The Digital Markets, Competition and Consumer Bill is expected in the next month or so.
Among significant reforms to the merger and markets regime (see our previous blog post), the forthcoming Bill could give the Competition and Markets Authority (the “CMA”) the power to impose fines of up to 10% of global turnover for misleading green claims. The regulator has already shown significant interest in “greenwashing” in the fashion and FMCG sectors and with significantly strengthened enforcement powers, the stakes are set to get much higher.
Under the current regime, the CMA has no direct power to fine companies, and would have to take a company to court and prove a breach of consumer law in order to impose a civil penalty. The proposals under the forthcoming Bill are expected to be similar to the CMA’s existing powers in competition matters and would give the CMA the power to decide itself whether consumer law has been broken and impose directions and monetary penalties on companies without having to go through the courts.
The new Bill would allow the CMA to impose penalties for breach of certain general or core consumer protection offences under the Consumer Protection Regulations 2008, including those relating to unfair commercial practices and unfair contract terms and would likely extend to greenwashing (i.e. misleading and unsubstantiated environmental claims). Details of the proposals are set out here in the Government’s response to the consultation on “Reforming competition and consumer policy” published in April last year.
Even without direct enforcement powers, the CMA has already shown significant interest in misleading green claims. In September 2021, it published its ‘Green Claims Code’ (see our previous blog post) and since then has continued work to tackle “greenwashing”, scrutinising whether products and services that claim to be green or eco-friendly are being marketed accurately. In January 2022, the CMA announced that it was looking at the fashion sector and in July 2022, launched investigations into eco-friendly and sustainability claims made by ASOS, Boohoo and George at Asda about their fashion products (see our previous blog post). In January 2023, the CMA announced that it was focusing on household equipment, energy, retail banking and travel, including several actions concerning airlines, as well as investigating green claims in the fast moving consumer goods (“FMCG”) sector (see our previous blog post).
The UK Advertising Standards Authority (the “ASA”) has also been increasingly active in clamping down on green claims and continues to take action against big name companies for breaches of its advertising codes. Notably, in 2022, the ASA looked to set a precedent for the banking industry by banning two sustainability-focused bank advertisements because they did not mention the bank’s financing of fossil fuel projects (see our previous blog post). However, as a self-regulatory organisation, the ASA is not able to levy fines, and so the enforcement powers to be granted to the CMA under this new Bill will ensure that the CMA has the “teeth” it needs to robustly challenge the increasing numbers of potentially misleading green and environmental claims being made in UK markets.
The Bill will also put the CMA on a level footing with peer regulators in e.g. Canada, France and Australia, which have had powers to issue infringement notices and impose fines to uphold consumer law (alongside competition law enforcement) for some time now.
For companies in the UK that use green claims in their advertising and marketing materials, now is a good time to review those claims for compliance with the CMA Green Claims Code before the price tag for getting it wrong is counted in the millions.