Green advertising claims in the UK: CMA’s new fining powers under the Digital Markets, Competition and Consumer Bill

The Digital Markets, Competition and Consumer Bill (DMCC) has now landed.

As anticipated in our March blog post, the DMCC heralds a radical overhaul of consumer protection laws including those that apply to green claims in advertising.

Consumer protection in the UK has historically been underweight compared to the competition regime – the Competition and Markets Authority (CMA) has to date not had direct enforcement powers meaning that it would need to take a firm to court to enforce any breach of consumer law. Historically the CMA has typically not taken this route, preferring to negotiate undertakings with infringing firms to bring the conduct to an end. But the DMCC will change this, giving the CMA direct enforcement powers including the power to fine infringers up to 10% of their global turnover.

Direct enforcement powers for the CMA

The DMCC builds on the UK’s existing (court-based) consumer law regime, introducing new, direct enforcement powers for the CMA. Pursuant to its new powers, the CMA may decide itself whether consumer law has been broken and impose directions or fines without having to go through the courts.

Specifically, the CMA will be able to fine businesses:

• up to £300,000, or 10% of a businesses’ annual turnover (whichever is higher), for breaching consumer laws;
• up to 5% of a business’s annual global turnover, with an additional daily penalty of 5% of daily turnover during non-compliance, for failing to comply with a direction.

The introduction of steep penalties for non-compliance, alongside existing criminal penalties (punishable by fines or imprisonment of up to two years) for individuals found to have engaged in misleading commercial practices or have engaged consumers in unfair contractual terms, should focus the minds of companies subject to consumer protection laws.

Focus on environmental claims

The government could have taken the opportunity to put the CMA’s Green Claims Code (see our previous blog post) on a legislative footing in the way it has done relation to subscription traps (see here), but the DMCC itself does not specifically mention greenwashing claims.

That said, at its core, the DMCC is expansive and inclusive – designed to catch any firm (regardless of size) which engages in behaviour likely to cause the average consumer to take a “transactional decision” that they would not have otherwise taken, for example, through misleading actions or omissions. As it stands, the CMA will, therefore, have no difficulty bringing enforcement actions (and potentially fines) against unsubstantiated green claims, claims that overstate sustainability credentials or in situations where a firm provides only a one-sided picture of their environmental commitments. The CMA is also highly incentivised to do so, with the government specifically directing the CMA to protect consumers from misleading environmental claims in its Draft Strategic Steer which informs how the CMA sets its priorities for the coming years.

What next?

The exact timing of the DMCC will depend on its progress through Parliament. It is unlikely to come into force this calendar year, but in the absence of political upheaval, we expect it to make it onto the statute books in the first half of 2024.

Given the broad nature of consumer law obligations and the soon to be high stakes of getting it wrong, now would be a good time for consumer-facing businesses to think about how they monitor compliance with their consumer law obligations.

Please get in touch if you would like to discuss further.