Truly Green or the Emperor’s New Clothes? – UK CMA targets fast fashion first in its investigation of sustainability claims | Morrison & Foerster LLP | Fashion

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On July 29, 2022, the UK Competition and Markets Authority (CMA) launched an investigation into three fashion companies for potentially misleading environmental and sustainability claims made on their products. This action, against ASOS, Boohoo and George @ Asda, is the first major step the UK watchdog is taking against individual companies, as part of its wider investigation into ‘greenwashing’, the practice of using inaccurate or the exaggeration when qualifying something as sustainable. , ecological or respectful with the environment. The CMA follows a growing trend of international authorities showing a willingness to investigate and prosecute entities that fail to substantiate their green claims, most recently evidenced by the UK Advertising Standards Authority’s action to ban ads containing green claims. unproven environmental claims and, in particular, the U.S. Securities and Exchange Commission $1.5 million fine from the Exchange Commission imposed on BNY Mellon in May 2022 for misstatements about its environmental, social and governance investment considerations (IS G).

In September 2021, the CMA published guidance for companies on how to meet their existing obligations under consumer protection laws when making environmental claims about their products. As part of this guidance, the CMA warned that, from early 2022, it would conduct a full review of misleading green claims, starting with targeting certain industries. Sure enough, in January 2022, the CMA announced that the fashion retail sector would be the first industry subject to a detailed review of its environmental claims. In selecting this sector, the CMA recognized the impact of fashion on carbon emissions (representing between 2% and 8% of all global carbon emissions), the greater desire of consumers to choose more sustainable options since the environmental point of view when purchasing clothing and related products. growth of environmental claims promoted by fashion companies.

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The Fashion Concerns of the CMA

In announcing its action against ASOS, Boohoo and George @ Asda, the CMA is particularly concerned that these companies may have:

(i) Used overly broad and vague statements to suggest that their products are more sustainable than they are (including, for example, product lines called ‘Responsible Publishing’, ‘Ready for the Future’ and ‘George for Good’);

(ii) Establish criteria for inclusion in these ‘sustainable’ product lines that are lower than what customers might reasonably expect;

(iii) They did not accurately apply these criteria to their products;

(iv) Failure to provide material information about the products included in its product lines; Y

(v) It was unclear whether references to environmental standards or accreditation schemes apply to specific products or to broader company practices.

The CMA’s actions are based on the UK consumer protection rules contained in the Consumer Protection Against Unfair Trading Regulations 2008 (CPUT)[1]. These rules prohibit unfair or aggressive business practices and deceptive actions or omissions. Generally speaking, the rules require a company to ensure that its claims (including those related to the environment):

(i) are true and accurate;

(ii) are clear and unambiguous;

(iii) Do not omit or hide important details;

(iv) Compare goods or services fairly and meaningfully;

(v) consider the complete life cycle of the product or service; Y

(vi) Are substantiated.

Penalties for breaches of consumer rules include fines and imprisonment, and the CMA in its announcement of its recent investigation confirmed that if breaches are found, it “will not hesitate to take enforcement action, through the courts if necessary”.

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Future Regulatory Actions and Potential Consumer Complaints

Although the CMA’s announcement shows that it is currently focusing on the fashion industry, this is only the beginning and the CMA has made it clear that it intends to act in all sectors where it has significant concerns. Consequently, the focus of the CMA is sure to expand and companies in all sectors need to carefully consider their own practices to ensure that they comply with the law and can substantiate any environmental claims made about their products or services. In addition, companies should not only be concerned about actions taken by law enforcement authorities, as non-compliant companies may face direct customer complaints for misleading actions, especially effective given the increasing availability of class actions. of consumers within the EU (and the possible introduction of ‘opt-out’ group claims in the UK for breaches of consumer law).

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