Really Green or The Emperor’s New Clothes? – UK CMA targets fast fashion first in investigation of sustainability claims | Morrison & Foerster LLP

On 29 July 2022, the UK Competition and Markets Authority (CMA) launched an investigation into three fashion firms over potentially misleading eco-friendliness and sustainability claims about their products. The action, against ASOS, Boohoo, and George @ Asda, is the first major step taken by the UK watchdog against individual companies as part of its wider investigation into ‘greenwashing’ – the practice of using inaccuracies or exaggeration to call something sustainable. , environmentally friendly or environmentally sound. The CMA follows a growing trend of international authorities showing a willingness to investigate and prosecute entities that are unable to substantiate their green claims, most recently evidenced by action by the UK’s Advertising Standards Authority to ban advertising containing unproven environmental claims and, specifically, US securities and securities and Exchange Commission Fine of $1.5 million imposed on BNY Mellon in May 2022 for misrepresentations about its considerations of environmental, social and governance (ESG) investments.

In September 2021, the CMA published guidance for businesses on how to meet their existing obligations under consumer protection laws when making environmental claims about their products. As part of this guidance, the CMA warned that, from early 2022, it would carry out a full review of fraudulent green claims, starting with a targeting of certain industries. Indeed, in January 2022, the CMA announced that the fashion retail sector would be the first industry to undergo a detailed review of its environmental claims. In choosing this sector, the CMA recognized fashion’s impact on carbon emissions (reportedly accounting for between 2% and 8% of all global carbon emissions), consumers’ increased desire to choose more environmentally sustainable options when buy clothes and the like. the increase in environmental claims promoted by fashion businesses.

CMA’s Fashionable Concerns

In announcing its action against ASOS, Boohoo and George @ Asda, the CMA is particularly concerned that these businesses may have:

(i) Use overly broad and vague statements to suggest that their products are more sustainable than they are (including, for example, product lines called ‘Responsible Editing’, ‘Future Ready’ and ‘ George for Good’);

(ii) Set criteria for inclusion in these ‘sustainable’ product lines that are lower than what customers might reasonably expect;

(iii) They have not accurately applied these criteria for their products;

(iv) Failed to provide relevant information about the products included in their product lines; AND

(v) It has not been clear whether references to environmental standards or accreditation schemes apply to specific products or to wider firm practices.

The CMA’s actions are based on UK consumer protection rules contained in the Consumer Protection from Unfair Trading Regulations 2008 (CPUT)[1]. These regulations prohibit unfair or aggressive trade practices and deceptive acts or omissions. In general, the rules require a business to ensure that its claims (including those related to the environment):

(i) Are true and correct;

(ii) Are clear and unambiguous;

(iii) Do not omit or conceal important details;

(iv) Compare goods or services fairly and meaningfully;

(v) Consider the full life cycle of the product or service; AND

(vi) Are authenticated.

Penalties for breaches of consumer rules include fines and imprisonment, and the CMA confirmed in its notice of its latest investigation that if breaches are found, it “will not hesitate to take enforcement action – through the courts if necessary”.

Future Regulatory Actions and Potential Consumer Claims

Although the CMA’s announcement indicates that it is currently focusing on the fashion industry, this is only the beginning and the CMA has made it clear that it intends to act across all sectors of major concern. The CMA’s focus is therefore sure to widen and businesses across all sectors need to pay close attention to their practices to ensure they comply with the law and are able to substantiate all claims environmental claims made for their products or services. Further, businesses should not only worry about actions taken by enforcement authorities, as non-compliant companies may face direct customer claims of fraudulent activity, particularly effective given the increasing availability of class actions of consumers within the EU (and the possible introduction of ‘opt Group claims in the UK for breaches of consumer law).

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