The Australian Competition and Consumer Commission (ACCC) launched the legal action against Clorox Australia, alleging it had breached consumer law over "ocean plastic" claims on GLAD kitchen tidy and garbage bags.
The watchdog started proceedings as part of a campaign on misleading environmental claims on products, often labelled greenwashing.
While the product claimed the bags were made from 50 per cent recycled plastic taken from the ocean, the watchdog alleges it was instead taken from communities in Indonesia up to 50km away from the shoreline.
The commission's chair Gina Cass-Gottlieb said the case was part of enforcement action against misleading environmental claims on products.
"We are concerned that, by its alleged conduct, Clorox deprived consumers of the opportunity to make informed purchasing decisions, and may have out other businesses making genuine environmental claims at an unfair disadvantage," she said.
"Increasingly, consumers choose the products they buy based on their environmental impact, and in doing so they must be able to rely on the environmental claims made by businesses being accurate."
A spokeswoman for Clorox told AAP the company was examining the issue brought by the watchdog in the legal action.
"GLAD takes seriously its obligation to package and market our products with claims that are truthful and substantiated," the spokeswoman said on Thursday.
"We are considering the ACCC's concerns raised by their court proceedings.
"The proceedings relate to the 50 per cent ocean bound plastic recycled bags product line only, which was discontinued by GLAD in July 2023."
The watchdog said the use of blue colours on the garbage bags and wave imagery on the packaging had created the impression the bags came from waste reclaimed from the ocean, when it was not the case.
10°C