More than 90 Banana Boat and Hawaiian Tropic sunscreens allegedly contained false and potentially misleading representations between 2020 and 2024, the consumer watchdog claimed on Tuesday.
The brands' owner Edgewell labelled the sunscreens as "reef friendly", claiming they did not contain two ingredients known to cause damage to reefs.
But the sunscreens included other ingredients that cause harm to marine life, the Australian Competition and Consumer Commission says.
The claims are detailed in a lawsuit filed in the Federal Court on Monday evening against the US personal care company and its Australian arm.
Court documents allege Edgewell "took advantage of consumers' concerns about the environmental impact of ... products on reefs".
The company also knew of scientific studies and reports that found these ingredients can negatively affect reefs.
The personal care company's claims had "no reasonable or scientific basis" and affected both its competitors and consumers, the watchdog said on Tuesday.
"Businesses should not shy away from promoting the environmental credentials of their products, but they must be able to substantiate any claims," deputy chair Catriona Lowe said.
"By engaging in this alleged greenwashing, we say Edgewell deprived consumers of the ability to make an informed decision and may have prevented them from purchasing a different brand of sunscreen that did not contain chemicals which risked causing harm to reefs."
Edgewell removed "reef-friendly" tags off its US products in 2020 but allegedly continued the branding in Australia until December 2024.
The ACCC is seeking penalties, costs and other court orders.
A spokesperson for the company's Australian arm said it would defend the lawsuit.
"Edgewell has fully co-operated with the ACCC throughout its investigation and firmly stands by the claims it has made," the spokesperson told AAP.
The lawsuit comes after testing of popular sunscreens by consumer advocacy group Choice found some major sunscreen brands failed to meet their SPF labels.
Several brands disputed the consumer group's claims.
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