Australia's consumer watchdog has lodged legal action in the Federal Court against two e-cigarette online retailers for allegedly falsely claiming their products don't contain potentially cancer-causing chemicals.

The Australian Competition and Consumer Commission alleges that the two companies, Social-Lites Pty Ltd (Social-Lites) and Elusion New Zealand Limited (Elusion), breached the Australian Consumer Law (ACL) by making representations on their websites from at least August 2015 that the e-cigarette products being sold did not contain carcinogens or toxic chemicals, and did not contain any of the chemicals found in conventional cigarettes.

In fact the e-cigarettes sold by the two companies do contain harmful carcinogens and toxic chemicals, including formaldehyde acetaldehyde and acrolein, according to the ACCC.

Formaldehyde is classified by the World Health Organisation International Agency for Cancer Research as a Group 1A carcinogen, meaning there is sufficient evidence to show it causes cancer in humans.

Acetaldehyde is classified as a Group 2B carcinogen by the IARC, while Acrolein is classified as a toxic chemical.

"It is imperative that suppliers have scientific evidence to support claims that their products do not contain carcinogens and toxic chemicals such as formaldehyde and acetaldehyde," ACCC chairman Rod Sims said.

"There is an increasing level of concern among international, national and state authorities regarding the composition of e-cigarettes, and the likely effects of their use. The ACCC will continue to work with its local and international counterparts to ensure consumers are receiving accurate information about these products," Mr Sims said.

The ACCC also alleges that the chief executive of Social-Lites and the director of Elusion were knowingly concerned in the alleged contraventions by Social-Lites and Elusion respectively.

E-cigarettes are metal tubes that heat liquids typically laced with nicotine and deliver vapour when inhaled. The liquids come in thousands of flavours, from cotton candy to pizza.

Use of the devices has grown quickly in the past decade and experts fiercely debate whether the devices can help people give up smoking and whether they are safe - with some studies raising concerns about the toxicity of some of the ingredients.