UK consumer regulator the Competition and Markets Authority ("CMA") has recently opened an investigation into false and misleading environmental claims in advertising. The CMA's investigation starts with a consultation which is open until 14 December 2020. It is also expected to lead to new guidance for businesses making environmental claims in their marketing, and may include enforcement action against non-compliant companies. The CMA is also co-leading an equivalent investigation at an international level, which starts with a website sweep this month.
What triggered the investigation?
The CMA is following up on a commitment it made in its 2020-21 Annual Plan (one of six key strategic objectives) to support the transition to a low carbon economy. In particular, the plan committed to "improve [the CMA's] understanding of 'green' claims", and where appropriate exercise powers to "correct false or misleading statements that affect consumers". The CMA also notes the commercial backdrop of consumers having spent £41bn on ethical goods and services in 2019, four times the equivalent figure from 1999. It is concerned that some businesses are making misleading, vague and false claims about sustainability in order to cash in on this growing demand.
What will the CMA's investigation consist of?
The first stage of the investigation involves the CMA engaging in a fact-finding exercise focussing on: (1) how environmental claims about are being made; (2) whether such claims are supported by evidence; (3) their impact on consumers' purchasing decisions; and (4) whether consumers are being misled by an absence of information about the environmental impact of products and services.
In particular, on 2 November 2020 the CMA opened a "call for information" whereby businesses, consumers, and other interested parties are invited to provide input that they wish the CMA to take into account, by 14 December 2020. The online forms to be completed are available here. Questions addressed to businesses explore issues such as whether further guidance on the law is necessary (and if so in what areas), what disclosures should be made by advertisers, and how consumer's trust in environmental claims could be enhanced.
Using this information, as a second stage, the CMA aims to publish guidance for businesses on how they can make claims about their products and services' environmental impact in a way which doesn't mislead consumers. The intention is that this guidance will be published by Summer 2021 with the goal being for the CMA to support the transition to a low carbon economy.
Possible Enforcement Action
The CMA says that while it has not yet determined whether consumer protection law has been broken, it will "take appropriate action" if it finds evidence that businesses have been misleading consumers.
The international angle
The CMA has also announced that in parallel it is also, with the Dutch Authority for Consumers and Markets, looking at green claims in a global context on behalf of international consumer regulator organisation ICPEN. As part of this initiative, from 9 to 20 November 2020 the CMA will be conducting a "sweep" of randomly selected websites to identify the types of misleading environmental claims being used around the world. It therefore follows that other national regulators who belong to ICPEN are likely to adopt similar strategies to the CMA in this area in the near future.
What does this mean for businesses going forward?
Firstly, businesses with an interest in making environmental claims (and/or in controlling the use of such claims by their competitors) may want to engage with the call for information, by the 14 December 2020 deadline. Such contributions may inform the legal guidance which the CMA plans to introduce, and may also affect its enforcement strategy.
Secondly, businesses which make environmental claims should consider reviewing their marketing content and policies, to determine compliance with the current regime, as the likelihood of enforcement action in this area is clearly on the rise. The CMA openly reserves the right to take enforcement action in due course, and it is even possible that its website sweep could be a starting point for such action. The CMA has in particular singled out the fashion, travel, and FMCG sectors as having consumers who are most concerned about misleading claims. Businesses would therefore be well advised to check that all environmental claims are true and fully substantiated, and compliant with the UK Department for Environment, Food & Rural Affairs' Green Claims Guidance and the Advertising Standards Authority's CAP Code, as well as with any sector specific requirements.
Thirdly, and in addition to ensuring compliance with the existing regime, businesses should keep their ear to the ground, keeping abreast of changes as they are announced.
Finally, businesses may want to look at how their competitors are using environmental claims about their products, as the time may be ripe to take action against any non-compliant practices of such competitors, for example by making regulatory complaints against them.