Fines of this level may be unlikely for incidences of greenwashing – the DMCCA also covers consumer harms such as aggressive sales practices, hidden fees and unfair contracts – but regardless of how it chooses to exercise its powers, there’s no denying the CMA now has real teeth to take a bite out of greenwashers. From this point on, businesses making claims about their achievements relating to things like carbon neutrality, net-zero, regenerative agriculture and sustainable packaging must go the extra yard to support them with hard evidence, or face the consequences.
Direct action
The ambition of the DMCCA is to promote consumer trust and confidence, and help to grow the economy while deterring poor corporate practices. A key change from the old regime is how the Act enables the CMA itself to decide whether consumer protection laws have been infringed and take direct action to tackle breaches. Previously, the regulators had to go to court to show that consumer protection law had been broken, allowing firms to, in the words of the CMA, ‘game the system’ by engaging in protracted legal disputes – or exercise their legal right to a defence as others might describe it.
Green claims specifically have been in the CMA’s crosshairs for some time. It first published dedicated green claims guidance for businesses in 2021 and subsequently launched an investigation into possible greenwashing by the fashion sector, with a particular focus on Asda and Asos.
The Advertising Standards Authority (ASA) has taken a similarly keen interest in the subject and has made examples of brands such as Brewdog and Alpro by demanding the removal of green claims in their marketing. Yet, the CMA is a very different beast from either trading standards or the ASA.
That’s because its powers are so much more extensive – most notably that headline ability to issue a fine of up to 10% of a company’s global turnover. Had the CMA concluded its investigation into the fashion sector under the DMCCA, and ruled against the retailers, it could potentially have cost Asda, which owns the George clothing brand, a whopping £2.4bn (10% of its £24bn turnover). These are numbers that are massively different to anything we’ve seen before.
In reality, a lot has to happen for a case ever to reach that stage, if indeed the CMA decides to prioritise environmental claims within its enforcement action.
The ‘4 Ps’
To give businesses some clarity over how the new regime will work in practice, in April the CMA published guidance summarising how it plans to enforce the Act in its first year, based around its four guiding principles (the ‘4 Ps’) – pace, predictability, proportionality and process.
The CMA says it will focus early action on “more egregious conduct” where businesses should already be clear about their consumer law obligations, including questions on which there have been clear verdicts delivered by bodies such as the ASA. It will also prioritise action that “benefits competitive and fair-dealing businesses, who should not be put at a disadvantage for doing the right thing”.
The CMA has produced a ‘hit list’ of five types of practice it sees as being particularly harmful for consumers, and fair-dealing businesses with the potential to undermine consumer trust and confidence. These are:
- misleading information about prices;
- misleading information about goods and services;
- unfair online choice architecture;
- unfair contractual barriers to switching and exercising legal rights; and
- banned practices (including fake reviews and ‘drip pricing’ where shoppers are shown an initial price for a product before more fees are added as they proceed with their purchase).
Of these, green claims, although not referenced explicitly, would likely fall under ‘misleading information about goods and services’. (A CMA spokesperson told Footprint recently: “We’ll be focusing on particularly harmful practices over the next 12 months, which includes a number of practices, such as aggressive sales tactics, hidden fees and objectively false information being provided to consumers (which by their nature, could include things like misleading environmental claims, were we to find evidence of it)).”
Misleading material
A key point hammered home repeatedly during the roundtable is that green claims do not have to be demonstrably false in order to fall foul of the rules. The Act applies to information which, although true, is presented in a misleading way or omits material information. In practice, that means a business claiming that greenhouse gas emissions have been reduced by a certain amount could be in breach if it fails to mention a heavy reliance on offsetting, or that the reduction only applies to scope 1 and 2 emissions and not scope 3. Businesses could also be culpable when making a claim that relates to a specific brand or business segment without acknowledging the wider context of the company’s operations.
These are early days and we’ll know more about how the CMA plans to use its new powers in due course. During the first three months, the regulator says it will focus on supporting businesses rather than enforcement action. Investigations and fines, meanwhile, are likely to take some time to filter through as the law can’t be applied retrospectively.
Fine factors
When deciding the level of fine, the CMA says it will take a range of factors into account. These include the economic harm caused to consumers and the level of culpability of the offending business – high for regular, deliberate acts and low for accidental, one off infringements. It will also consider the size of the business, the need for the fine to act as a deterrent and to ensure the party hasn’t profited overall from the infringement once the penalty has been taken into account.
Aggravating factors will also be considered, like continuing infringement after a warning and attempts to conceal the breach, alongside mitigating factors like taking steps to cease and correct the conduct before the CMA’s investigation has been launched. Once the level of fine has been determined, a discount of up to 40% can be applied where the accused settles with the CMA. The Act also gives the CMA power to ask businesses to pay compensation to consumers and demand compliance measures, such as staff training on green claims.
Going forward, businesses will be hoping for some consistency between how the CMA and ASA police green claims. Noting that the pair of regulators have produced webinars and tutorials together, and have stressed they don’t want to create an environment for greenhushing.
Yet, there is a view that the new regime will fundamentally alter how businesses choose to communicate – or rather not communicate – publicly about their environmental achievements and ambitions.
Will a newly powerful CMA drive improvement in the veracity of green communications? Or will it force businesses into silence? We shall soon find out.
Top tips when making green claims
- Be cautious about making absolute or unqualified claims about your product that state or imply every aspect of your product has a particular quality or is ‘environmentally friendly’, ‘recyclable’ etc., when there are limitations or qualifications to this.
- Don’t make claims about your product as a whole when they only apply to certain aspects of it.
- Don’t be too general.
- Be careful using industry terms. Ask yourself what does the average consumer understand?
- Consider the wider impact of your business and whether you can make the claims you want without having to add in unattractive points in order to not be accused of omitting information.
- Always consider the full life cycle of any product you make green claims about.
- Always hold a high level of substantiation for any claims, and have that ready to provide should it be requested.
- Be cautious when using vague words, or words which are frequently misinterpreted by consumers like ‘biodegradable’ or ‘eco-friendly’.
- If you’re struggling to work out how to make a claim, there is probably a reason. It might be a good idea to rethink it.
If you have any questions about points raised above, or how this may affect your business, please get in touch with the authors below.
This article was originally prepared by Nick Hughes, together with Footprint Media Group and is also available here.
We would like to acknowledge Abigail Reay's contributions to this article.
