Professor Allan Fels AO, former Chair of the Australian Competition and Consumer Commission, speech to the Climate Integrity Summit.

The Australian Consumer Law

The nature of misleading and deceptive conduct

Section 18 of the Australian Consumer Law (ACL) provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or that is likely to mislead or deceive.

Section 18 is very broad. The test is whether the conduct is deceptive or misleading to an ordinary consumer. Consumers typically have a poor knowledge about the validity of claims made in this field.

Misleading conduct can include silence or omission.

The intention of the person engaging in the misleading or deceptive conduct is irrelevant.
Misleading conduct can include false predictions if the maker had no reasonable grounds for making them or if the prediction should have been qualified and was not.

Other sections of the Act prohibit false and misleading representations about specific aspects of goods and services. A business can’t falsely represent goods as being of a particular standard, quality, value, grade, style, model or having a particular history or particular use.

Goods must comply with any description that is provided in advertising or labelling. This is relevant to the many claims about recycled and recyclable content for example.

A business can’t make false claims about sponsorship approval, performance characteristics, accessories, uses and benefits they do not have.

Section 33 also prohibits false claims as to the nature, manufacturing process, the characteristics, the suitability for the purpose or the quality of any goods.

The ACCC has also emphasised the need to consider the whole life of a product when making a claim about carbon neutrality, The claim can’t for example just be just about, say, the manufacturing process and not it’s actual use and operation. It can’t in other words be a partial assessment. It can’t be about just a subset of products or activities.

Claims must be able to be substantiated. The ACCC can require substantiation from business in relation to claims it regards as suspicious.

Coverage

The law applies to persons engaged in trade or commerce (which incidentally includes trade associations).

The law does not apply to government or the ACCC. It does apply, however, to governments where they are engaged in trade or commerce e.g. publicly owned enterprises.

An important question is whether a government agency that receives significant fees for its services e.g. licensing, certification and so on is engaged in trade and commerce and therefore covered by the Act. In at least some cases it is covered.

In particular, the government agency may not be immune if it is carrying on a business, where it involves profit, repetition in purchases, and business transactions such as contracts, advertising, and promotion.

Broadly, therefore, the government agency must be engaged in trade or commerce. There is a very real possibility – I would say probability – that Climate Active is covered by the Act. The Australia Institute has made a complaint about Climate Action to the ACCC. This will require a decision by it. In any case, the issue is litigable by NGOs and others.

It is worth noting that if a firm merely advertises that it has a certificate or something like that from the government recognising its credentials that in itself is not misleading or deceptive, even if the government has wrongly accepted its credentials.

Suppose that a business makes a fake claim that it is carbon neutral – obviously it can be sued. Suppose, however, it simply says: we have a certificate from the government e.g. from Climate Active saying that we are carbon neutral, then this is not misleading or deceptive and not normally able to be litigated.

Enforcement

The law is enforced by the ACCC.

ASIC also has a role in regard to investment products where there are misleading or deceptive claims e.g. that the investment is being made in carbon neutral products when that is not the case.

Both the ACCC and ASIC have made it a priority to tackle false greenwashing claims.

Importantly private action can be taken to enforce the law – individuals, NGOs and others can go to Court. They may face some costs including costs if they lose the case, but private litigation is very important.

The most important remedy in today’s context is the power to get an injunction from a court to stop behaviour. Damages are a possibility. There are also penalties for specific false and misleading representations of the kind I have mentioned.

Although the ACCC and ASIC play an important role in protecting the integrity of products there are other parts of government and the private sector that must play their role properly. I refer for example to certification and accreditation and all sorts of other decisions made by governments or certifiers.

Greenwashing

Greenwashing claims abound these days. They state that in some way a good or service is environmentally friendly or carbon neutral or the like. These claims are widespread. They can relate to small household items such as nappies, toilet paper, cleaners, and detergents.

They include major whitegoods and appliances, water, energy efficiency etc.

Note that the final seller – say the retailer – is liable for false claims that may have been made at earlier points of the supply chain. They need to check the veracity of claims coming from their suppliers.

I believe most big Australian businesses claim they are carbon neutral.

Offsets

Much has been said about offsets including today and on Four Corners.

I will focus on Climate Active which is sponsored by the Department of Climate Change, Energy, Water and the Environment or which operates a carbon neutral certification scheme.

I am concerned about its approach to issuing certificates.

It has issued certificates to opposed producing companies and to electricity businesses.

Examples of the former include Tokyo Gas (involved in Northern Western Australia), Ampol, Cooper Energy, AGL, and Energy Australia.

To be certified there is no requirement for actual carbon emission. All that is needed is offsets.

Often the claims relate to offsets which may only come into being in later years. Or to reduced intensity i.e. fewer emissions per unit of output.

And Climate Active seems to have a low standard for substantiation of claims.

And claims often relate only to carbon emission reductions in one part of the business, or for partial or not whole of life features.

The actual trademarks are rather unclear e.g. a simple page which just says: Climate Active carbon neutral – and nothing more.

Competition Issues

Businesses sometimes collaborate or want to collaborate in regard to dealing with climate change matters. The competition law does not prohibit business collaboration unless it is anticompetitive in terms of the provisions of the Competition Act.

If there is collaboration and it involves a competitive variable such as a price agreement, market sharing, coordinated bidding etc. then it is possible to get such behaviour authorised if there is sufficient public benefit that outweighs any harm to competition.

It goes without saying that widespread false greenwashing undermines competition. The market does not deliver what consumers want – environmentally friendly products. And genuine providers of environmentally friendly products are held back.

General Competition Issues

Right now, and in the period ahead governments are taking many steps in relation to climate change e.g. encouraging the development of renewables. Broadly speaking, if the government is taking these steps, then their actions are not covered by the competition or consumer law. However, governments may intentionally or inadvertently set up arrangements that are harmful to competition in the longer term. Businesses often push for this. It’s possible that a government will propose that there be an activity and that it be conducted by a single firm which would thereby achieve a monopoly. A government may set a standard which suits bigger or incumbent business but has the effect of excluding new players, innovators, small business and so on. Subsidies can sometimes have similar effects.

It’s really important to keep a close eye on these developments.

Suggestions for Action

One possible action would be to clarify or explicitly extend the Australian Consumer Law so that it covers false and misleading conduct by government in relation to climate change claims, decisions, or certifications or the like.

Someone would have to work on the drafting.

I have never favoured the proposal that the Australian Consumer Law should apply to all normal decision making by governments: that would be devastating in its effects on public administration and politics but there could be a special case to extend the misleading and deceptive conduct provisions to climate change actions by governments certainly in relation to certification and licensing. It would just require them to be honest and not misleading or deceptive and not engaging in misleading or deceptive greenwashing. It would not otherwise circumscribe their policies.

Another option would be to establish some kind of independent tribunal which could make rulings on the integrity of offset decisions by government or its agencies that are made that may be questionable.

Another option is to require all firms, especially bigger ones, to disclose publicly whether they are truly carbon neutral and for those claims to be subject to Australian consumer law.

Finally, my remarks are about actions to take to remedy private or government false greenwashing. The biggest issue, however, is root cause analysis of why governments engage in greenwashing and what should be done to remedy it by their own actions.

— Professor Allan Fels AO, former Chair of the Australian Competition and Consumer Commission, to the Climate Integrity Summit.