Greenwashing as an Unfair Commercial Practice

The concept of sustainability has undergone radical developments in recent years, as has the sustainability awareness of consumers. Where sustainability used to have a hippy image, it is now a must for many consumers. Traders are responding strongly to this and label their products as “green” or “environmentally friendly”. But not everything is as it seems. Just think of the Volkswagen diesel scandal, where the cars turned out not to be as sustainable as indicated due to built-in software that circumvented emissions testing. What can you do as a consumer in such cases? This article highlights cases of greenwashing under Dutch law on unfair commercial practices. These articles are the implementation of the European Directive on unfair commercial practices by companies in the internal market.

Unfair Commercial Practice

An unfair commercial practice (Section 6:193b BW) exists if a trader does not behave in accordance with the requirements of professional diligence and thus limits the ability of the average consumer to make an informed choice. This constitutes an unlawful act against the consumer because it allows him to take or has taken a decision on a contract that he would not otherwise have taken. In principle, this does not include excessive advertising statements that should not be taken literally. The legislator distinguishes two particularly unfair commercial practices, namely: misleading and aggressive commercial practices. This article discusses misleading business practices as they best align with greenwashing.

Misleading Commercial Practice

There may be a misleading commercial practice (Section 6: 193c BW) if information is provided that is factually incorrect or could mislead. Even if information is concealed in a misleading manner, this can be a misleading commercial practice. The law provides many examples of misleading commercial practices, but these are not exhaustive. Of these examples, two in particular play a role in greenwashing. The first is apparent from the first paragraph under b, namely the main characteristics of the product such as, among other things, the advantages, risks or geographical or commercial origin. For example, if a product is advertised as “environmentally friendly” but this is not the case (e.g., due to the use of harmful substances), this can be misleading on this basis. Another possibility for deception is non-fulfilled obligations in a code of conduct, which are discussed below.

Misleading claims in the Code of Conduct

Sustainability claims in the trader’s code of conduct could also lead to a misleading commercial practice if these are specifically known and the trader indicates that he is bound by them (Article 6: 193c paragraph 2 under b BW). However, the question is whether a specific CSR code of conduct for companies can therefore be seen as misleading towards consumers. For this it is important whether there is a commercial practice within the meaning of art. 6: 193a paragraph 1 sub d BW. The non-binding but indicative Guidance to the European Directive indicates that provisions on unfair trading practices mainly apply to information with marketing purposes and not so much to non-financial information for the information of shareholders, for example. But what if the information appears to be intended for consumers, for example because it is referred to on the consumer section of the website? Neither the Guidance nor the legislator is clear about this. This is likely to be the case if this is a sufficiently clear reference to this information intended for the consumer and, moreover, a code of conduct clearly binds the trader. In that case, the average consumer would be entitled to assume that the trader is complying with this, which could influence who takes or could take the decisions about the contract.

Consequences of an Unfair Commercial Practice

If there is an unfair commercial practice, this is considered an unlawful act towards the consumer. The legislator meets the consumer with a presumption of evidence, so that it is up to the trader to prove that the information he has provided is correct and complete (instead of the consumer who has to prove that the conduct is misleading). In the event of a successful claim, the trader is liable and must compensate for the damage. Additionally, an unfair commercial practice is a ground that justifies the avoidance of the agreement.

Damage Requirement of Tort Law

For a successful claim for damages it is important that the consumer has suffered damage as a result. This is less easy to imagine in cases of greenwashing than in other forms of unfair commercial practices. In the absence of damage, termination still seems a better option for consumers. However, should damage be suffered by misleading corporate behaviour, a tort claim based on an unfair commercial practice could be a good option. Not only to get your damage compensated as a consumer, but also as a means of pressure to encourage the trader to adopt a more sustainable policy.

Are you a consumer and have you concluded an agreement based on misleading information and would you like to know more about your legal position? Or are you a trader dealing with a claim based on an unfair trading practice? Then contact Law & More. Our lawyers are specialized in the field of liability law and sustainability and are happy to offer you advice and assistance during any proceedings.