18 April 2024
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Misleading Consumer Claims: The CMA puts down a marker ahead of the DMCC Act's implementation

To The Point
(4 min read)

Against the backdrop of the imminent Digital Markets, Competition and Consumer (DMCC) Act, which is expected to significantly enhance the CMA's consumer enforcement powers, the CMA has issued an open letter to the fashion retail sector, urging them to consider their obligations under consumer protection law. The open letter accompanied undertakings, entered into by Boohoo, Asos and Asda, to bring to an end the CMA's investigation into their alleged use of misleading environmental claims (environmental claims being claims which suggest or create the impression that a product/service is better for, or less damaging to, the environment) (the Undertakings). The Undertakings provide a clear framework for ensuring that environmental claims (whether fashion related or not) comply with consumer protection law. We would therefore urge all businesses making, or intending to make, environmental claims to review their claims and practices in light of the Undertakings and prior to the arrival of the DMCC Act.

Almost two years after opening its investigation into Boohoo, ASOS and Asda's use of potentially misleading environmental claims, the CMA has announced the acceptance of Undertakings from each party. Pursuant to these Undertakings, the parties have committed not to make new misleading environmental claims and to remove any existing misleading environmental claims. While the Undertakings only bind the parties to the investigation, the CMA's open letter, published alongside them, provides the latest signal (alongside its ever increasing case load in the consumer space) that the CMA considers compliance with consumer law no less important than compliance with competition law. While the Undertakings bind only the parties, the open letter is clear that the Undertakings should be viewed as setting the standard for the making of environmental claims. Any businesses making such claims should therefore carefully review their claims and practices to ensure they comply with the Undertakings' requirements.

The CMA's messaging is particularly pertinent given it is imminently expected, by virtue of the DMCC Act, to receive significantly enhanced consumer enforcement powers. The Act, anticipated to receive royal assent within the next few weeks, will broadly align the CMA's powers in respect of consumer protection law with its competition law powers. The CMA will no longer have to apply to court to enforce consumer protection law (a process which has to date acted as a barrier to tougher consumer enforcement). Rather, the Bill is expected to grant the CMA the power to issue infringement decisions in respect of new and continuing consumer protection law breaches and, crucially, to impose fines of up to 10% of global group turnover without having to bring proceedings before the courts.

The key piece of consumer protection legislation relevant to the CMA’s "Green Claims Code", and to this investigation, is the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The CPRs contain a general prohibition against unfair commercial practices and specific prohibitions against misleading actions and misleading omissions, which are intended to be imported into the DMCC Act from the outgoing CPRs. Consumer facing businesses should be alive to the possibility of potential claims from consumers if, for example, they are successfully prosecuted for a CPUT offence. In such circumstances, there is a risk that, going forward, consumers will bring a claim parasitic on that enforcement action. It will therefore be necessary for businesses to approach any potential regulatory action with greater caution, and be alive to the risk that giving of an undertaking such as those discussed here may open up substantial civil claims or the need to make compensation payments.

Having clearly signalled its expectations with regards to compliance, the CMA is unlikely to look kindly upon businesses who continue to routinely make misleading environmental claims. This increasingly robust position is not unique to the CMA – it is reflective of a broader trend of enhanced consumer enforcement across Europe. The EC, for example, recently secured commitments from Zalando in respect of misleading green claims to conclude an investigation opened by the EC and four member states in 2022 and a new EU Directive, strengthening consumer protection laws on "greenwashing" and circularity, entered into force late last month. Businesses should therefore take this opportunity to ensure their practices with regards to environmental claims, and more generally, are compliant with consumer protection law within the UK and more widely

The Undertakings, which build on the CMA's existing "Green Claims Code", provide a helpful roadmap to compliance when making environmental claims. We set out some key takeaways from the Undertakings below.

1. Ensure your environmental claims are not misleading
2. Clarificatory or qualificatory information must be "clear and prominent"
3. Review the Undertaking's rules relating to specific environmental claims
4. Ensure your compliance mechanisms are robust and up to date

To the Point 

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