Airing the laundry?: CMA targets fashion retailers in the UK over alleged greenwashing claims

The UK Competition and Markets Authority (“CMA”) had warned for the last couple of years that it had its sights set on misleading environmental claims or ‘greenwashing’ and had previously identified the fashion sector as a key area of focus.  Now it is set to follow through on these warnings, launching an investigation into three fast fashion retailers (including online platforms) over their ‘green claims’ (see CMA press release). 

Is this just the tip of the iceberg and what can other firms in the fashion sector and indeed other sectors expect from the CMA?

CMA’s Guidance on Green Claims

The CMA launched a call for information on misleading green claims in November 2020, in order to better understand how consumer protection legislation, which falls within the remit of the CMA, can be used to tackle false or misleading environmental claims that affect consumers, and contribute to its commitment to support the UK government’s move towards a low carbon economy.

On this basis, the CMA launched draft consumer protection law guidance for all businesses making environmental claims in May 2021 and, following receipt of responses from close to one hundred companies, industry bodies and other interested parties, published its final guidance on green claims, the ‘Green Claims Code’, in September 2021. 

The Code focuses on six principles which are based on existing consumer law and require that claims must:

• be truthful and accurate;
• be clear and unambiguous;
• not omit or hide important relevant information;
• consider the full life cycle of the product or service; and
• be substantiated.

The sixth principle is that if comparisons are made, these must be fair and meaningful.

The CMA warned that, if it found evidence that some businesses were making misleading claims or omissions about how environmentally friendly their products or services are, it could take enforcement action against them under consumer law, and that it would be carrying out a full review of misleading green claims in early 2022. It also indicated that it would prioritise which sectors to review, including “industries where consumers appear most concerned about misleading claims – textiles and fashion, travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products).”

The Advertising Standards Agency (“ASA”) has also published guidance on misleading environmental claims and provided practical examples of claims in ads that may be problematic, including references to ASA rulings where complaints were upheld (see our previous blog post). The new ASA guidance is intended to be consistent with the CMA’s Green Claims Code. The ASA has also warned that it plans to take a stricter interpretation of the Code rules in relation to environmental ads and confirms that it will be shining a "brighter regulatory spotlight" on environmental ads going forward.

Fashion in the spotlight

In January this year, the CMA turned its focus to the fashion sector, in which consumers spend an estimated £54 billion annually, and its initial review had identified concerns around potentially misleading green claims (see our previous blog post).

Now the CMA has announced that it will be scrutinising eco-friendly and sustainability claims made by ASOS, Boohoo and George at Asda about their fashion products. 

The CMA’s investigation will examine its concerns, which it says include, among other things, whether:

• statements and language used by the retailers are too broad and vague, and may create the impression that clothing collections (such as the ‘Responsible edit’ from ASOS, Boohoo’s current ‘Ready for the Future’ range, and ‘George for Good’) are more environmentally sustainable than they actually are;
• the criteria used by some of the companies to decide which products to include in the collections may be lower than customers might reasonably expect from their descriptions and overall presentation (for example, some products may contain as little as 20% recycled fabric);
• some items have been included in the collections when they do not meet the criteria;
• there is a lack of information provided to customers about products included in any of the companies’ eco ranges, such as missing information about what the fabric is made from; and
• any statements made by the companies about fabric accreditation schemes and standards are potentially misleading, such as a lack of clarity as to whether the accreditation applies to particular products or to the firm’s wider practices.

The CMA will now gather evidence from the firms and progress its investigation. While it does not currently have administrative fining powers under consumer protection law, possible outcomes under the CMA’s existing consumer powers include securing undertakings from the companies to change the way they operate, taking the firms to court, or closing the case without further action. The CMA has exercised its consumer powers extensively in recent years: addressing concerns in relation to leasehold properties, care homes and online console video gaming but this is the first greenwashing investigation commenced by the CMA.

Further, if the UK government’s proposed wide-ranging reforms to the consumer protection regime are implemented, the CMA will have stronger powers to enforce consumer law itself in future – so companies should watch this space!

What next?

The CMA has stated that its wider investigation into fashion sector will continue, as it considers whether to put additional firms under the green microscope. Therefore, other firms in the fashion sector may still be targeted by the CMA.

In addition, the CMA will likely turn its attention to other sectors, including those it has previously specifically called out such as FMCG and travel/transport, but also any others where consumers or other interested parties might raise concerns. Given the increasing focus on sustainability and greenwashing by the UK government and society more broadly, this is likely just the beginning of enforcement in this area.