Guide brings environmental claims under increased UK consumer law scrutiny

Consumer law expert Angelique Bret, and copy clearance specialist Huw Cookson, both of Pinsent Masons, the law firm behind Out-Law, said the publication of draft guidance how consumer protection law applies to environmental claims by the Competition and Markets Authority (CMA) would be the spur for the increased scrutiny.

The CMA has opened a consultation on the draft guidance after an investigation it opened last year into descriptions and labels used to promote products and services claiming to be ‘eco-friendly’ found that 40% of green claims made online could be misleading.

Bret said the regulator has significant powers, including to ‘name and shame’ non-compliant advertisers and go to court to compel changes in advertising practices, if businesses ignore its guidance.

Bret said: “Rather than taking formal enforcement action against a number of selected businesses, the CMA has decided at this stage to issue draft guidance and consult with the market. In other consumer protection cases, for example, in relation to online gambling and secondary ticketing, the CMA has targeted certain businesses with a view to obtaining formal undertakings from them which are then published on the CMA’s website and act as a warning to other businesses to follow suit or risk action themselves.”

“Where businesses do not agree to undertakings to make the changes required by the CMA, the CMA can apply to court for an order to force these businesses to make changes. The CMA may still decide to take this approach in relation to misleading ‘environmentally friendly’ claims by particular businesses which come to its attention going forward, particularly after it has issued such detailed guidance; businesses should therefore ensure that they can demonstrate that their claims are valid and that they are sufficiently and clearly explained to the consumer,” she said.

Cookson said that while the CMA had not partnered with the Advertising Standards Authority (ASA) on issuing its draft guidance, unlike it did in producing advertising guidance for social media influencers, the ASA is likely to reflect on the guidance when considering whether businesses are compliant with the advertising standards it is tasked with monitoring compliance with.

“The CMA’s draft guidance is the most comprehensive guidance we’ve seen relating to environmental claims and businesses will need to pay close attention to it,” Cookson said. “If they don’t, they risk potential enforcement action from the CMA, Trading Standards and/or the Advertising Standards Authority.”

“The draft guidance should offer businesses more certainty in terms of the parameters of their advertising but it will also give regulators more confidence to take on and enforce against non-compliant green claims,” he said.

Jacqueline Harris of Pinsent Masons said businesses making misleading environmental claims in relation to their products or services would further risk being the target for litigation brought on behalf of customers.

“Although the CMA has not yet identified any particular companies as having breached the rules, businesses are also likely to be concerned about the potential, ultimately, for consumers to claim compensation in the courts for products which have been miss-sold to them,” Harris said. “It is already possible to bring collective consumer claims in the Competition Appeals Tribunal for infringements of competition law and group claims on behalf of consumers for breaches of consumer law must be the next step.”

“Although such consumer claims might, individually, be relatively small, the availability of group and representative procedures in the CAT and UK courts could lead to large groups of claims of very significant value. Any attempt to use ‘greenwashing’ to promote goods could come at a high price. Business should be alert to the risks and the increased scrutiny such practices are likely to receive from regulator and consumers alike,” she said.

Six principles underpin the CMA’s draft guidance. Any environmental claims must be truthful and accurate; clear and unambiguous; not omit or hide important information; only make fair and meaningful comparisons; consider the full life cycle of the product; and be substantiated.

On its guidance that environmental claims must be clear and unambiguous, the CMA said that the claims “should be worded in a way which is transparent and straightforward so consumers can easily understand them” and “not presented in ways that are liable to confuse consumers or to give the impression that a product, service, brand or business is better for the environment than it is”. It said vague or general statements citing a product’s environmental benefit “are more likely to be misleading”, adding that they can “give the impression a product, service, brand or business is better for the environment than is really the case” and “also be difficult to substantiate”.

“Businesses are increasingly recognising the importance of improving the environmental effects of their products, services and practices,” the CMA said. “However, claims about future goals should only be used for marketing purposes if the business has a clear and verifiable strategy to deliver them. Claims about a business’s environmental ambitions must be in proportion to its actual efforts.”

On the need for businesses comparing their product’s green credentials to others’ to make fair and meaningful comparisons, the CMA stressed that “comparisons should be based on clear and objective information” and “not benefit one product or brand to the detriment of another if the comparison is inaccurate or false”.

“Comparative claims should compare like with like. That means: any products compared should meet the same needs or be intended for the same purpose; the comparison should be between important, relevant, verifiable and representative features or aspects of the relevant products; and the basis of the comparison, and the way it is presented, should allow consumers to make an informed decision about the relevant merits of one product over another,” the CMA said “A claim which compares two similar products’ recyclable content, CO2 emissions or organic composition, for instance, should calculate these measurements in the same way for each product. The values used to measure these comparisons, and the way they are presented, should be clear enough for consumers to understand.”

The CMA has said it will aim to issue finalised guidance on environmental claims by the end of this summer.

A study by the European Commission in 2014 found that that “half of UK consumers take environmental considerations into account when buying products”.

Brand protection expert Iain Connor of Pinsent Masons said: “Businesses in every sector need to be careful about the environmental claims they make. It is possible the CMA has deliberately kept its powder dry by not targeting its interventions at a particular industry so it can fry the biggest fish it finds when they step out of line and make claims contrary to the guidance.”