The ACL applies to all forms of marketing, such as information on packaging, advertisements, store signs, social media, and websites, or told to consumers in writing or verbally. More generally, it applies to representations in connection with the supply or possible supply of goods or services, or to conduct, in trade or commerce.
The Draft Guidance identifies eight principles that businesses should apply when making environmental and sustainability claims, in order be less likely to mislead consumers and violate the ACL:
- Claims should be accurate and truthful (entails considering the overall impression created, including through the use of visual elements, and avoiding overstating the level of scientific acceptance of evidence relied upon).
- Claims should be supported by evidence (independent and scientific evidence is the most credible; a representation about a future matter must be based on reasonable grounds and third-party certifications should be properly vetted).
- Important information should not be left out or hidden (all the relevant information about environmental impact should be considered and presented in a transparent manner, including full life cycle of a product or service).
- Any conditions or qualifications on the claims should be explained (theoretical environmental or sustainability benefits, which are not clearly explained, are likely to mislead consumers).
- Broad and unqualified claims should be avoided (claims should be qualified with prominent disclaimers, if there are any limitations to them, especially in highly polluting industries).
- Clear and easy-to-understand language should be used (technical terms should be avoided).
- Visual elements should not give the wrong impression (the overall impression needs to be considered, taking into account not just the words used or information that is left out, but also visual elements, colours, and logos).
- Businesses should be direct and open about their sustainability transition (unless clear and actionable plans detailing how it will be achieved are in place).
The ACCC enforces the ACL in conjunction with State and Territory consumer and fair trading agencies and works closely with the ASIC on the detection and investigation of misleading environmental and sustainability claims. The ACCC focuses on consumer-facing products and services, whereas ASIC is primarily responsible for financial products and services.
The Draft Guidance details severe consequences for businesses that are found to have misled customers. The ACCC can take court action, and the maximum penalty for each violation of the relevant penalty provisions of the ACL would be the greater of: (i) $50 million (£26 million); (ii) three times the value of the benefit obtained, if a court can determine the benefit that is “reasonably attributable” to the violation; or (iii) 30% of the corporation’s adjusted turnover during the relevant period. Criminal liability for corporations and individuals for offences under the ACL may also apply with respect to some claims.
Looking Into the Future
The Draft Guidance seeks to send a clear warning to businesses and signals increased regulatory enforcement and litigation risk, as more claims are being brought by NGOs and other concerned parties.
The ACCC’s compliance and enforcement agenda echoes the priorities of other regulators and industry bodies across the globe, in particular the Advertising Standards Authority in the UK whose guidance we have covered in a recent blog post.[4]
The Draft Guidance was subject to public consultation until 15 September and will likely be adopted in Q4 2023.
Latham & Watkins will continue to monitor developments in this area. For more of our thought leadership on environmental claims and greenwashing, please see:
UK Advertising Standards Authority Publishes Updated Guidance on Greenwashing Claims
Focus on Greenwashing: The Latest Regulatory Proposals in the EU and the UK
The Future of Green Marketing: Anticipated Changes to the FTC’s Green Guides
Greenwashing: Key Drivers, Risks, Enforcement, and Litigation
Endnotes
[1] https://www.accc.gov.au/system/files/Environmental%20and%20sustainability%20claims%20-%20draft%20guidance%20for%20business_web.pdf
[2] https://www.accc.gov.au/system/files/Greenwashing%20by%20businesses%20in%20Australia.pdf
[3] https://download.asic.gov.au/media/ao0lz0id/rep763-published-10-may-2023.pdf
[4] https://www.globalelr.com/2023/06/uk-advertising-standards-authority-publishes-updated-guidance-on-greenwashing-claims/