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HG Alert: Promoting your company as clean and green? Two reasons to be careful - 30 Jun 2010

The Australian Competition and Consumer Commission (ACCC) is vigilant in prosecuting those companies that breach the provisions of the Trade Practices Act 1974. In particular, the Commission has been keeping an eye on those companies who use misleading or deceptive messages when promoting their green credentials.

As the following case studies show, the ACCC won't tolerate false claims by companies who advertise themselves as clean and green in order to divert attention away from other less green practices (termed ‘greenwashing').

For more information about misleading and deceptive conduct and how it may affect you, see our article on avoiding misleading and deceptive conduct in green marketing.

Prime Carbon

Prime Carbon is a Townsville-based business that sells soil carbon sequestration programs to farmers, land owners and industry. Prime Carbon claims to sequester carbon from the atmosphere and store it into agricultural land, thereby providing farmers and the environment with improved soil quality, and providing farmers with financial benefits from carbon credits that can be resold to energy producers to offset their carbon emissions.

Interestingly, Prime Carbon was not charged with misleading customers about its carbon offsets or for charging consumers for a service that could not be provided. Instead, it was charged in relation to representations it made on its website and in promotional brochures:

  • Prime Carbon claimed to be affiliated with the National Stock Exchange of Australia, when it was not.
  • Prime Carbon stated that the National Environment Registry Pty Ltd, through which Prime Carbon supplied its services, was regulated by the Federal Government, when it was not.
  • Prime Carbon stated that the National Environment Registry Pty Ltd had an arrangement with the Chicago Environment Registry, which it did not.

In Federal Court action initiated by the ACCC, Prime Carbon was found to have made false or misleading representations in connection with its soil carbon and sequestration programs. The Court restrained Prime Carbon and its director from engaging in such conduct in the future, and required its director to undertake trade practices compliance training and only publish carbon credit claims in the future after first receiving legal advice that the publication does not breach the Trade Practices Act.

Prime Carbon was also ordered to send letters to all of its clients (both landholders and those who purchased carbon credits) advising of the Federal Court's orders, and was required to display the Court Orders on its website for 60 days. Prime Carbon was also ordered to pay the ACCC's costs of $15,000.

GreenSwitch

Global Green Plan Limited operated a retailer called GreenSwitch between 2006 and 2008. GreenSwitch provided renewal energy certificates under the government's GreenPower program.

GreenPower is a government accredited program for renewable energy, allowing consumers to pay extra on their electricity account to be invested in Australia's renewable energy sector. In essence, electricity providers use the extra money to purchase more renewable energy on behalf of customers from companies in the solar, hydro, wind power and biomass sectors. This is achieved through the purchase of what are called ‘renewable energy certificates'. These purchases encourage more renewable energy and alternative energy suppliers into the electricity market, helping to achieve the government's renewable energy target of ensuring 20 percent of all electricity in Australia is produced by renewable energy means by the year 2020. For a more detailed explanation of the renewable energy scheme, see our article on dual markets for renewable energy certificates.

Over a two year period GreenSwitch received funds and entered into agreements to purchase some 11,300 renewable energy certificates on behalf of its customers. However, the program fell short by 4,137 renewable energy certificates, which GreenSwitch acknowledged.

GreenSwitch was subsequently charged with breaching the Trade Practices Act by making misleading representations about the future purchases of those renewable energy certificates, making representations that services provided by GreenSwitch had an environmental benefit, when they did not, and making representations that GreenSwitch had an approval or affiliation with the National Green Power Accreditation Program, when it did not.

GreenSwitch gave a court enforceable undertaking to the ACCC that it would purchase and surrender those extra 4,137 renewable energy certificates, as well as write letters to its customers explaining the situation. Three months later, GreenSwitch had not taken any action, and accordingly the ACCC instituted proceedings in the Federal Court related to those breaches of the Trade Practices Act.

Lesson to be learned

The raft of climate change legislation being enacted (and debated) in Australia and internationally provides ongoing opportunities for companies to capitalise on the ever growing ‘green market'. Opportunities exist for companies to invest in and create alternative energy sources and produce carbon credits, which are in demand by consumers. However, in scrambling to fill these green niches, companies need to ensure that they comply with the basic tenements of the consumer protection legislation that has been in existence for decades.

Companies need to bear in mind that no matter how clean or green a product may be, the prohibitions contained within the Trade Practices Act, and in particular the ban on misleading or deceptive conduct, will be strictly enforced.

For more information on climate change or greenwashing, please contact HopgoodGanim's Climate Change practice.