Commerce Commission issues warning on recyclable claim for hot drink cups

17 September 2021

​​​A manufacturer has been warn​​​ed that a claim its hot drink cups were recyclable is likely to have breached the Fair Trading Act, highlighting some of the tensions that exist around environmental claims.

Earlier this week, the Commerce Commission issued a war​​ning letter to Glopac New Zealand Limited, a paper packaging products company in Christchurch. Glopac had been representing (on its website, social media and the products themselves) that its hot drink cups were recyclable.

Whilst the cups are indeed recyclable - unlike some other hot drink cups which can contain a non-recyclable plastic lining, the Glopac hot drink cups are 100% paper. While the technology to recycle them exists in New Zealand, the Commission considered the representations were misleading because commercial recycling facilities in New Zealand do not accept the Glopac hot drink cups. The reason for commercial recycling facilities not taking the Glopac hot drink cups doesn't relate to the Glopac cups themselves. Rather, it is said to be too difficult to separate the recyclable Glopac hot drink cups from similar-looking cups which contain a plastic lining and are therefore not recyclable.

The Commission took the view that Glopac was likely to have breached the Fair Trading Act 1986, in particular:

  • Section 10 which prohibits persons in trade engaging in conduct that is liable to mislead the public as to the characteristics of goods;
  • Section 13(a) which prohibits persons in trade making false or misleading representations that good are of a particular kind; and
  • Section 12A of the Act which prohibits persons in trade making unsubstantiated representations.

In other words, the Commission considered that the term “recyclable" would be taken by consumers to mean “will actually be recycled" rather than “could technically be recycled".

Luckily for Glopac, the Commission issued a warning letter rather than issuing legal proceedings, as a company that breaches the Act can be fined up to NZ$600,000.

Still, this warning raises a question as to whether the Commission's position is too strict and harsh for Glopac and traders generally, and whether the harm that is sought to be addressed in this case is in fact the one that needs regulator intervention.

The outcome points to a risk that those innovating products better for the environment – in this case 100% paper cups that keep coffee hot inside a paper container without plastic – will be penalised because of New Zealand's recycling ecosystem.

A 2021 assessment of packaging recyclability by Consumer New Zealand and its counterparts in nine countries found 57% of the packaging assessed wasn't recyclable in practice in New Zealand, the second-worst outcome among the group.1There is a real tension here between encouraging innovation in packaging and making sure environmental claims are accurate and enabling consumers to make informed purchasing decisions.

That said, the Commission's position should not come as a surprise.

In 2010 the Commission charged Eco-Pal Limited in the District Court with breaches of the Fair Trading Act arising out of the manufacture and sale of plastic bags claimed to be, among other things, recyclable. Part of the Commission's case was that Eco-Pal's plastic bags could not be recycled because there was not sufficient infrastructure in New Zealand to recycle plastic bags (as opposed to rigid plastic).

In that case, survey evidence showed that 92.7% of consumers would expect to be able to put a bag labelled as "recyclable" out with the hard plastic items they normally recycle.

Although the Judge dismissed the charges related to the recyclable claim on a procedural point, His Honour commented in his decision2​:

“Of course, it seems sensible to me to conclude that the word "recyclable" on a refuse bag purchased by an average consumer shopper would connote an available recycling option or facility in New Zealand, in relation to that particular bag.

The Commission's Environmental Claims Guidelines issued in July 20203​ also state:

“If you are marketing a product as recyclable, you should consider whether appropriate recycling facilities are available to consumers likely to acquire the goods to avoid misleading them. Items that are widely accepted at kerbside recycling or council drop offs can be labelled as recyclable but other items that are less widely accepted, or that are not recycled through kerbside recycling, should specify where they can be recycled. For example, “Recycle at store drop off" or “Contact supplier for recycling options".

The Australian Competition & Consumer Commission takes a similar position, stating in its equivalent guidelines4​:

“These claims [as to recyclability] can be potentially dangerous if … the facilities to recycle it are not available in Australia. Manufacturers and retailers should verify that their product can actually be recycled before using such claims. Consumers are likely to understand the term 'recyclable' or recycling symbols on products to mean that the product is likely to end up in a recycling facility. If there are very few facilities, such facilities do not exist at all or they exist only as pilot plants, then the use of the term or symbols may be misleading."

However, it is interesting to note that the Federal Court of Australia in 2019 took a different approach in a case involving products claimed to be “biodegradable and compostable". The Judge stated in her decision5​:

“The recycling comparison is a good one, and one I am satisfied reasonable consumers would readily make. Consumers understand that recyclable products will only in fact be recycled if they are treated appropriately in a recycling facility. The reasonable consumer understands that fact does not alter a product's state, or inherent qualities, as a “recyclable" product, but it does affect whether that capacity or capability, and benefit to the environment, comes to fruition."

“I see an analogy, as I have noted, [between the words “biodegradable and compostable" and] the word “recyclable". That is also a description of the features or characteristics of a product, derived from what it is composed of. Whether or not it is, in fact, recycled, and turned into something that is re-usable or useful will depend on the environment into which it is placed, and whether that environment allows its features and characteristics to be fulfilled."​

On appeal6​, the Full Federal Court agreed with the primary judge that in this case Woolworths' claim that its products were biodegradable and compostable was accurate. Although the Full Federal Court did not directly express an opinion on how “recyclable" should be interpreted, it stated that a statement such as “recyclable" is about “presently measurable and provable scientific characteristics or properties"7​.

This would seem to endorse the primary judge's approach that a claim as to recyclability is a statement about the characteristics or inherent features of the products rather than a statement as to a future matter; i.e. whether it will in fact be recycled or not.

It is important to note that these comments by the Federal Court and the Full Federal Court are not binding precedents in New Zealand because this is not what the Courts were asked to rule on, and New Zealand Courts are not in any event bound by Australian decisions. However, they will be persuasive in Australia (and to a much lesser extent in New Zealand too).

It is fair to say that the Commission's position in its warning letter to Glopac clearly puts the burden on businesses to be proactive when ensuring compliance with the Fair Trading Act (for example in this case, by engaging with recyclers on an ongoing basis). As the Commission puts it in its letter to Glopac, “it is important that you maintain an awareness of industry changes to ensure that your claims remain accurate over time".

The Commission's paramount consideration here is consumer protection. Its position is that consumers do not have time to investigate such claims and that they are entitled to take them at face value when making quick, low-value purchasing decisions. There should therefore be no room for interpretation. It has to be black and white.

It would be interesting to see how New Zealand consumers interpret “recyclable" eight years after the High Court's decision in Eco-Pal. Would they in fact understand that 'recyclable' products will only in fact be recycled if they are treated appropriately in a recycling facility – and that accordingly the claim is only about a products' inherent ability to be recycled? This is the balance that the Australian Federal Court appears to have favoured.

If you have any questions about the matt​​ers raised in this article, please get in touch with the contacts listed, or your usual Bell Gully adviser.

1 Consumer NZ, New Zealand packaging recycling second-worst in global trial, 23 April 2021 at Commerce Commission v Eco-Pal Ltd DC Auckland CRI-2010-063-004397, 21 June 2013, at [142]3 Commerce Commission, Environmental Claims Guidelines, a guide for traders, July 2020. See also Bell Gully.4 Australian Competition & Consumer Commission, Green marketing and the Australian Consumer Law, published 11 March 2011 – available at Green marketing and the Australian Consumer Law ( Australian Competition and Consumer Commission v Woolworths Limited [2019] FCA 1039 at [175] and [200].6 Australian Competition and Consumer Commission v Woolworths Group Limited (formerly called Woolworths Limited) [2020] FCAFC 1627 at 120.​​

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.