This week the UK’s Consumer law regulator, the Competition and Markets Authority (the “CMA”), published its final guidance for businesses on “green claims”, together with a Green Claims Code to help businesses comply with the CMA’s interpretation of the law. This is the next step in the CMA’s investigation into environmental claims, launched in November 2020, and following the draft guidance published for consultation earlier this year. Here is our take on the guidance and what businesses should be looking out for.
As with the draft guidance, the final version contains six principles which broadly reflect the current position in the UK and across Europe. While there is little in the principles that is wholly new, the final guidance (as with the draft guidance) increases the emphasis on the requirement to take into account the full lifecycle of the product or service to which any claim relates. The guidance principally applies to B2C claims, but is claimed to have relevance to B2B arrangements, at least in so far as misleading advertising and comparative advertising is concerned, particularly where small businesses are involved. The guidance also indicates that online marketplaces may be held responsible in relation to misleading environmental claims, including where they do not take adequate steps to ensure that products being sold on their platform comply with the law.
Environmental claims must:
Be truthful and accurate: claims must not mislead consumers by giving an inaccurate impression, even if the claims are factually correct. Claims must only give an impression that the product, service, process, brand or business is as green as it really is.
Be clear and unambiguous: the wording used should be straightforward and transparent, not liable to confuse consumers or give the impression that something is better for the environment than it is.
Not omit or hide important information: consumers must be provided with the information they need to make informed choices – omitting or hiding information can inappropriately influence consumer decisions.
Only make fair and meaningful comparisons: linked to the requirement for claims to be truthful and accurate, comparisons should be based on clear, up to date and objective information.
Consider the full life cycle of the product or service: all aspects of a product or service’s lifecycle may be relevant to the accuracy of a claim including, for example, the manufacture and disposal of the product.
Be substantiated: claims must be capable of being supported by scientific or other evidence.
By way of application, the guidance provides a number of examples, including a consumer facing advertisement with the headline: “Go 100% green with us – you’ll save money and the planet with the UK’s cheapest and greenest energy supplier”. This engages principles (a), (b), (c), (e) and (f) and will need to be substantiated. Whilst not impossible, it will be very challenging to substantiate the claims to be (i) the UK’s cheapest energy supplier amongst all suppliers of comparable tariffs; and (ii) the UK’s greenest energy supplier, making the most positive environmental impact of all UK suppliers (taking account of the whole life cycle of its operation). In the CMA’s view, this environmental claim falls foul of a number of the principles, and would therefore breach consumer law.
Along with the guidance, the CMA has launched an updated version of the Green Claims Code, seemingly aimed at SMEs who may not have the support of a wider legal team or external advisers to assist.
Next steps and further consideration
The CMA is encouraging businesses to consider and apply the guidance in advance of a compliance review, commencing in early 2022. Initially, the sectors of focus are likely to be (i) textiles and fashion, (ii) travel and transport, and (iii) FMCG, but this could quickly change. Whilst the CMA has not yet publicly stated its view on whether consumer law may have been broken, it does not start these sorts of investigations without enforcement action in mind. Following the compliance review, the CMA has stated that it may decide to take action should infringement be identified. Where there is evidence of breaches of consumer law, the CMA has indicated it will take action even before the formal review begins.
Given the CMA’s actions to-date, enforcement action can be anticipated even where the guidance stretches the boundaries of underlying consumer law. This, coupled with the current consultation on the CMA’s wider enforcement powers, including the ability to fine businesses 10% of global turnover for consumer law infringement, means that consumer law risk should be high on any business’s agenda.
The ASA will also play a key role in monitoring green claims, with the principles set out in the guidance intended to be consistent with the CAP and BCAP codes. The new guidance will likely be a key tool in the ASA’s wider enforcement toolkit, with breaches of the guidance indicating a breach of the CAP Codes, and even, in the case of more serious or repeat breaches, leading to CMA or Trading Standards enforcement.
The issue of transparency and accountability is also being tackled at a sectoral level. In the energy sector BEIS has launched a Call for Evidence in relation to the Framework for Transparency of Carbon Content in Energy Products. The Call for Evidence is seeking to help Government understand the challenges that the energy sector has in providing transparency on green electricity tariffs and wider environmental carbon accounting schemes given the rapid growth in availability of such tariffs. To find out more on the background to the Call for Evidence read our Law-Now here.
What should businesses be doing now?
Over the next few months, businesses are therefore well-advised to review the guidance and their current practices, adapting them where appropriate, and to prepare for any compliance review and potential enforcement action down the line. Whilst the ASA, Trading Standards and the CMA will co-operate in terms of enforcement and escalation, there is a clear trajectory of increased intervention by the CMA across sectors. Businesses need to be prepared for this, and to push back where appropriate. For any assistance with this or any related issues, please contact the authors or your usual CMS contact.