Australia - Is It All Going Down The Drain? The Risks And Opportunities Of Making Environmental-related Marketing Claims.
Legal News & Analysis - Asia Pacific - Australia - Regulatory & Compliance
6 September, 2019
In June 2019, the Federal Court of Australia (Court) handed down its decision in Australian Competition and Consumer Commission v Kimberly-Clark Australia Pty Ltd in favour of Kimberly-Clark Australia Pty Ltd (Kimberly-Clark).
The case related to action by the Australian competition and consumer regulator (ACCC) against Kimberly-Clark for alleged misleading and deceptive conduct in the advertising and marketing of its Kleenex Cottonelle Flushable Cleaning Cloths (Flushable Wipes). This decision has since been appealed by the ACCC.
The Flushable Wipes are moist toilet towelettes, which were marketed by Kimberly-Clark as "flushable", based on the language and markings on the packaging as well as various statements on Kimberly-Clark's website.
The case provides insight to two key areas:
1) the ACCC's interpretation of the representations conveyed to an ordinary reasonable consumer; and
2) the Court's approach to evidence relied on to prove alleged false, misleading or deceptive conduct in respect of environmental and sustainability-related claims.
The alleged representations
The parties were in dispute as to the representations conveyed by Kimberly-Clark's marketing of the Flushable Wipes.
The ACCC contended that Kimberly-Clark's representations suggested to an ordinary reasonable consumer that the Flushable Wipes:
1) had similar characteristics to toilet paper when flushed and would behave and disintegrate in a similar manner and timeframe once it entered the sewerage system (Toilet Paper Representation); and
2) were suitable to be flushed down the toilet and into Australian sewerage systems and were compatible with such systems (Flushability Representation),
each of which were false, misleading or deceptive.
On the other hand, while Kimberly-Clark accepted that it made the Flushability Representation (and contended that it was true), it was of the view that the Toilet Paper Representation went too far.
In arguing that Kimberly-Clark made the Toilet Paper Representation, the ACCC relied on the overall packaging of the Flushable Wipes and in particular the following language:
• the descriptor "flushable";
• the words "For best results, flush one or two cloths at a time";
• the words "Cloths break down in sewerage system or septic tank"; and
• the logo.
The logo was featured alongside text with words to the effect that "dry toilet paper alone doesn’t provide a good enough clean" and that the Flushable Wipes are to be "used with regular toilet paper".
The Court found that the Toilet Paper Representation was not made.
The Court found that there was no language which might convey to the ordinary reasonable consumer any representation about the likely behaviour of the Flushable Wipes when flushed or their relative composition to toilet paper. It was found that there was sufficient language to convey that the Flushable Wipes were neither:
• characteristic of toilet paper, particularly as it was recommended that only two Flushable Wipes be flushed at once (a characteristic uncommon to toilet paper); nor
• a substitute for toilet paper, given they were to be "used with regular toilet paper".
At most, the Court held that the packaging represented to an ordinary reasonable consumer that the Flushable Wipes have a similar use to toilet paper and are flushable.
Nature of evidence used to prove the Flushability Representation was false, misleading or deceptive
Kimberly-Clark's Flushability Representation was based on the fact that the Flushable Wipes passed the flushability tests set by the third edition of guidelines published by the International Nonwovens and Disposables Association and the European Disposables and Nonwovens Association (GD3 Guidelines). Kimberly-Clark relied on these test results to substantiate its Flushability Representation.
To prove that the Flushability Representation was false, misleading or deceptive, the ACCC made various submissions. Some of these, and the evidence relied on and the Court's findings are set out below.
1) The ACCC submitted that the Flushable Wipes did not have similar characteristics to toilet paper when flushed and suggested that they did not break down or disintegrate in a timely manner to prevent the risk of harm to household and municipal sewerage systems – the break down rate of toilet paper was used as the yardstick for what was considered timely to prevent the risk of harm.
To support this submission, the ACCC relied on a physical demonstration of how toilet paper and the Flushable wipes behaved differently under similar forms of agitation as well as internal Kimberly-Clark records (namely, emails and other documents about testing of the wipes) which show that Kimberly-Clark effectively accepted that the Flushable Wipes may not disintegrate by the time they reached the wastewater treatment plant.
The Court accepted that the Flushable Wipes did not break down as quickly and easily as toilet paper, however was not convinced that such characteristics posed a real risk of harm to household and municipal sewerage systems over and above that posed by toilet paper. The Court appeared persuaded by the absence of substantial evidence that harm in fact eventuated.
2) The ACCC submitted that the Flushable Wipes are not suitable to be flushed into Australian sewerage systems and cause or contribute to blockages and damage to sewerage infrastructure.
The ACCC relied on Kimberly-Clark's decision to accelerate the development of an "improved flushable cloth" which would exceed the GD3 Guidelines standards and internal Kimberly-Clark emails about potentially removing the synthetic element of the Flushable Wipes to improve their dispersibility. Generally speaking, the emails demonstrated that Kimberly-Clark did not expect the wipes to fully disperse in the sewerage system and sought to improve this quality of the Flushable Wipes. Further, the ACCC relied on evidence from wastewater authority witnesses in respect of waste collection studies and the damage caused by flushable wipes.
While the Court accepted that the Flushable Wipes were not fully dispersible, thereby posing a risk of harm to the sewerage system, it found there was insufficient evidence that such harm in fact eventuated. Further, the expert evidence in respect of damage caused to the sewerage system was in relation to wipes generally, not "flushable" wipes. The Court was not willing to infer that the wipe products the subject of such witness evidence were the Flushable Wipes.
3) Further, the ACCC submitted that the GD3 Guidelines were not a suitable indicator for flushability as such tests neither:
• constituted an independent testing regime (given it was developed by manufacturers within the industry, including Kimberly-Clark Corporation, to avoid formal regulation), thereby allowing "worst products" to pass; nor
• accounted for real life sewerage conditions in the absence of a more stringent disintegration test.
Expert evidence as to the insufficiency of the disintegration test in the GD3 Guidelines was relied on to establish the latter point.
The Court dismissed the first point on the basis that there was no evidence of "worst products" having passed the GD3 Guidelines. With respect to the latter, the Court held that there was insufficient evidence to prove that the absence of a more stringent disintegration test would lead to a not insignificant risk of harm to sewerage systems over and above that of toilet paper. It was ultimately found that the GD3 Guidelines represented a "conscientious and scientific effort to establish an appropriate framework for assessing flushability".
• The Court showed reluctance to infer that a certain representation is being made in the absence of express words to support the representation.
• Representations made about a certain quality or characteristic of a product, particularly those which relate to the environment or sustainability must be substantiated.
• A reasonable and scientific basis for environment and sustainability-related claims is generally looked upon favourably by the Court. In the absence of any formal standards, there must at least be a conscientious effort to establish a framework for assessing and substantiating such claims.
• Sufficient evidence of actual harm caused will be critical to prove that an environmental or sustainability-type representation is false, misleading or deceptive.
The ACCC has appealed the decision. On appeal, the ACCC will argue that the Court should have found the Flushability Representation to be misleading and was wrong to require evidence that the actual Flushable Wipes caused harm to the sewerage systems.