The Competition and Markets Authority (“CMA“) has published advice for the UK Government on changes that could be made to consumer and competition law to facilitate the UK achieving a “Net Zero” economy by 2050. Whilst the regulator does not consider that current law represents a barrier to such sustainability goal, the CMA nonetheless recommends changes to consumer law that some may consider radical.
The CMA’s view comes against a background of commitment to sustainability from the UK regulator, including the publication of the Green Claims Code (discussed here) and its ongoing investigation into greenwashing in the fashion retail industry (discussed here).
The Secretary of State for Business, Energy and Industrial Strategy requested the advice in July 2021, asking for the CMA’s view on restrictions presented by current legal frameworks, recommended changes, and any other opportunities the government should be considering. The CMA consulted on the Secretary of State’s request, and has now published its advice.
At first blush, competition law and environmental goals appear to be two mutually exclusive mechanisms. Competition law necessitates a level playing field where organisations can compete against each other, ensuring innovation and improvements for customers (which can often include reduced prices). In contrast, the pursuance of environmental goals may require competitors to cooperate to find environmental efficiencies (perhaps by pooling resources), and can also result in price increases to consumers.
However, the CMA advises – broadly – that the current consumer and competition law framework does not create barriers to environmental goals. Nonetheless, it feels that clarity for the application of competition law in an “environmental sustainability context” is required.
The CMA found organisations needed certainty on the circumstances where sustainability agreements did not restrict competition. In particular, the Competition Act 1998’s exemption criterion that requires consumers to receive a “fair share of the resulting benefit“ of an agreement could benefit from clarification as to the quantification/qualification of consumers.
The CMA highlights its intention to provide guidance to assist, which, alongside the flexibility of the current framework, should address stakeholders’ concerns. However, if the government wished to be “more explicit about how environmental benefits can or should be taken into account” the CMA suggests it could amend existing law. It further suggests that if there were “exceptional and compelling reasons of public policy” to do so, the government could consider using exclusion orders.
The CMA does not recommend any “immediate significant changes” to the law. However, it advises various possible amendments to clarify consumer legislation, such as to the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs“) and the Business Protection from Misleading Marketing Regulations 2008 (“BPRs”). These changes could help ensure consumers are properly informed on the sustainability of their purchases.
Currently, misleading commercial practices (such as publishing misleading environmental statements), are analysed by considering two tests under the CPRs. Firstly, whether the practice is misleading; and secondly, if it would cause the “average consumer” to make a different decision (for example, purchase a different product). The CMA highlights that these two tests are “unnecessary and unhelpful” and could be removed when considering environmental claims. Therefore, it suggests adding the use of misleading and unsubstantiated green claims to the list of banned practices (either all claims or perhaps only specified claims that are “particularly confusing“) and/or implementing a new law that prohibited such claims.
The CMA also recommends the introduction of standardised definitions for environmental terms (for example, “recyclable“, “compostable“, “biodegradable“) that organisations should correctly adopt when marketing their products. It also suggests an express obligation for organisations to disclose certain specified environmental information.
When considering suppliers, the CMA notes there is no requirement for them to publish the environmental impact of their supply chains. Therefore, the CMA recommends improving supply chain transparency by, for example, requiring suppliers to disclose evidence to their customers that substantiated any environmental claims made.
Finally, the CMA recommends that the government strengthen the CMA’s enforcement powers. This was recently consulted on by the government (and discussed in our earlier blog). This could include additional remedies for breaches of consumer protection laws that also harmed environmental objectives – for example, selling products that become prematurely obsolete.
Other Suggestions and CMA Actions
In its advice, the CMA also sets out future suggestions that it does not currently recommend, however may be pertinent down the line. These include, for example, broadening the “right to repair“, expressly prohibiting premature obsolescence, and educating consumers on “sustainable consumption“.
The CMA recommends that more market inquiries and consumer investigations would facilitate environmental goals. It also sets itself “immediate actions” to help contribute. These include the launch of a “Sustainability Taskforce” within the CMA that would be tasked with addressing sustainability issues including through developing guidance and interacting with stakeholders.
It is clear that achieving environmental objectives remains on the government and regulators’ agenda, and this may result in legislative changes to both competition and consumer law. Some may consider the removal of an ‘economic impact’ requirement for breach of consumer law to be a step too far. In particular such changes to laws controlling ‘greenwashing’ can be considered radical if failure to comply will be a criminal offence. Nonetheless, without a private right to enforce consumer law as seen in many EU countries, like Germany, for example, power to enforce will remain with regulators, to the disappointment of environmental campaigners.
Oranisations are well advised to consider their current practices under the light of environmental sustainability, whilst keeping an ear to the ground for any regulatory and legal change, to ensure ongoing compliance.