29 Oct 2020

Environmental claims again under the spotlight in the Full Federal Court

By Elizabeth Richmond, Kate Madgwick, Brendan Bateman and David Bell

Products said to be "biodegradable and compostable" do not need to be able to biodegrade or compost within a reasonable time; and a representation about the nature, quality, character or capability of a product is not a representation "with respect to a future matter".

Environmental claims can be a potent marketing tool for business, with "green" products often commanding significant premiums.  However, sometimes these claims may not be based on science but only be in the nature of "green marketing".  When it may be the latter, such claims are likely to attract the attention of the Australian Competition and Consumer Commission (ACCC). 

In recent proceedings brought by the ACCC against Woolworths (Australian Competition and Consumer Commission v Woolworths Group Limited [2020] FCAFC 162) the debate centred on the environmental claim that a retail product was "biodegradable and compostable".  What did that mean?  Was it simply a claim that the products were capable of biodegrading and composting?  Or was it also a representation about the future: that the product would degrade and compost within a reasonable time?

While some consumers may expect the latter, the Full Federal Court found that the claim "biodegradable and compostable" in this instance extended only to a representation regarding the inherent properties of the products – that is, that the products were capable of biodegrading and decomposing.

Organisations making similar environmental claims in relation to their products should take a level of comfort from this decision, but should still ensure that any claims of a similar kind can be substantiated.  It may also create an opportunity for those brands whose products do biodegrade or compost more readily to differentiate themselves.

Inherent characteristic or representation about a future matter?

The products in question were a range of disposable cutlery and crockery sold under the Woolworths' "Select Eco" brand.  The products were made of non-toxic organic materials and the packaging featured a prominent statement "Biodegradable and Compostable" along with the statement "Made from a renewable resource".

In the context of environmental claims, "biodegradable and compostable" is a "lifecycle" claim, which concerns the composition, production or disposal of a good or its packaging.  More specifically, this would generally be considered a claim relating to disposal of the good.  

The ACCC argued that by claiming the products were "biodegradable and compostable", Woolworths represented that they were capable of biodegrading and composting within a reasonable time when someone tried to domestically compost or dispose of the products in a landfill and was therefore making a representation with respect to a future matter. Further, it was argued that as Woolworths did not have reasonable grounds for making that representation the claim was misleading and deceptive under the Australian Consumer Law (ACL).

At first instance, Justice Mortimer favoured particular expert evidence that the words "biodegradable and compostable" referred to the inherent characteristics of the product, rather than a prediction about what would happen to the products in future.  This was in large part due to:

  • the adjectival use of the suffix "-able", which signified that Woolworths was describing the inherent qualities or characteristics of the products; and
  • an analogy that could be drawn with the claim that a product is "recyclable", which indicates the capacity of a particular item to be recycled or put through a recycling process.

She found that all that was being represented was the capability of the products to biodegrade or compost and that there was no implication that they would do so within any "reasonable time" if disposed of in a domestic compost or landfill, as contended for by the ACCC.  

Full Federal Court: "biodegradable and compostable" an inherent characteristic

The ACCC appealed the decision and maintained its earlier arguments on appeal.

The Full Federal Court ultimately agreed with the primary judge.  The Full Court formed the view that the claim made in connection with the sale of the products was a representation about the existing or present facts, ie, the capability of the products to biodegrade or compost.  It also said that it did not think that, in general, a representation about the nature, quality, character or capability of a product based on its inherent characteristics is a representation with respect to a future matter.  The Court continued, that

"A representation will only be with respect to a future matter if it is in the nature of a promise, forecast, prediction or other like statement about something that will only transpire in the future – that is, a representation which is not capable of being proven to be true or false when made."

This is a helpful restatement of the legal position with respect to future representations.

The Full Court also referred to Justice Gleeson's decision in Australian Competition Consumer Commission v Kimberly-Clark Australia Pty Ltd [2019] FCA 992, a case concerning allegedly "flushable" wipes, which was also recently affirmed by the Full Federal Court. 

In that case, the Court endorsed the view that the forms of words ending in "-ble" means "able to be", and drew an analogy with similar claims such as "soluble", "edible", "dishwasher safe", "water-proof" and "scratch resistant", which were essentially claims about the characteristics of the good, rather than a prediction or forecast of what would occur in future.  In that case, the Court also found that the claim that wipes were "flushable" was a claim about the characteristics of the product.  That is, the wipes were "flushable", whether or not they were ever flushed.  

Implications for your own green or future claims

Yes, Woolworths won this case.  However it would not have done so had its claims about the nature of the products not been true, regardless of whether any future representation could be imputed.

This case reinforces that businesses need to ensure that any environmental or "green" claims made are specific and truthful.  As to claims regarding future matters, it is particularly important to make sure that there is a sound basis for making such claims at the time the claim is made, and the decision to make such claims is well-documented.  

If you have questions about the judgment or would like to discuss how your business can comply with the Australian Consumer Law, please contact those listed below.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.