The competition watchdog is taking Woolworths to the federal court accusing it of labelling its disposable picnic products as biodegradable when they are not.
A Woolworths spokesperson says the products had been removed from shelves in November 2017 when the Australian Competition and Consumer Commission first contacted the supermarket giant.
"We are now in the process of reviewing the ACCC's claims and (are) considering our next steps," the spokesperson said in a statement on Friday.
The ACCC said that from November 2014 to November 2017 'W Select eco' branded bowls, plates and cutlery were incorrectly marketed as biodegradable and compostable.
This was "false, misleading or deceptive" and in contravention of the Australian Consumer Law, the ACCC said.
The commission also alleges Woolworths "failed to make reasonable or adequate efforts to substantiate these biodegradability and compostability claims".
"Customers paid a premium because they rightfully thought the environmental claims would have been substantiated," ACCC commissioner Sarah Court said in a statement on Friday.
"Woolworths made these claims in circumstances where it was aware there was confusion among consumers and businesses about the meaning of biodegradable and compostable," the watchdog alleged.
In its statement on Friday, Woolworths said all products in the range were made from "materials derived from corn starch or sugarcane and other natural materials".
"We treat our obligations under the Australian Consumer Law very seriously, and understand how important it is that environmental claims are clear and accurate for our customers," the spokesperson said.
The ACCC is seeking pecuniary penalties, injunctions, declarations, publication orders and costs.
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