On 14 March 2022, the UK Competition and Markets Authority (CMA) published its advice to the Government on how it believes existing competition and consumer regimes could be improved to help achieve the UK’s net zero and environmental sustainability goals. The CMA’s advice is a response to three questions posed by the Secretary of State to the CMA in July 2021, and follows a call for inputs as well as targeted stakeholder engagement.
The CMA concluded that it has not seen sufficient persuasive evidence that the current competition and consumer law frameworks are an obstacle to sustainability initiatives (i.e. it does not consider that any fundamental changes to those frameworks are needed), but that stakeholders would benefit from further clarity about how these frameworks will be applied in an environmental sustainability context.
To this end, the CMA plans to launch a cross-organisational Sustainability Taskforce to provide a focal point in the CMA for policy issues relating to sustainability on consumer and competition issues. This Taskforce will develop formal guidance on areas where it is required (such as those discussed below) and lead engagement with stakeholder, Government and partner organisations to continue dialogue regarding environmental sustainability issues. The Taskforce will initially focus on developing guidance in respect of competition law issues, but we can expect to see it consider other consumer protection angles in due course.
Below, we examine the CMA’s key recommendations in respect of the UK’s consumer law regime. For our analysis on the CMA’s advice relating to competition law, see our blog post here.
Amendments to existing consumer protection legislation to improve transparency and consumer awareness
The CMA’s recommendations focus on certain changes which could be made to existing consumer law legislation (in particular, the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and/or the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs)). Nevertheless, it recognises that bespoke legislation may be required in some circumstances to allow for a more tailored approach.
The key amendments it recommends are:
1. Introducing standardised definitions of environmental terms
The CMA recommends introducing standard definitions of environmental terms commonly used by businesses (such as “biodegradable”, “compostable” and “carbon neutral”) to ensure consistency in marketing and product labelling.
The CMA does not, however, address how such definitions would be aligned with other existing or anticipated “green taxonomies”. For any glossary of key environmental terms to be understandable for consumers, and workable for businesses, consistency with other regulatory regimes and pre-existing standards is key.
2. Requiring mandatory disclosure of information relating to the sustainability impact of goods and services
The CMA recommends introducing mandatory requirements for companies to disclose certain sustainability impacts of their products/services (including, in particular, their environmental impact, recyclability, repairability and durability). This marks a shift from the current legislative position, whereby business may choose to make claims about the environmental impact of their product, provided such claims are not misleading. The CMA’s advice notes that its Green Claims Code guidance, published in September 2021, “already emphasises that the omission of environmental impact information may, in some cases, be a breach of consumer protection law”, for example where claims focus on only one (often positive) environmental aspect of a product, or say nothing at all about its environmental impact.
The CMA suggests a move towards mandatory disclosures could be achieved by new legislation on disclosure of environmental impact information, or by amending the definitions of material information in the CPRs and CCRs to set out the material environmental impact information which must be given to consumers when promoting and selling goods and/or services.
The CMA considers that these disclosures may help consumers to identify and distinguish between more and less environmentally harmful products and services. This was another key consideration of the CMA’s Green Claims Code guidance, on which see further here.
3. Banning misleading and/or unsubstantiated environmental claims
The CMA has already focused significant attention on “greenwashing” (the practice of making misleading and/or unsubstantiated environmental claims about products or services) and is currently conducting market-wide compliance reviews (starting in the fashion retail sector) following the publication of its Green Claims Code.
The CMA now proposes that the Government go further still. Its advice notes that whilst the CPRs require businesses to avoid potentially misleading practices, they do not do enough to deter greenwashing. It considers this to be a particular risk “where new markets are emerging as a result of the rapid transition to Net Zero, where consumers are likely to lack the knowledge and experience to make informed decisions”.
The CMA considers that the test of whether a potentially misleading practice causes or is likely to cause the average consumer to take a different transactional decision than they would otherwise have taken should be removed in the context of potentially misleading environmental claims. The CMA proposes adding the practice of making misleading or unsubstantiated “green” claims to the list of automatically prohibited practices set out in Schedule 1 to the CPRs (or, at the very least, adding the use of specified, commonly confusing claims, to this list). The European Commission has also consulted on proposals to prohibit greenwashing claims by way of amendment to the Unfair Commercial Practices Directive 2005, as part of its Circular Economy Action Plan (and its own proposals are still awaited).
Amendments to B2B legislation
The CMA has also proposed amendments to B2B legislation, with a view to ultimately improving transparency for consumers.
The Business Protection from Misleading Marketing Regulations 2008 (the BPRs) currently prohibit businesses from actively misleading their business customers, but do not provide the same level of protection in respect of misleading omissions as the CPRs. This may in turn prevent consumers at the end of the supply chain from obtaining relevant environmental and sustainability impact information in order to make an informed purchasing decision.
The CMA recommends improving supply chain transparency obligations to incentivise businesses to improve their environmental credentials, and ultimately to provide consumers with more environmental information at the end of the supply chain about the businesses they interact with. To achieve this, the CMA suggests amendments to the BPRs, to:
- make expressly clear that businesses are protected against misleading omissions of material environmental impact information by their suppliers; and
- require suppliers making environmental claims to disclose the evidence which substantiates the claim to their business customers.
The CMA acknowledges the complexities of such an approach (in particular, the need to avoid potential competition concerns resulting from the exchange of competitively sensitive information), but notes that similar legislation has been introduced elsewhere, for example in Germany. Nevertheless, we expect that businesses will be closely watching any substantive proposals made by the Government on this issue, particularly with respect to the practical challenges which could arise. These include any potentially onerous requirement for businesses to verify sustainability information provided by their suppliers, before onwards supply to their next (business) customer, and the practical challenges of doing so where the relevant information is commercially sensitive or trade secret.
More regulation could be on the horizon
Many of the CMA’s proposals for consumer law are consistent with its previous focus in this area. It has, for now, declined to propose firm legislative changes on issues such as how to tackle premature planned obsolescence and overconsumption, though it indicates that BEIS may wish to consider these further.
The CMA notes that there may be instances in which consumers are well-informed and competition is functioning properly, but where a market nevertheless operates in a way that is less environmentally sustainable than required to support the transition to Net Zero. In such circumstances, the CMA notes that bespoke regulation may be the best way forward. The CMA will also keep under review whether further legislative change, or additional guidance, is required in light of additional evidence gathered – for example, in light of any “new and innovative sustainability initiatives which may reveal the limitations of the existing framework.”
Although providing sufficient information to enable consumers to make properly informed transactional decisions is a core requirement of the UK’s existing consumer protection regime, it is not clear from the CMA’s advice that information on environmental sustainability will be “material” information in every context, and it may in fact lead to information overload for consumers. If the CMA or the Government consider that there are specific situations in which such information should be disclosed (for example, in the context of purchasing specified goods or services), our view is that it would be preferable for the Government to consult on specific new regulation.
Potential strengthened enforcement powers for the CMA
In parallel to its consideration of the CMA’s advice on supporting Net Zero, the Government is also considering its proposed changes to the CMA’s enforcement powers, which could include the ability to impose fines of up to 10 per cent of global turnover for consumer law breaches (see further here). Although the CMA’s call for inputs on the present consultation did not explicitly raise the question of consumer remedies and the CMA’s enforcement powers, the CMA nevertheless hinted that the Government may wish to consider measures to enable the courts to order payments of redress in the collective interests of consumers where there is “wider environmental harm caused by practices such as the sale of products using misleading environmental claims or which become prematurely obsolete”.
The European Commission is due to publish the details of its Sustainable Products Initiative (SPI) shortly. The SPI is also expected, among other things, to strengthen disclosure requirements relating to product sustainability.