On 4 November 2021, the Netherlands Authority for Consumers and Markets (ACM) issued a press release announcing an investigation into six companies active in the clothing sector (of which four are based outside the Netherlands) following initial findings of misleading sustainability claims by the ACM. The ACM considers many clothing companies to exaggerate their sustainability claims and that such claims are often not substantiated. In its press release, the ACM now warns these companies that the ACM will take action, including potentially imposing fines.
This specific action by the ACM into six clothing companies follows an initial investigation into three sectors and around 170 companies at the beginning of the year. In May of this year, the ACM assessed various sustainability claims on websites or products of companies active in the energy dairy and clothing sectors. Following an initial sweep of their websites, the ACM sent letters to 170 companies in these sectors, calling on them to check the accuracy of their sustainability claims and reminding them of consumer protection laws that prevent companies from making false claims, including false sustainability claims.
In its press release, the ACM refers to three examples of (potentially) misleading sustainability claims that it came across during its investigation into the clothing sector:
- The use of vague or absolute and general phrases such as “sustainable” or “ethical” on clothing tags or websites, when no further explanations are provided for these claims.
- Special sustainability collections whereby the products that are part of this collection are all given a specific name, but it is unclear what criteria are used in that context. As such it is thus unclear what the sustainability benefit is of these products in comparison with other products.
- The use of “organic cotton” on product’s tags (e.g. a T-shirt) when information found elsewhere on the website reveals that the product in question contains less than 95% organic cotton. In that case, percentages or ranges of percentages of the amount of organic cotton must be given, for example: T-shirt made from 60% organic cotton.
Rules of thumb for sustainability claims
In January of this year, the ACM had published Guidelines on Sustainability Claims (the Guidelines) which set out five main rules of thumb which companies much adhere to in order to prevent misleading consumers as regards sustainability aspects of their products and services (please refer to our earlier blog on this topic).
As a reminder, the five rules of thumb set out in the Guidelines are as follows:
- Make clear what sustainability benefit the product offers: sustainability claims are only useful to consumers if they are clearly phrased, easy to understand and do not contain any misleading information.
- Substantiate sustainability claims with facts and keep them up to date: any sustainability claims should be sufficiently substantiated with data and by reference to credible sources. From the moment the claim is made, a company must be able to prove the claim or refer to verifiable sources.
- Comparisons to other products, services or companies must be fair: any comparisons with other products, services or companies must be “fair” and not misleading. The claims must explicitly mention what the products or services are compared with.
- Be honest and specific about sustainability efforts: making general claims about a company’s sustainability efforts may be misleading. Instead, for each product, the sustainability efforts need to be specified.
- Visual claims cannot be confusing: using symbols, pictures, pictograms, labels and colours cannot be misleading or give false impressions about a company’s sustainability efforts. It is important that consumers are able to distinguish between information about the sustainability efforts of the company or of the product specifically.
Following the ACM’s publication of the Guidelines, in September of this year, the UK Competition and Market Authority (CMA) also published guidance for companies in relation to misleading environmental claims, in its Green Claims Code (the Code). Similar to the ACM’s five rules of thumb, the Code sets out six key principles to prevent misleadining sustainability claims and provides further guidance on how businesses should communicate any claims on how a product, service, brand or business provides a benefit or is less harmful to the environment (please refer to our earlier blog on this topic).
As noted previously, we expected all European consumer protection agencies to closely collaborate on these issues (within the Consumer Protection Cooperation Network, or bilaterally). The ACM’s press release now confirms this to be the case, as the ACM will request (or has already done so) other regulators to take action against four companies which are not based in the Netherlands, but which the ACM considers to engage in misleading sustainability claims in the clothing sector.
We expect that the ACM and other regulators will actively monitor (potentially) misleading sustainability claims, especially in view of the increasing importance consumers attach to all things sustainable. These six cases (especially if they were to result in fining decisions or otherwise publicly available decisions) may shed some further light on how the ACM (and other regulators) will continue to enforce in this space going forward.