Clifford Chance

Proceedings before the regulatory authority, consumer and NGO actions (and class actions), and corporate disputes: three (potentially concurrent) routes to tackle "greenwashing" advertising claims in Italy.

What is "greenwashing" in advertising (in legal terms)

Broadly speaking, "greenwashing" is using (or, more accurately, abusing) green claims, commitments or statements to cover ("wash") business practices that do not correspond to the actual environmental impact suggested by the claim, commitment or statement.

We have become increasingly familiar with claims such as "environmentally friendly", "100% green" and "carbon free", but the great proliferation of these claims in advertising is not without concern. Even if such claims are not (always) false, they are often sufficiently vague and generic to make it very difficult to verify them. But they are still effective at attracting consumers' attention and ensuring competitive advantage in view of the fact that environmental issues now have such a high profile.

The urgent need to consider (and regulate) "green claims" in advertising resulted, firstly in 2014, in the addition of Article 12 in the Code of Self-Regulation of Commercial Communication, enforced by the Italian advertising standards authority (Istituto di Autodisciplina della Pubblicità or "IAP"), which requires that advertising claims stating or suggesting a positive impact on the environment should (i) be based on accurate, proper and scientifically verifiable data and (ii) make it easy to understand which part of the product or service has the beneficial "green" impact.

The Code of Self-Regulation is limited in that it is binding only among those companies adhering to the IAP rules and, despite the fact that this constitutes the majority of industries in Italy, the IAP's remit is restricted to advertising. It may require that a claim be amended or no longer use, but cannot impose fines or award damages.

The rapid increase in the use and abuse of green claims has made it necessary to find more stringent and effective legal remedies. In this context, Article 12 of the Code of Self-regulation and the IAP decisions in this regard has and still plays a crucial role as they help in setting the boundaries of the subject matter and form the basis for the decisions of the watchdog authority and the civil courts in terms of the three different options currently available in the Italian system for settling disputes of this nature.

Option 1: proceedings before the watchdog authority

Because they are false and deceptive, greenwashing claims constitute misleading advertising and, as such, are also an unfair commercial practice under Directive no. (CE) 29/2005 (implemented in Italy by Legislative Decree no. 145/2007). According to the guidelines issued by the European Commission ("Guidance on the implementation/application of directive 2005/29/EC on Unfair Commercial Practices", dated 25 May 2016), green environmental statements must be clear, true, accurate, not misleading, and based on robust, independent, verifiable, and generally recognized evidence, which must consider updated scientific findings and methods.

In Italy, the competent authority to sanction unfair commercial practices is the Italian Competition Authority.

Therefore, companies making greenwashing claims may face cases brought by this authority, in some cases pushed by local NGOs, which are increasingly committed to scrutinising corporate environmental claims and ready to make them accountable for those claims. Such cases can end up with large fines being imposed if the environmental claims are proven to be vague, false, generic, and non-verifiable and can potentially result in significant reputational damage.

A good example of that is the case brought by the Italian Competition Authority sanctioning Eni S.p.A. with the highest possible fine of EUR 5 million for misleading green claims in the "Diesel+" fuel campaign.

Option 2: consumer and NGO actions (and class actions)

Greenwashing claims as an unfair commercial practice can expose companies (and potentially their directors) to claims by consumers, customers, investors, and shareholders who are able to prove that they have been persuaded to buy or invest in a product by misleading green marketing. The risks entailed in this context are particularly high given the unforeseeable number of potential claimants involved.

This risk could be even higher in Italy nowadays given the new collective redress regime that (from May 2021) allows all potentially aggrieved parties, and not just consumers, to bring a class action claim.

The recent decision issued by the Court of Venice on 7 July 2021 in one of the Italian proceedings regarding the "dieselgate" affair shows how material this risk is. The decision (currently being appealed at the second instance) ruled in favour of over 63,000 Italian consumers, represented by Altroconsumo (an Italian consumers' association), granting a class action claim against Volkswagen (both the German headquarters and the Italian branch//subsidiary?). The Court found that the defendants were responsible for using misleading and, at times, false 'green claims' in their marketing and advertising activities. The Court awarded damages under tort law, amounting to EUR 3,000 in financial damages for each member of the class action, plus EUR 300 in moral damages (a total of more than EUR 200 million) and legal expenses.

Option 3: corporate disputes

Under Italian law, unfair commercial practice may also constitute an act of unfair competition, insomuch as it entails an (unlawful) competitive advantage to the detriment of other competitors. Concurrently or alternately to the proceedings before the Italian Competition Authority and/or the IAP, competitors may bring an action before the civil courts requesting interim injunctions to prevent the use of unlawful green claims and damages for lost market share if they are able to draw a causal link between their competitor's 'green claim' and changes in customer choices.

From this perspective, the interim decision issued on 25 November 2021 by the local civil court of Gorizia (which is currently being appealed) preventing, upon recourse of a competitor, Alcantara from using deceptive green claims signals the extension of greenwashing cases beyond the realm of consumer protection investigations into a battleground between competing businesses.