Greenwashing Within the Framework of Competition Law

By Ezgi Cömert On Feb 22, 2024

The public awareness regarding the climate crisis, which is gaining momentum each day, has urged players in the market to have the upper hand in competition by creating a more responsive, greener, more sustainable and circular economy than their competitors, regardless of their industry. Indeed, companies are forced to compete with one another instead of collaborating because consumers, playing a key role among social actors these days, have started to prefer sustainable and green products.

What is Greenwashing?

Today, we see the labels “eco-friendly” and “green” in almost any industry as a marketing and competition method by companies. While corporations try to outrun their competitors in terms of business reputation management by way of this method, the concept of “greenwashing” comes forward because of companies that are misleading about the eco-friendly features of their services and products with unrealistic, false or unsupportable actions and claims. If such practices are discovered, the businesses in question may suffer various social and financial negative consequences, including loss of reputation, investors, market share, and actions for damages.

Current examples of greenwashing typically include companies’ commercial practices and advertisements containing labels such as “sustainable”, “organic”, “eco-friendly”, “green”, and “climate friendly”.

Standards and Auditability of Greenwashing

Greenwashing defies exact and constant auditability since the relevant labels are almost always descriptive, and there are no legal standards.

In Türkiye, there is legislation regarding the limits and standards of “organic” products, including the “Organic Farming Law” and the “Regulation on the Principles and Practice of Organic Farming”. In a similar vein, at least the descriptions that can be framed by standards may be regulated through laws drafted by legislators and independent authorities that can make regulations in the relevant area.

On the other hand, it is challenging to regulate labels such as “sustainable”. Under current circumstances, it would be unlikely to establish, measure and supervise standards for such descriptions that are multifaceted with different definitions, criteria and fields of interest.

Likewise, being an “eco-friendly” and “socially responsible” company or having “ethical” business practices are descriptive claims that are rather difficult to be checked and may have different consequences in terms of consumer perception.

Still, independent authorities establish certain principles and liabilities regarding such claims prevalent in business practices and advertisements, even if they are difficult to be regulated and fully controlled, in order to prevent the global trend of greenwashing from misleading consumers and resulting in loss of rights due to unfair competition.

For instance, in the United States, the Federal Trade Commission issued the “Green Guides” to prevent marketers from making misleading claims to consumers in environmental aspects.

Moreover, the Danish Consumer Ombudsman issued an environmental guide regarding ethical claims, which states that environmental claims may mislead consumers by giving the impression that the relevant products or services are better than similar products or services. Therefore, if general environmental claims are to be made:

It must be verifiable that the product in question is less harmful to the environment than similar products, and
The economic life of the product must also be taken into account.

Although businesses should respect certain principles, liabilities and regulations around the world to avoid “greenwashing” in their business practices and advertisements within the framework of competition and consumer rights, greenwashing is becoming increasingly prevalent in any industry and every aspect of our lives. Therefore, we can say that companies are under-audited in this regard. In this context, certain misleading or potentially anticompetitive claims can be regulated. However, very strict and limiting standards regarding advertisements and ecolabels may inadvertently discourage manufacturers or service providers from offering such labels. Hence, rather than deterring them, the strictness of regulations concerning ecolabels (such as introducing standards; enabling the environmental certification institutions to become private entities, with measures in place to safeguard their independence; and appropriate penalties if dishonest ecolabels are granted or facilitated) should encourage manufacturers and service providers to offer them.

Greenwashing and Unfair Competition

As mentioned above, businesses are required to follow certain principles and standards worldwide to prevent greenwashing. Likewise, the Turkish Advertising Board, which is essentially an administrative supervisor, requires advertisers to prove the accuracy of environmental claims in their advertisements with scientific information and documentation if there are objective and auditable aspects (article 9 in Regulation on Commercial Advertising and Unfair Business Practices).

The Board’s other principles and criteria include the obligation that information and documents provided by the advertiser, such as research results and reports, will concern the relevant products or services and attest to the associated claims [84]. The Board also pays heed to and decides in accordance with the 4th paragraph in article 9 of the Regulation on Commercial Advertising and Unfair Business Practices, which states that if there are scientific research results and reports attesting to the relevant environmental claims, they should prove the claims in the advertisement at the time they are released.

In addition, the Turkish Ministry of Trade’s Department of Consumer Protection and Market Surveillance gave effect to the “Guidelines on Advertisements Containing Environmental Claims” on 13.12.2022, issued based on Law no. 6502 on Consumer Protection and the Regulation on Commercial Advertising and Unfair Business Practices, in the context of measures for environmental claims and in line with the Advertising Board’s actions, in an effort to guide all persons, institutions and organizations involved in advertising in ensuring that environmental visuals and statements used in business practices and commercial advertisements by advertising agencies, advertisers, and media organizations comply with the relevant legislation.

The Guidelines lay down certain standards that will facilitate the auditability of businesses’ claims and advertisements within the framework of claims intended for consumers and unfair commercial practices.

Indeed, the 4th paragraph in article 5 of the relevant legislation, titled Basic Principles, states that general terms such as “green”, “sustainable”, “eco”, “environmentally friendly”, “carbon neutral” and “renewable” are not allowed to be used in advertisements without providing any explanations or in a way to confuse consumers with regard to the environmental impact of relevant goods & services or production processes.

The 6th paragraph in the same article sets out that environmental claims regarding the legal processes and standards that the relevant goods or services or advertisers must comply with as per the relevant legislation may not be made to give the impression that those goods or services, processes or companies are different from or superior to their equivalents or competitors.

For instance, if a detergent brand states “we use less phosphate to preserve our seas” in its advertisements and packaging, it will violate the relevant legislation. The reason is that the legislation already imposes significant restrictions on the use of phosphate in detergent production. Therefore, it will mislead consumers by giving the impression that a restriction that also applies to other brands in the market is only valid for the product in question.

Moreover, pursuant to the 10th paragraph in article 5 of the legislation, an advertisement should clarify the basis of its comparative environmental claims. This regulation aims to prevent any unfair competition. For instance, if an advertiser states “20% more recycled content” in its plastic bottle packaging, it should clarify whether it compares to a previous product of the same brand and content or the products of competitors.

Meanwhile, unfair competition clauses in the Turkish Commercial Code must also be considered in the context of greenwashing.

In Turkish Law, the main regulation on unfair competition is article 54 and the following articles in the Turkish Commercial Code. There, article 55 provides a list of violations that create unfair competition. This list does not contain a clause that directly concerns environmental claims. However, it does not mean that claims constituting greenwashing will not result in unfair competition.

In fact, if environmental claims constituting greenwashing are deceptive, discredit third parties, or generally violate business terms valid in an industry, those claims or the relevant actions may be evaluated within the framework of article 55 in the Turkish Commercial Code. Moreover, if an action or a business practice affects the relationships between competitors, or suppliers and customers, and violates good faith, it will create unfair competition even if the situations listed in article 55 in the Turkish Commercial Code do not apply to it (art. 54/par. 2 in the Turkish Commercial Code). As such, an environmental claim or a business practice will result in unfair competition under these circumstances even in the absence of the situations provided in article 55 in the Turkish Commercial Code.

Hence, if a company’s claims or actions in its business practices or advertisements as well as operations or commercial procedures that harm the natural environment create any of the situations specified in article 55 of the Turkish Commercial Code in a way to affect an honest and fair business competition or influence the relationships between competitors, or suppliers and customers, and violate good faith, we can speak of the presence of unfair competition.

In view of the following decisions, it is evident that the Court of Appeals rules that it will be unfair competition when a brand claims to offer ecofriendly products as opposed to other brands by way of comparative advertising or defamation and is unable to prove it, thus violating the relevant regulations.

For instance, a case brought to the attention of the Court of Appeals concerned a copy on a product packaging, which said: “For your health, the rock salt in your hand was produced from rock salt obtained from underground rock salt deposits, instead of sea or lake salt that are affected by environmental pollution, with the use of fully automatic and zero-touch refining method based on modern Swiss technology.” According to the Court, this copy gave the impression that the source of the product was clean as opposed to other types of salt that were affected by environmental pollution, thus misleading consumers and discrediting other brands. As a result, the Court identified and prohibited unfair competition in this case, deciding on the prevention of any advertising and promotion in this manner.

Likewise, another case filed with the Court of Appeals concerned a piece of news released on the website of a company, available to public access, with the headline, “The invention that ends the need for Brickwork and Sheathing!” The Court ruled that this headline created unfair competition. Moreover, the panel of experts referred by the Court for expert opinion stated that unfair competition was caused by the defendant’s claims of offering a more environmentally friendly product than brick and of making all its brick factories use terra rossa from which tomatoes, peppers and vegetables were produced, instead of first-class agricultural soil as in the case of red bricks, for its products.

The Court of Appeals’ decisions above illustrate the matter in the context of unfair competition due to misleading advertisement. However, these decisions do not specify the criteria for determining the accuracy and reliability of environmental claims, the impact of such claims on consumers, the criteria for deceitfulness, and any judgment about general descriptive claims with no specific definition, such as “ecofriendly”. Therefore, we think that in Türkiye, there are less disputes and decisions in this regard, and the matter is more broadly addressed as opposed to other countries. Surely, this situation is a direct result of the low number of disputes and decisions.

As for the decisions of the Advertising Board, publicly and regularly released by the Ministry of Trade in the form of press releases on the website, we can argue that the Advertising Board delivers in-depth and to the point analyses, e.g. stating that intangible environmental claims should not be used, pointing to consumers’ lack of information in environmental concerns, which is open to exploitation, asking for proving controllable claims with up to date and verifiable scientific data, and using the relevant scientific data when necessary.