Greenwashing: UK competition watchdog to investigate the FMCG sector

On 26 January 2023, the UK’s Competition and Markets Authority (the “CMA“) announced that it intends to investigate the accuracy of environmental claims made by businesses in the fast-moving consumer goods (“FMCG”) sector. The CMA has stated that it will examine claims made both online and in-store about household products – such as food and drink, cleaning, homecare and self-care products – to determine whether they comply with UK consumer protection law.

The investigation of goods in the FMCG sector will expand the scope of the CMA’s ongoing anti-greenwashing work, which has the ultimate aim of ensuring products and services that claim to be ‘green’ or ‘eco-friendly’ are being marketed to consumers accurately.

Background – the CMA’s fight against greenwashing

As discussed in our earlier blog post, in September 2021, the CMA published a Green Claims Code to provide guidance for businesses on making environmental claims when advertising goods and services in the UK. Alongside the publication of its Green Claims Code, the CMA announced that it would carry out a full review of environmental claims made by certain businesses in early 2022, with a view to commencing enforcement action against businesses with regard to claims that do not comply with UK consumer protection law. Following this review, in July 2022, the CMA launched formal investigations into a number of well-known fashion brands for making environmental claims that potentially breached UK consumer protection law.

The CMA’s publication of the Green Claims Code and the launch of these formal investigations reflect the fact that the CMA have listed recognising “the vital importance of the UK’s commitment to net zero” and ensuring “business practices do not impede the successful transition to a low carbon economy” as strategic priorities in its Annual Plan 2022/23 (for further information on the CMA’s wider climate change strategy, please read our earlier blog post here).

The CMA’s FMCG investigation

According to the CMA, a significant number of household products in the FMCG sector are marketed as environmentally-friendly, including 91% of all dishwashing items and 100% of toilet products. The CMA is, however, concerned that consumers are being misled into paying a premium for these purportedly environmentally-friendly products. In particular, the CMA has stated that it is concerned about:

1. the use of vague or broad environmental claims (such as ‘better for the environment’ and/or ‘sustainable’) with insufficient evidence to support such claims;
2. misleading claims about the use of recycled materials to create products and how recyclable those products actually are; and
3. entire product ranges being incorrectly branded as ‘sustainable’ and/or ‘natural’.

In light of these concerns, the CMA will now review claims made by businesses in respect of a range of FMCG products to assess whether they comply with the Green Claims Code and the underlying consumer protection laws, such as the Consumer Protection from Unfair Trading Regulations 2008. Following this review, the CMA may well decide to open formal investigations into claims made by specific businesses, as it did in respect of the fashion claims mentioned above. If the CMA find that businesses are not complying with the Green Claims Code when making environmental claims, the CMA could then take enforcement action. As well as the significant reputational harm that could be suffered, any enforcement action could have significant financial consequences for businesses, particularly given that the CMA will have the ability to fine businesses up to 10% of their global turnover for consumer law infringement under the UK Government’s proposed reforms to the CMA’s enforcement powers, which are expected to enter into force in late 2023.

Mitigating the risk of regulatory action

Although the CMA has thus far only targeted the fashion and FMCG sectors, it intends to continue a wider review of environmental claims made by businesses in other sectors. All businesses that make environmental claims in the UK are, therefore, at risk of facing regulatory action for infringing UK consumer protection law. To reduce the risk of facing such action, businesses should consider the Green Claims Code’s six core principles when making environmental claims:

• Be truthful and accurate: claims must not mislead consumers by giving them an inaccurate impression, even if the claims are factually correct. Claims must only give an impression that goods or services are as green and sustainable as they really are;

• Be clear and unambiguous: claims should be worded in a straightforward and transparent manner, which is not liable to confuse consumers or give the impression that goods or services are better for the environment than they are;

• Not omit or hide important information: consumers must be provided with the information they need to make informed choices, since omitting or hiding information can inappropriately influence consumer decisions;

• Only make fair and meaningful comparisons: comparisons should be based on clear, up-to-date and objective information, and should not benefit one product or brand to the detriment of another if the comparison is inaccurate or false;

• Consider the full life cycle of the product or service: all aspects of a product’s or service’s environmental impact over its lifecycle may be relevant to the accuracy of a claim including, for example, the manufacture and transport of a product; and

• Be substantiated: claims must be capable of being tested against scientific or other evidence.

Although not legally binding, the CMA has previously stated that it will consider non-compliance with these principles as potential evidence of UK consumer protection law infringement which, in turn, increases the potential exposures faced by businesses.

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