The three retail giants have entered into agreements published by the UK Consumers and Markets Authority (CMA) on 27 March 2024, following which the CMA says that millions of consumers can now expect to see accurate and clear green claims when shopping for fashion items at the retailers.
The action brings an end to the CMA’s investigation, originally launched in July 2022, into the three retailers, without a finding of infringement of consumer law.
The CMA has on the same date published an open letter to all businesses in the fashion retail sector, emphasising that they must consider their obligations under consumer protection law when making environmental claims. In particular they should pay heed to the six key principles set out in the CMA’s Green Claims Code.
The open letter makes clear that businesses should familiarise themselves with the code and with the commitments in the undertakings provided by the retailers, and take steps to ensure that environmental claims made are compliant.
The CMA has also stated that it intends to publish further sector specific guidance.
The CMA is an independent non-ministerial department with regulatory powers, tasked with promoting competitive markers, tackling unfair behaviour and resolving market failure. It has power to enforce consumer protection laws including general legal rules which prohibit firms from, amongst other things, making misleading statements in their advertising and marketing materials, making false claims about their products, and making misleading omissions, which do, or are likely to cause an average consumer to enter a transaction which they would not otherwise make.
The six key principles which retailers need to comply with state that any environmental claims must:
Retailers are encouraged to put in place robust internal processes to ensure that these principles are complied with. Full details on how a business may comply with the key principles are set out in the CMA’s guidance on “Making environmental claims on goods and services”, which can be found at the link here: Making environmental claims on goods and services – GOV.UK (www.gov.uk)
The undertakings provided by the three retailers were given to the CMA in accordance with the CMA’s power to enforce consumer laws under Part 8 of the Enterprise Act 2002. In summary, this allows the CMA to accept an undertaking not to continue or repeat an act, or not to carry out an act in future which the CMA believes infringes consumer law and which harms the collective interests of consumers.
These undertakings are provided in lieu of the CMA taking more formal enforcement action. They are forward looking and do not represent an admission of wrongdoing.
While the undertakings are tailored to the individual businesses, the key features are broadly as follows:
Green claims: the retailers must ensure all green claims are accurate and not misleading. Key information must be clear and prominent.
All three retailers subject to the investigation must provide the CMA with reports on how they are complying with the commitments made.
Following the publication of the investigation and the undertakings, retailers and firms more generally should beware the enforcement powers of the CMA, and expect those powers to be used. The open letter to the fashion retail industry can be seen as a “fair warning” to retailers, stating that the CMA will “continue to consider any intelligence that businesses may not be complying with consumer protection law with a view to taking possible enforcement action where appropriate“.
Sarah Cardell, Chief Executive at the CMA has hailed the action taken by the CMA as a “turning point for the industry”, stating that “the commitments set a benchmark for how fashion retailers should be marketing their products, and we expect the sector as a whole – from high street to designer brands – to take note and review their own practices“.
The CMA has further stated in its open letter that it intends to publish further guidance for the fashion industry in due course, so retailers and manufacturers alike should watch this space with interest.
Businesses should further consider the Digital Markets, Competition and Consumers Bill, currently making its way through Parliament, which will give further powers to the CMA to enforce consumer protection laws, which is expected to come into force in Autumn 2024.
The CMA update on the outcome of its investigation, and its open letter to the fashion industry can be reviewed by following the links below.
