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Spotting the lemon

01 Jun 2010

I f you are an IT decision-maker in a commercial or government organisation, chances are that green IT claims will not be new to you. Considerations of environmental impact commonly feature in the procurement of IT products and services in today’s environmentally-conscious society.Despite this, many suppliers may still be surprised to hear the significant financial and reputational risks that can be associated with making certain green IT claims. Similarly, many customers may be surprised to hear that they have a potential remedy against a supplier where they have been misled by a green IT claim, even where the supplier had no intention to mislead or such conduct does not constitute a breach of contract.In New Zealand, actions for misleading or deceptive green marketing (commonly referred to as ‘green washing’) are not simply limited to misrepresentation (making a false statement that induces someone else to enter into a contract) or breach of contract. More generally, such conduct is also regulated by the Fair Trading Act 1986 (the FTA).Types of green washing claimsThe FTA applies to all forms of marketing, including (in the context of IT procurement) claims made by suppliers in the RFP process. The obligation under the FTA to not engage in misleading or deceptive conduct is a broad one. The following is a sample of potential green washing claims that may be relevant in an IT procurement context:

  •     Making claims as to the future, such as that a business will be compliant with a certain environmental standard within 12 months, where there are no reasonable grounds for making those claims;
  •     Silence, for example, where only a half-truth is disclosed such as that a product is recyclable when only a portion of the product is recyclable;
  •     Naming or describing a business, product or service in a way that falsely implies a certain impact on the environment;
  •     Using a trademark of another party, or suggesting that the business has the backing of another party, where not authorised to do so;
  •     Claiming that an approval has been obtained (for example, from a government agency or licensing board) where no such approval has been given;
  •     Claiming or implying that a good or service is endorsed by any person or organisation when that is not true; and
  •     Making claims which are technically or narrowly correct, but which create an overall impression that is likely to mislead.
Potential penalties and remediesGreen washing can expose a business to legal action by the consumer watchdog, the Commerce Commission (the Commission), or any other person, including a business’s customers or competitors.Criminal court action taken by the Commission may result in:
  •     Fines of up to $200, 000 per offence for a company and $60, 000 per offence for an individual (where both a company and the individuals involved in a breach can be prosecuted by the Commission); and/or
  •     Corrective advertising orders, including orders to disclose information to the public or to publish corrective statements (at the business’s own cost); and/or
  •     Other remedial orders, including orders to render a contract altered or void, refund money to consumers, make payment for the amount of any loss or damage, or order that goods be repaired or services supplied.
Civil court action taken by either the Commission or other persons may result in:
  •     Declaratory orders; and/or
  •     Injunctions to prevent or stop unlawful activity; and/or
  •     Orders to pay money.
Importantly, a breach of the FTA does not require any intention to mislead, or even for anyone to have actually been misled; conduct only needs to be likely or liable to mislead to be unlawful.It is therefore important for suppliers to take utmost care to ensure that any green IT claims they make are accurate and truthful, and not likely to mislead in any way. This is true even if the supplier is simply passing on green IT claims made by another person (such as a manufacturer).GuidelinesThe Commission has published guidelines in relation to green marketing and carbon claims. You can access these guidelines on the Commission’s website at the guidelines and this article should not be treated as a substitute for legal advice, they are a readily accessible and inexpensive first step to promoting compliance with, or determining whether your supplier has acted in compliance with, the requirements of the FTA in relation to green IT claims. If in doubt, we suggest consulting your lawyers to reduce the risk of your business being exposed to unnecessary and potentially expensive green washing claims.