Just Seen to be Green? CMA Launches Investigation Into Three Fashion Companies

The trend of regulators cracking down on misleading green claims or the so-called “greenwashing” continues this week. In the latest development, on Friday 29 July 2022, the British competition watchdog, the Competition and Markets Authority (CMA), launched an investigation into the eco-friendly claims of retailers Asos, Boohoo, and Asda.

CMA and the Fashion Industry
The fast fashion industry has long struggled with environmental issues, given the inherent cyclical nature of their supply chain and products. It is therefore not a surprise that the fashion industry has been a particular area of focus for the CMA, where eco-claims are now ‘in fashion’ but some query whether these are just to further drive unnecessary consumption and lack substance. In this context, on 10 January 2022, the CMA launched its first ever review of environmental claims in the fashion industry.

The CMA will be examining a few different issues in its investigation, but most importantly, it will consider whether:

  1. the statements and language used are too broad and vague;
  2. the criteria used to determine eco-friendly claims are too low; and
  3. that statements made by the companies about their fabric accreditation schemes and standards are misleading.

If the CMA concludes that the brands are in breach of consumer law, the brands are at risk of receiving fines (which can be substantial) or undertakings to rectify the complaints.

Regulator Activism
In the UK, both the CMA and the Advertising Standards Authority (ASA) have been considering misleading environment claims for some time.

The ASA has been upholding an increasing number of complaints against companies making misleading green claims on a range of topics and industries, such as a recycling campaign (see here), emissions claims (see here), general eco-friendly claims (see here) and food claims (see here).

Is There Any Guidance?
Both regulators have recently published guidance on environmental claims. The ASA recently published advertising guidance to consolidate its position on misleading environmental claims and social responsibility (see here), and there is a lot of helpful guidance on the ASA website (see here). On 20 September 2021, the CMA has published its final guidance for businesses to help them understand and comply with their existing obligations under consumer law, which is called the Green Claims Code (see here).

And It’s Not Just the UK
Greenwashing is an ever-growing concern for both national regulatory bodies and end-customers and it is not only limited to the fashion industry in the UK.

At the end of 2021, two significant greenwashing lawsuits were brought against companies in the cosmetics industry, and the U.S. Securities and Exchange Commission (SEC) made it clear that they had a goal of pursuing companies engaging in greenwashing. Additionally, in the U.S., end-consumers are starting to take action, as seen in the proposed class action complaint filed in a New York federal court last week (see here).

In Germany, a bank was raided by prosecutors for allegations of greenwashing their investment claims (see here), and in France the government has introduced legislation through which companies found to be greenwashing could be fined up to 80% of the cost of the false promotional campaign.

It is becoming more and more apparent that companies should not only create Environmental, Social, and Governance (ESG) statements, but also that these statements need to be carefully examined to ensure that they genuinely comply with regulatory requirements. ESG statements must be ongoing and constant to keep up with the fast-paced evolution of corporate governance and pay particular attention to potential allegations of greenwashing.

Sarah Cardell, the interim CMA chief executive, has ominously warned the fashion industry that this is “just the start” of further investigations. Fashion brands should take notice of this investigation and consider whether their eco-standards are at risk of falling afoul of consumer protection law.

By Arthur Artinian, Georgina Rigg and Ryan Mullen

Copyright © 2024, K&L Gates LLP. All Rights Reserved.