Fashion brands' green credentials are firmly under the CMA's spotlight for misleading consumers. At the moment, the CMA can do little to get the companies to improve – but that's about to change, says Fieldfisher partner Jessica Gardner.
Back in January 2022, the CMA announced its review of environmental claims in the fashion sector, looking at whether brands' environmental claims hold up. Eight months on, and activity is stepping up, with the launch of a formal investigation into leading 'fast' fashion brands, to scrutinise their sustainability claims and understand whether they're misleading consumers.
This is what's known as "greenwashing" – when environmental statements and language used to advertise certain products or services are too vague, with the effect that consumers are given the misleading impression that the products are more sustainable than they actually are.
For many consumers, the sustainability factor may be the reason they choose to buy one product over another, and so they need to be able to trust the information provided to them in order to make an informed choice.
The environmental criteria used to decide which clothing products are included in 'eco-friendly' collections are also being investigated, and whether those criteria are lower than consumers might reasonably expect.
If the CMA finds evidence of misleading consumer practices, its current toolkit enables it to compel the businesses in question to change their behaviour, either through voluntary undertakings or by obtaining an enforcement order in the High Court. What the CMA cannot currently do, however, is impose fines on the non-compliant business for breaches of consumer protection law.
This mismatch between the CMA's powers under consumer law vs. competition law (where it has much more punitive enforcement powers) is set to change under a new Competition and Consumer Bill, which is expected to be published in draft form this parliamentary year.
Under the new regime, the CMA will be able to impose a penalty of up to 10% of the global turnover of a business found to have breached consumer protection law, without going to court. It will also have the power to impose fines of up to 1% of global turnover for any failure to comply (even in part) with CMA information requests during investigations, including ongoing penalties of up to 5% of daily turnover for each day that the failure goes un-remedied.
In addition, the CMA will have the power to impose fines of up to 5% of global turnover on businesses that fail to comply with undertakings accepted by the CMA as settlement of an investigation.
The CMA's increased investigation and enforcement powers under competition and consumer law signify its commitment to future investigations. Businesses, whether consumer-facing or otherwise, should expect greater levels of scrutiny from the CMA and swifter and more direct intervention where it decides to investigate.
To prepare for the CMA's new powers and to protect your operations from unnecessary competition and consumer law risk, businesses should ensure they have a clear risk management process in place. To find out more about our recommended four-step approach to risk management, get in touch with any of our competition law experts.
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