Carbon Claims and the ACCC

20 August 2008 Topics: Competition and consumer law, Planning and environment

With the introduction of the National Greenhouse and Energy Reporting Act, the impending Emissions Trading Scheme and the intense media coverage surrounding these issues, being carbon friendly is playing a significant role in a marketplace where consumer awareness of the environmental issues is at an all time high.

The “green” industry and the availability of carbon neutral, carbon friendly or carbon offset products are in increasing demand. However, as there is currently no widely accepted definition of these terms, there are some concerns about claims made by businesses marketing and promoting such products. As a result, the ACCC has released “Carbon Claims and the Trade Practices Act” guidelines to inform businesses of their obligations under the Trade Practices Act (TPA) and the issues surrounding these claims.

Obligations under the TPA

1. Misleading or Deceptive Conduct

A claim by a business in relation to a “green” product could be considered misleading and deceptive conduct in accordance with section 52.

It is important to remember that the conduct only has to be “likely to mislead or deceive” to be caught by the Act. The actual outcome or intention is not relevant.

The ACCC warns that you can engage in misleading and deceptive conduct by not providing full disclosure of the circumstances surrounding your claim. For example, if a product’s carbon emissions are offset by planting trees, but you do not inform the consumer that the trees will not be planted for several years, this could constitute misleading conduct.

2. False or Misleading Representations

Certain claims in relation to “green” products can also be considered to be a false or misleading representation in accordance with section 53.

It is critical that any claim made in relation to a product is accurate, and that businesses do not represent that their products as having sponsorship, approval, performance qualities, uses or benefits they do not have. It is also a requirement that any future claim, i.e. a sufficient amount of carbon will be sequested by the trees planted to offset the carbon, is made on reasonable grounds.

Penalties

Although it is not an offence to breach section 52, consumers, potential consumers and competitors who are adversely affected by the “green” claim could potentially take legal action seeking civil remedies such as damages as a result of a breach.

The ACCC also has extensive enforcement powers and can impose the following penalties for contravening the Act if section 53 is contravened by making false or misleading statements:

  • Fines for companies of up to $1.1 million;
  • Fines for individuals of up to $220,000.

The following remedies are available where there are breaches of either section 52 or section 53:

  • Injunctions;
  • Corrective advertising orders;
  • Community service orders; and
  • Ancillary orders.

The ACCC has now taken action against several companies as a result of carbon claims which have resulted in future restraints and orders requiring the company to inform customers of the real benefits of particular products.

Ensuring future compliance

The following should be considered when making a “green” claim:

  • the message being received by your audience, considering their varying ages, education and experience;
  • the accuracy of the information provided to consumers, including the level of risk associated with any particular claim;
  • whether complete disclosure has been made, considering silence can amount to misleading and deceptive conduct, and that there is no accepted definition of carbon neutrality; and
  • whether you have a reasonable basis for making the claim.

The implementation of a trade practices compliance program can assist in identifying possible breaches of the TPA, whilst working to put controls in place to minimise the real risk of contraventions occurring.

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