On 27 March 2024, the UK Competition and Markets Authority (CMA) announced that fashion retailers ASOS, Boohoo and George at Asda (the Retailers) has signed undertakings to ensure that the environmental claims they make are accurate and clear (the Undertakings).  The announcement was accompanied by an open letter to the fashion retail sector (the Letter).  The  Letter warns businesses to act in accordance with the CMA’s 2021 Green Claims Code and to take note of the Undertakings, or risk incurring significant monetary penalties once the Digital Markets, Competition and Consumers Bill comes into force (see our previous blog posts here, here and here).  The CMA also indicated that it will be updating the Green Claims Code with specific guidance for the fashion sector.  

Background

The CMA published the Green Claims Code in September 2021.  The Code aims to provide businesses with guidance on how to comply with their obligations under existing consumer protection law. 

The law defines misleading environmental claims broadly to include statements that are factually correct but nevertheless create misleading impressions.  The Green Claims Code sets out six principles of compliance that firms should adhere to.  Specifically, environmental claims should:

  • Be truthful and accurate;
  • Be clear and unambiguous;
  • Not omit or hide important information;
  • Compare goods and services in a fair and meaningful way;
  • Consider the full life cycle of the product or service;
  • Be substantiated.

In early 2022, the CMA launched a compliance review of environmental claims in the fashion retail sector.  Six months later, it announced investigations into environmental claims made by the Retailers regarding their fashion products.  The CMA’s investigation focused on a range of suspected conduct, including the use of broad and vague language, the provision of incomplete product information to customers and inadequate criteria applied to products included in supposedly sustainable ranges.  In March, each of the Retailers offered undertakings to address the CMA’s concerns.

Timeline of CMA Investigation

Timeline of CMA Investigation

The Undertakings

Asda, ASOS and Boohoo each signed undertakings as to how they will display, describe, and promote their green credentials.  According to the undertakings, the Retailers have committed not to make “misleading environmental claims.”  This term is defined widely to include: claims that:

  • are false or inaccurate;
  • are based on, or subject to, assumptions, limitations, qualifications or explanations that are not disclosed and that contradict or change the meaning of the claim; or
  • fail to provide all material information required by consumers to make an informed decision, including any explanations necessary to enable consumers to understand a claim.

The Undertakings target not only misleading use of language, but also the use of images and search criteria or filter functions that could create misleading sustainability impressions, as well as compliance, monitoring and reporting obligations:

  • Misleading Environmental Claims.  The Retailers have undertaken to remove or amend any misleading environmental claims within two months and to ensure that no future environmental claims will be misleading.  Information provided to consumers must be expressed in plain language, easy to read, and be clearly visible.
  • Clear definitions and Misleading Effects.  The Retailers must clearly set out the criteria for the inclusion of products in green ranges, detail any minimum requirements and refrain from using descriptions, comparisons or “natural” images, such as green leaves, that amount to misleading environmental claims.  
  • Environmental Targets.  All environmental claims based on the Retailers’ targets must be accompanied by clear and verifiable information as to what those targets aim to achieve, the date on which the Retailer expects to meet the target, and the strategy for meeting the target.
  • Fabric composition and labelling.  The Retailers must not label products as “recycled” or “organic” unless the proportion of non-recycled or non-organic fibres is “negligible”, or must otherwise specify the percentage of such materials used.
  • Accreditation schemes.  Statements regarding accreditation schemes and standards must not be misleading.  For example, statements must make clear whether an accreditation applies to particular products or to the firm’s wider practices.
  • Compliance.  The Retailers must implement appropriate mechanisms to prevent misleading environmental claims, including supplier due diligence and new product spot checks.  The Retailers must also put in place internal policies and training programmes reflecting the requirements of the Undertakings, consumer protection law and the Greens Claims Code. 
  • Monitoring and Reporting.  The Retailers must report regularly to the CMA on how they are complying with the commitments and what steps they are taking to improve their internal processes.

Outlook

CMA Chief Executive, Sarah Cardell said that this decision “marks a turning point for the industry.  The commitments set a benchmark for how fashion retailers should be marketing their products, and we expect the sector as a whole – from high street to designer brands – to take note and review their own practices.”

The CMA investigation comes at a time of increased scrutiny of greenwashing practices.  This is not limited to the UK.  For example, the European Union has enacted a new Directive aimed at combatting greenwashing.  Member States now have two years to implement provisions of the Directive under national law.  

The UK is nevertheless at the forefront of enforcement in this area. The CMA announced late last year that it intended to examine green claims made by the Unilever group and, as noted above, has also indicated that it will update the Green Claims Code with additional guidance tailored to the fashion sector.  More significantly, as reported in our previous post, the Digital Markets, Competition and Consumers Bill (expected to come into force this year) will significantly bolster the CMA’s powers to enforce consumer law, with similar powers to those that the CMA can deploy under competition law.  It will be able to take decisions on whether a company has infringed consumer law (as opposed to making applications to court) and have the power to impose penalties of up to 10% of a group’s worldwide turnover.  It is therefore highly likely that the number of greenwashing cases will continue to grow over the coming months and years.