Following the opinion of the Competition and Markets Authority (“CMA“) publication of the Green Claims Code (as discussed in our previous blog), the UK regulator is now moving forward with its investigation into greenwashing, currently focusing on the fashion industry, with other industries expected to be considered in the future.
Greenwashing is the use of misleading environmental or green claims (eg, “natural”, “recyclable”, “organic”) by companies to market products to consumers. This can be done via “statements, symbols, emblems, logos, graphics, colors and product brand namesas stated on the government’s Green Claims campaign site. Greenwashing has become more prevalent as consumers increasingly prioritize the impact of their environmental footprint and consider the sustainability of their purchases.
In September 2021, the CMA warned companies that they would carry out a “Full reviewof misleading green claims in 2022.
Subsequently, last January, the CMA announced that it had begun its investigation into the fashion retail sector. The investigation will examine green claims in light of consumer protection law and will in particular examine claims regarding the use of recycled materials as well as allegedly ‘sustainable’ branded clothing ranges. Actions are expected against the offending companies.
With the fashion industry first in the spotlight, the CMA reported that any industry it found “important concernscould be prioritized.
Ad regulator rulings on green claims
Notably, the UK’s advertising regulator – the Advertising Standards Authority (“LIKE A“) – also investigated misleading green claims, but in the food and beverage sector. They recently sanctioned two alternative dairy companies: Alpro and Oatly, in accordance with their advertising codes.
In October 2021, ASA ruled that Alpro’s slogan, “GOOD FOR THE PLANET“, as seen in advertisements hosted on the side of the buses, was misleading and subject to interpretation. It was unclear whether the claim meant the featured products had a net positive effect on the environment or were better for the planet compared to equivalent products.
Following this, ASA last month reviewed several Oatly advertisements and upheld complaints about four out of five environmental claims, including: (i)”Oatly generates 73% less CO2e compared to milkand (ii) “The dairy and meat industries emit more CO2e than all planes, trains, cars, boats, etc. of the world together“. Overall, ASA found the claims to be unsubstantiated as they lacked evidence to support the claim as the consumer would understand it (emphasis added). Additionally, where a claim noted support for “experts“, but the supporting evidence came from a single expert, the allegation was found to be insufficiently substantiated.
Alpro and Oatly were required to remove advertisements in the offending form and to ensure that the basis for their environmental claims was clear. Oatly also had to make sure he had “sufficient evidence to support environmental claims“.
The enforcement powers of the CMA and Trade Standards in relation to consumer law infringements are tempered by the requirement to consider referring complaints to the ASA, the “established meansfor the control of misleading advertising covered by the Regulations. However, if necessary (which is not very common in practice), regulators can intervene by initiating civil or criminal legal proceedings or by accepting undertakings from the offending company (see the consumer protection of the CMA : application tips). In contrast, the powers of the CMA in relation to competition law violations are broader and broader.
However, from July to October 2021, the government conducted a consultation on competition and consumer policy reform. It proposes to strengthen the CMA’s consumer protection powers to bring them into line with their current competition powers. This would increase the CMA’s ability to tackle consumer law violations, including by imposing fines itself without having to go to court. The CMA responded by endorsing the proposal.
By comparison, the ASA’s enforcement powers are more limited than the AMC’s powers (current and proposed) and include, for example, requiring the editing or removal of advertisements, issuing a “advertising alert” advising members to suspend services and/or request search sites to remove paid search ads from their sites. Where further action is required, the ASA may refer the advertiser or broadcaster to CMA or Trade Standards to use their teeth as instructed.
With consumers’ growing environmental awareness, environmental claims are likely to remain key elements of corporate marketing strategies. However, it should be borne in mind that these environmental claims are firmly on the radar of UK regulators and it is likely that further action will be taken against those who fail to comply with the CMA’s Green Claims Code, the ASA Codes and applicable consumer protection laws. .
With the current movement in the region, and particularly in light of the potential increased enforcement capacity of the CMA, now is the time for companies to audit their green claims and ensure regulatory compliance, before any potential CMA investigation.
© Copyright 2022 Squire Patton Boggs (USA) LLPNational Law Review, Volume XII, Number 39