ACCC highlights the dangers of Green Marketing

26 February 2008 Topics: Compliance and corporate governance

Corporate social responsibility is now acknowledged as an important part of any corporate culture. With the introduction of the UN Global Compact rating and many of the same kind of green classification programs, businesses have come to see ‘green marketing’ as an essential advertising tool.

Green marketing has increased in recent years because consumers have become aware of the increased importance of their product’s effects on our environment. In response to the rise in the number of environmental claims in marketing, the ACCC released ‘Green marketing and the Trade Practices Act’. This publication outlines the power of green marketing and businesses obligations under the TPA.

Obligations

There are two sections of the TPA which are relevant to the conduct of those businesses considering green marketing. Firstly, under s52 some marketing methods can be considered misleading or deceptive conduct, and, secondly, under s53 businesses can be found to have made false or misleading representations.

Businesses should be warned that conduct only has to be “likely to mislead or deceive” to be caught by the Act. In a marketing context this means that there must be a “real or not remote possibility” that members of the business’ target audience have been misled. It is important to note that in the advertising of goods the class of people or the target audience that is likely to be affected is quite wide. The ACCC recommends that marketing claims be clear as well as avoid the use of technical or scientific language. However, the law does make allowances for advertising where the statements made are clear ‘puffery’, in that most consumers are conscious of the exaggerating tools used in marketing. This section is not an offence section but gives civil rights to persons affected adversely including consumers or potential consumers and competitors.

False or misleading representations are more serious than the general conduct outlined above. This is because such aspects are made about specific aspects of goods and services. There are two components that can be seen as specific to green marketing. Initially, the products must comply with any description that is provided in the advertising or on the label. This is particularly relevant to claims about recycled products, recyclable components or environmental impacts. Also, businesses must not represent that their products have sponsorship, approval, performance qualities, uses or benefits they do not have. Making representations or undertaking conduct in the pursuit of green ratings that is likely to be false, mislead or deceive the intended audience is a mistake for any risk-adverse business. Making a false or misleading claim is on offence and also creates civil rights for aggrieved parties.

Penalties

The penalties for contravening obligations under the Act are:

  • Fines for companies of up to $1.1 million;
  • Fines for individuals of up to $220,000;
  • Injunctions;
  • Corrective advertising orders;
  • Community service orders; and
  • Ancillary orders.

The fines are the harsher of the punishments and are usually assigned on contravention of criminal liability under s53 (false or misleading representations). Corrective advertising orders are most commonly allocated to manufacturers who are required to give notice of incorrect details to resellers’ and customers. Ultimately, penalties will depend on the circumstances and the conduct involved in the breach.

Ensuring future compliance

In the first instance companies should employ a trade practices compliance program. These programs identify possible breaches whilst working to place controls in place to minimise the real risks of contraventions occurring. Education of all staff about their obligations to ensure that the business complies with the TPA is an important step in reducing the possibility of a breach. Compliance programs assist businesses to improve and build on their current legal habits. Moreover, having someone with legal knowledge about trade practices is also a prudent business procedure. Complying with environmental guidelines will only become more important in the future. Ensuring good marketing practice before that time through a commercial compliance program is essential and will benefit any business.

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