Environmental Claims for Marketing

Trade Practices Commission

Introduction

The Australian public is becoming more conscious of environmental issues. This is reflected in consumer demand for products which have minimal, or at least a diminished, adverse impact on the environment. Producers are responding by developing new products, modifying existing products and adopting marketing strategies emphasising environmental benefits.

Consumers are increasingly being presented with environmental claims for a wide range of products, including many ordinary household products. These claims can be confusing, or even, in some cases, misleading.

As with all marketing and promotional material, environmental claims are subject to the Trade Practices Act and the Fair Trading Acts which all prohibit, in essentially identical terms, misleading or deceptive conduct and specific false or misleading representations.

The Commission and State and Territory Consurner Affairs authorities can take action in the courts to prosecute for penalties or to restrain conduct or seek corrective advertising in cases in which they can establish contravention of those laws. Competitors and others can take legal action to restrain conduct or to recover compensation if they have suffered loss where a breach of these laws can be established.

This guideline is designed to:

• promote compliance with the Commonwealth Trade Practices Act and the State and Territory Fair Trading Acts by manufacturers, importers and marketers who make claims of environmental benefit for their products;
• make consumers aware of the Commission's views about such claims; and
• encourage industry to self-regulate by developing codes of practice for advertising and promotion, and systems for dealing with complaints.

The Commission believes that compliance with the guideline will help:

• ensure that consumers and ethical traders are not disadvantaged by false and misleading claims about the environmental impact of products; and
• encourage product innovation and competition based on truthful and informative claims of environmental benefit.

This guideline offers guidance on the approach the Commission will adopt in carrying out its functions to enforce the provisions of the Trade Practices Act. It does not have the force of law and, accordingly, it is not intended to supplant legal advice on the application of the law in particular circumstances. Federal, State and Territory courts will apply the law in particular cases according to the facts and circumstances presented to them and the principles established in the many cases decided under the Trade Practices Act. Some of those cases are referred to in this guideline.

Some of the matters briefly referred to in the guideline (for example, developing a compliance program) are dealt with more comprehensively in the Commission's booklet Advertising and Selling&emdash;a business guide to consumer protection under the Trade Practices Act. This contains much practical advice on the Act and marketing generally.

Misleading and deceptive claims

What is the target audience?&emdash;what the courts have said

In order to determine whether conduct is misleading or deceptive, the standard to be expected of those in the target audience, in making the decision to purchase, is that expressed in the case of Annand & Thompson Pty Ltd v TPC (1979) ATPR 40-116:

"The test is whether in an objective sense the conduct of the appellant was such as to be misleading or deceptive when viewed in the light of the type of person who is likely to be exposed to that conduct. Broadly speaking, it is fair to say that the question is to be tested by the effect on a person, not particularly intelligent or well-informed, but perhaps of somewhat less than average intelligence and background knowledge although the test is not the effect on a person who is, for example, quite unusually stupid. The question is not whether the purchaser was deceived but whether the conduct was misleading or deceptive."

The Full Federal Court, in the case of Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) ATPR 41-111 considered the target audience for the promotion of an inexpensive steel socket to be the relatively large class of those 'engaged in skilled trades or home handywork'. For the members of that class

"A decision to purchase is unlikely to be the subject of anxious consideration. The immediate impression that the article makes on the purchaser's mind would therefore seem to be of great practical importance in influencing the decision whether or not to purchase."

There are other formulations of the standard to be found in court decisions, but the above seems particularly appropriate for the promotion of the sale of ordinary household products which are unlikely to receive 'anxious consideration' when a consumer decides to purchase. Many products about which environmental claims are made would fall in that category.

Recent Federal Court cases suggest that if members of the target audience may read an unintended implication into a statement or representation, because the words used are not chosen with care, they may be quite justified in doing so. In Siddons, the Court found the following statement summed up the position:

"When persons publish words that are imprecise, ambiguous, loose, fanciful or unusual, there is room for a wide variation of reasonable opinion on what the words mean or connote. The publisher can hardly complain in such a case if he is reasonably understood as having said something that he did not mean,"

Many in the target audience may have a low, almost non-existent, level of scientific understanding, or may have some misconceptions about environrnental issues. For example, they may believe that

• the removal of chloroflurocarbons (CFCs) as a propellant in aerosols removes the threat to the ozone layer when, in fact, some permissible propellants continue to pose a threat, although a reduced one;
• all 'biodegradable' products are environmentally benign when, in fact, this depends on whether the product degrades into benign elements and does so within a reasonable time; and
• all recycling is environmentally beneficial, when in some cases it may not be, for example when energy use or by-products are taken into account.

Misleading or deceptive conduct may occur in several ways, that is, a misleading or deceptive message may be communicated:

• explicitly;
• by implication; or
• through use of a medium such as television, which by its nature can lend itself more to the creation of erroneous impressions in the mind of the viewer. This may be particularly relevant where an element of emotion is involved.

The law does not prohibit the use of humour, cartoons or particular advertising techniques, including attention-attracting exaggeration that is so obvious that most will quickly recognise it for what it is. For example, to show a section of tropical wilderness as part of an obviously suburban environment.

It must be borne in mind that the test for misleading or deceptive conduct is objective: Is the claim likely to mislead or deceive? The test is not whether the marketer intended deception to occur.

.....

Be specific about environmental benefits

If a product has environmental benefits then these should be spelt out. 'Now phosphate-free' is an appropriate claim if phosphate used to be a significantly harmful element in the product and it has now been removed. If, for example, a product is redesigned so that its thoughtless disposal poses a reduced risk to wildlife this may be stated.

Generally a claim should

• refer to a specific part of a product or its production process such as, for example, extraction, transportation, manufacture, use, packaging or disposal;
• use language which the average member of the public can understand;
• explain, but not overstate, the significance of the benefit; and be able to be substantiated.

A claim which may be relevant at one time (for example, 'no CFCs' when other competing products contained CFCs) will become less relevant and ultimately meaningless over time and therefore potentially misleading if authorities prohibit the use of CFCs (as has happened in Australia) in almost all aerosols.

In the case of detergents, there is an Australian Standard which indicates performance criteria for biodegradability in terms of breakdown of surfactant (which helps dissolve dirt in water). In these circumstances an appropriate enduring claim for environmental benefit would be one where performance exceeds the Standard and continues to do so.

A claim such as 'new packaging&emdash;contains 50% recycled post-consumer materials' would be unlikely to mislead because it

• clearly states the nature and extent of the benefit, and
• identifies the aspect of the product affected.

Is the environmental benefit a real one?

A manufacturer might be tempted to say that a plastic product '... may be disposed of safely by incineration'.

If the only safe method of incineration were in a high temperature incinerator not commonly found in Australia, and any other form of incineration involved the release of possibly toxic gases, the claim might be a breach of the law. It misleads in two ways:

• as to the availability of a safe disposal method; and
• by leading some users of the product to believe incorrectly that it might be safely disposed of by backyard incineration.

Some products are promoted as 'phosphate-free', 'chlorine-free' etc. Firstly, such a benefit must be real and relevant. It would risk contravention of the law if such products

• had never contained phosphates or chlorine because they were not relevant to the product, or
• still contained some of the chemical in a different formulation. In this case, qualifying words are advisable.

Secondly, the benefit should not be overstated in terms of environmental advantages.

The prudent course is to explain how the characteristics benefit the environment. If the absence of phosphate benefits water systems by not promoting algal growth, this should be stated. It cannot be assumed that consumers will know this.

Scientific or technical terms and unfamiliar symbols

The use, and particularly the prominent use, of scientific or technical terms on packaging or in advertising may convey to a consumer that what is being spoken of is an important attribute of the product but leave the consumer to guess what the attribute is and its significance.

Such guesswork may simply give rise to confusion and uncertainty. While this is not necessarily the same as being misled, it is quite possible that consumers, in trying to give meaning to such terms, will come to an incorrect conclusion and be thereby misled.

The case of Narhex Australia Pty Ltd v Sunspot Products Pty Limited v Anor (1990) ATPR 41-036 provides an example of that process where the phrase '10%&emdash;CROSS-LINKED ELASTIN CLR SOL N' was held to be misleading and likely to lead consumers to believe that the critical ingredient 'elastin' was present in a cosmetic in 10% concentration, whereas in fact the ingredient was present in only a .05% concentration but in a solution which formed 10% of the product.

If the target audience lacks a degree of scientific sophistication, scientific and technical terms and symbols should not be used unless they are accompanied by a clear and accurate statement of their meaning. It is not appropriate to rely on consumers receiving a point-of-sale explanation of what scientific, technical or other unfamiliar terms mean.

Effect on product performance

Sometimes enhancing the environmental benefits of a product may involve a trade-off which results in some loss of performance compared to that offered by a previous formulation. If a consumer can attain equivalent performance only by using substantially more of a product, then the environmental benefit may be slight or illusory.

In any event, a consumer should not be misled into believing that a product's performance is unimpaired if this is not so. Consumers should be able to decide for themselves the extent to which they will accept an environmental benefit performance trade-off.

Product recycling

Many consumers are likely to believe that a claim that a product contains recycled material means that it has been through a prior product life cycle, or that it has been recycled by another consumer.

Where a different process has taken place&emdash;for example, material has been recovered from the waste stream during manufacture and reused, this should be made clear by using words such as 'materials reclaimed from manufacturing'.

Consumers are likely to understand the term 'recyclable' or recycling symbols on products to mean that there is real likelihood that the product will find its way into a recycling facility. If such facilities do not exist at all, or there are few facilities, or they exist only as pilot plants, then the use of the term or symbols may be misleading. The term or symbols would not mislead if it were only in remote areas that there were no recycling facilities or comprehensive recycling facilities were being established but not yet fully operational. If there is an intention to establish facilities in the future, but no steps have been taken to do this, then the word 'recyclable' or recycling symbols should not be used.

Biodegradable

Consumers may believe that if a product is biodegradable this is always a good feature. However, biodegradability will be beneficial only if the product biodegrades within a reasonable time and into residues which do not harm the environment.

Biodegradability should be claimed only where it is relevant&emdash;that is, the likely or usual disposal process for the product involves a significant role for biodegradability. If there is a qualification to the biodegradable process, this should also be mentioned. For example, in the case of paper products there should be a statement that the paper is 'biodegradable when disposed of under suitable conditions'.

There should be no suggestion of compliance with any Australian Standard for biodegradability where this is not the case.

'New' products

Existing features

If a manufacturer produces a product that has environmental advantages, these may be advertised as benefits even if the advantages have always been present, but not promoted. They should not be promoted as 'new', or a 'breakthrough' or, in view of current knowledge, a significant enhancement of the product unless that is the case.

Product developments

It is important that consumers know that a product's performance or features have been enhanced when that is the case. Such features are at least for a time 'new' and may be advertised as such. Care should be taken not to overstate the benefits as 'new technology' or a 'breakthrough' if scientific or technical knowledge would not support this.

Animal testing

Consumer concerns about environmental issues are sometimes associated with concerns about animal welfare and, in particular, product testing on animals. If a product is promoted as 'not tested on animals' then not only should the product not be so tested but the materials or ingredients that are used in the product should not have been tested on animals. Again, such a claim should only be made if it is both true and relevant, and it may be misleading to make such a claim about a product that has never been tested on animals.

Can you convey all the information needed?

Where there is limited space available on packaging, the Commission's view is that if this means that the information that is left out may make the claim misleading, then it is better not to make the claim at all.

It is, of course, quite permissible to include on packaging a statement such as 'We are constantly improving the environmental performance of our products, telephone 008 ... for more information' providing the information supplied actually informs consumers about the environmental aspects of the product and otherwise complies with the law.

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