Products and services that are marketed as “eco-friendly” will be subject to a recently launched probe by the UK Competition and Markets Authority (CMA). This is a rapidly growing sector — UK consumers spent GBP 41 billion on ethical goods and services in 2019, according to the CMA — and the credibility of claims on sustainability can be fundamental to brand value. A regulatory finding that such claims are false or misleading could prompt litigation by consumers that purchased the products based on those claims, as well as by shareholders impacted by a drop in share value caused by negative publicity.
UK marketing practices will be the focus of the CMA’s examination. However, the CMA is also taking a leading role in looking at green claims in a global context. Work will be carried out alongside the Dutch Authority for Consumers and Markets, as part of a project with the International Consumer Protection and Enforcement Network (ICPEN). Between 9 November 2020 and 20 November 2020, the CMA is coordinating a “sweep” of randomly selected websites with ICPEN members.
In particular, the CMA is focusing on:
- how claims about the environmental impact of products and services are made (i.e., descriptions using eco-friendly language, packaging, logos and labels that imply eco-friendly status)
- whether such claims are supported by evidence
- whether such claims influence people’s behaviour when purchasing such goods and services
- whether consumers are misled by an absence of information about the environmental impact of products and services
At the conclusion of the review, the CMA plans to produce guidance for businesses on transparency in the way that they market goods and services and make claims about the environmental impact. It is likely that the high-level guidance will be published in the summer of 2021.
What is the potential impact of the review?
The review is wide-ranging, but is expected to focus on textiles and fashion, travel and transport, and FMCG. The CMA considers that these are the industries where consumers appear most concerned about misleading claims.
The CMA has not yet reached a view on whether consumer protection law has been broken. However, if it finds evidence that businesses have made claims liable to mislead consumers, then it will take appropriate action. This could include a fine or director disqualification in the most serious circumstances. There is also the potential for civil litigation brought by consumers or shareholders in order to recover damages resulting from those misleading claims.
The CMA has made a call for information that would assist it in its work relating to misleading green claims. The deadline for providing information is 14 December 2020.
The CMA is also calling upon the public to confirm what it is that they expect from eco-friendly products, and how green claims affect their purchasing decisions.
Read the CMA announcement here.