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Permission to Visit - Goldilocks and the Three Bank Statements
Robert Houchill
The Competition and Markets Authority (CMA) has announced a significant expansion of its project to examine misleading green claims. The regulator will be investigating a range of everyday essential items, including food and drink, cleaning products, toiletries, and personal care items, and will be considering whether companies are complying with UK consumer protection law in the environmental claims they make about those products.
In September 2021, the CMA launched the Green Claims Code, which is intended as a guide to help businesses comply with existing laws on statements made to consumers. The CMA also made the promise that it in early 2022 it would be investigating companies which make misleading green claims. The CMA listed textiles and fashion, travel and transport, and fast-moving consumer goods (FMCG) as sectors on which it might be focusing.
The CMA was true to its word, opening a review of environmental claims in the fashion sector in January 2022 and announcing investigations into three high-profile fashion brands in July of the same year. It noted then that it would be looking at other sectors in ‘due course’.
The time has now come for the CMA to turn its attention to FMCG products.
In its latest review, the CMA will look carefully at environmental claims made about frequently used consumer products. The CMA gives a number of examples of the kinds of practices which might be of concern: the use of vague and broad eco-statements (for example packaging or marketing a product as ‘sustainable’ or ‘better for the environment’ with no evidence); misleading claims about the use of recycled or natural materials in a product and how recyclable it is; and entire ranges being incorrectly branded as ‘sustainable’. The CMA will look at statements made online as well as in physical stores. As has become its usual practice, the regulator has set up a specific email address to allow the public to report their concerns
The newly-announced review may represent only the first phase of action in this area: if the CMA finds evidence of potential greenwashing it could choose to make use of its statutory powers to open a formal investigation into one or more target companies. In the most serious cases, this could lead to criminal enforcement action against companies, although other outcomes are possible, including the giving of undertakings to change bad practices or the payment of redress to consumers.
As we wrote when the CMA’s fashion investigation was launched in July 2022, ‘green’ investigations are not going to go away. The CMA is well-motivated and serious about discharging its stated aims in this area. At the end of 2022, in its Annual Plan consultation for 2023 to 2024, the regulator listed helping accelerate the UK’s transition to a net zero economy as one of its key medium-term priorities.
Now, in taking on the FMCG sector, the CMA has dramatically broadened the extent of its greenwashing investigations. The FMCG sector is large (according to the CMA, worth more than £130 billion per year) and diverse, covering product categories which are themselves broad, such as food and drink, cleaning products and toiletries. It is also home to many household names. As the fashion-sector project has shown, the CMA is not shy of taking actions against well-known companies. This raises the chances of headline-grabbing outcomes, meaning significant reputational as well as financial risks for those businesses involved.
The CMA is in the early phase of its overall review, so there is still time for companies in the FMCG sector to carry out their own work to ensure that any green claims being made are accurate, based on robust evidence, and not potentially misleading to consumers. Looking at the six principles set out in the Green Claims Code is a good place to start:
- Claims must be truthful and accurate;
- Claims must be clear and unambiguous;
- Claims must not omit or hide important relevant information;
- Comparisons must be fair and meaningful;
- Claims must be substantiated; and
- In making the claim you must consider the full life cycle of the product of service.
The CMA is also the UK’s competition regulator. In that capacity, its Chief Executive announced at the end of January 2023 that it would be relaxing the rules on how closely companies can cooperate in relation to climate change initiatives. The CMA proposes to add climate change mitigation to the list of ‘fair share’ exemptions to the statutory prohibition on companies entering into anti-competitive agreements. A consultation on the proposal is expected to be opened during February.
FURTHER INFORMATION
For further information on the issues raised in this blog post, please contact Louise Hodges, Katherine Tyler or a member of our criminal litigation team.
ABOUT THE AUTHORS
Louise Hodges is a specialist in corporate crime, financial crime, FCA investigations, and serious and complex fraud. She is widely recognised as a leader in this field and leads Kingsley Napley LLP's cross practice financial services team and internal investigations team.
Katherine Tyler is a legal counsel in the criminal litigation team where she specialises in extradition and investigations with a cross-border element, particularly those involving allegations of human rights abuses or environmental harm. Katherine leads on Business and Human Rights and is co-chair of the firm-wide group.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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