UK CMA Adopts Green Claims Code and Consults on Environmental Sustainability: Time for a Compliance ReviewOctober 7, 2021
October 7, 2021
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September 2021 was certainly the month of sustainability initiatives for the UK’s competition watchdog.
On 20 September, the Competition & Markets Authority (CMA) published a Green Claims Code aimed at protecting consumers from misleading environmental claims amidst concerns over ‘greenwashing’. Greenwashing refers to overstated, unsubstantiated green credentials of a product or service. The Code is also intended to protect businesses from unfair competition and ensure a level playing field.
And then on 29 September, the CMA launched a public consultation, to help inform its advice to government on how competition and consumer regimes can better support the UK’s Net Zero and sustainability goals. The consultation runs until 10 November 2021.
Impact: who needs to take the Green Claims Code into account
The new Code potentially impacts any company which puts forward claims of positive environmental impact in relation to its products or services. It is particularly important for businesses involved in textiles and fashion, travel and transport, and fast-moving consumer goods because the CMA has flagged these industries as priorities. These are the sectors where consumers appear to be most concerned about misleading claims. Any other sector where the CMA finds significant concerns could also become a priority in due course. Financial services, for example, is not currently one of the CMA’s priority areas, but the Code would nonetheless apply in this sector. For example, to companies selling “ethical” or “green” investment services, which would also be a focus area of the UK’s financial services regulator, the Financial Conduct Authority (FCA).
The purpose of the Code is to help businesses understand and comply with their existing obligations under consumer protection law when making environmental claims. The Green Claims Code is broad and applies to all commercial practices, including advertisements, product labelling, packaging, and even product names.
The Code will operate in parallel with and not to the exclusion of other applicable rules and regimes. Accordingly businesses should consider whether they are subject to any sector- or product-specific requirements and ensure they comply with them, as well as their obligations under general consumer protection law.
Consequences: what happens if the Code is breached?
The Code is not new legislation, it draws on enforcement powers derived from existing consumer protection rules under the Consumer Protection from Unfair Trading Regulations (CPUT) 2008 and Business Protection from Misleading Marketing Regulations 2008.
The CMA and other bodies (for example, Trading Standards Services) can bring court proceedings in relation to the Code.
Any business found to be in breach of consumer law can face civil action or criminal prosecution. Breach of CPUT can attract criminal liability, including for directors…