Grill'd has been accused of overstating the donations made through ''Tree Day Tuesday'', with only a small fraction of burger sales qualifying for the charitable contribution.
The Australian Competition and Consumer Commission chair Gina Cass-Gottlieb said it amounted to a form of "greenwashing", which refers to false or misleading sustainability claims.
''We allege Grill'd misled customers by overstating the extent of the donations it would make and the environmental contributions from its Tree Day Tuesday promotion," she said.
''In fact, only a small percentage of purchases on Tuesdays qualified for a donation by Grill'd because of the detailed conditions of the promotion, which we say were not disclosed or not adequately disclosed to customers.''
Declarations, penalties, costs and other orders are being sought by the consumer watchdog.
Of the five million burgers bought on Tuesdays between January 2021 and April 2024 at the 173 stores nationwide, just four per cent qualified for a donation to Greenfleet Trust, the not-for-profit partner responsible for planting trees to improve biodiversity and capture carbon emissions.
Social media advertisements posted by the fast-food chain suggest $1 goes towards tree-planting for every burger purchased on a Tuesday.
Hooks include "a burger for you, a baby tree for the planet" and "Grow-a-Grill'd forest".
In reality, customers had to satisfy a number of conditions to trigger the promotion beyond buying a burger on a Tuesday, including being a member of a loyalty program and making the purchase instore and at the counter, with takeaways and QR code use at tables excluded.
Some of the 26 offending ads posted on social media, online and in store were more upfront about the conditions than others, though the ACCC alleges all material overstated the circumstances of donations made to some degree.
Ms Cass-Gottlieb said failing to give customers accurate information on environmental credentials and promotions had the potential to give businesses an unfair advantage.
''When we see a business seeking to exploit a consumer's environmental concerns through misleading or deceptive conduct, we will not hesitate to take appropriate enforcement action,'' she said.
Grill'd said in a statement the promotion was undertaken with positive intent and more than $250,000 had been donated to plant more than 100,000 trees and restore 40 hectares of forests.
''Grill'd takes Australian consumer law very seriously, and our reputation is forged in trust and doing the right thing in the communities where we live,'' it said.
''Grill'd has worked internally and with all stakeholders, including the ACCC, to ensure that brand and sustainability initiatives undertaken are clear and cause no confusion in the eyes of the Australian public.''
Greenwashing has become a growing priority for the ACCC, with recent proceedings launched against Edgewell for allegedly misleading sunscreens branded '"reef friendly", as well as Australian Gas Networks for allegedly dubious claims about renewable gas in its advertising.
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