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On 14 March 2022 the CMA published its advice to the government on how the UK’s consumer and competition regime could work better to help the government achieve its Net Zero target by 2050.
The advice comes at the request of the government, with Kwasi Kwarteng writing to the CMA in July last year and asking a number of questions that touched upon how consumer and competition policy intersects with environmental and sustainability issues.
We already know that the CMA is focused on driving low carbon growth in the UK economy. At the back end of 2021 it published the Green Claims Code and it has been clear that in 2022 it plans to take enforcement action against businesses that mislead consumers with false, vague or unsubstantiated “green” claims. This has also come through in its competition enforcement, for example in relation to its Market Study (and subsequent CA98 investigation) in the electric vehicle charging sector.
The goal of developing fair competition in sustainable products and services is also at the heart of the CMA’s draft Annual Plan for 2022/23.
However, The CMA’s advice to the government goes further than this and proposes the establishment of a specialist Sustainability Taskforce within the CMA to oversee enforcement, technical knowhow and stakeholder engagement in this area. If the COVID-19 Taskforce is anything to go by, we can expect this to equate to more enforcement action, accompanied by frequent bursts of guidance to relevant sectors.
What else is the CMA proposing?
Other key points to note from the CMA’s announcement are as follows:
- The CMA has committed to launching at least one Market Study in a “Net Zero-relevant market” in the next financial year. We can only speculate what that market will be, but prime contenders are likely to be FMCG sectors. Given its propensity to commence formal enforcement action against individual companies upon the conclusion of Market Studies, retail and consumer goods business should take note of this development.
- The CMA also proposes a number of statutory amendments to the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) in order to clarify and strengthen the underlying legislation. This includes providing a statutory definition for commonly used environmental terms, such as biodegradable, compostable and carbon neutral. Amongst other things, the CMA is also considering adding misleading and unsubstantiated green claims to the list of banned practices under the CPRs, thereby making it easier to demonstrate a breach of consumer law.
- The CMA remains focused on boosting transparency in the supply chain so that businesses are better placed to undertake a full life-cycle assessment as to how green or sustainable their products really are. To this end the CMA is proposing amendments to the Business Protection from Misleading Advertising Regulations (BPRs) to introduce clearer regulatory offences for businesses that mislead their supply chain partners on ESG matters.
- Finally, the Sustainability Taskforce will provide clearer guidance on competition law compliance in relation to co-operation agreements between competitors that want to work together to reduce the impact on the environment.
What specific statutory amendments does the CMA propose?
Clearly at this stage the CMA’s legislative proposals at merely advisory and it is for the government to determine which, if any, are necessary. Expand the boxes below for summaries of the main statutory amendments the CMA considers may be appropriate at this stage:
The CMA has already set out its position in the Green Claims Code that the CPRs create an obligation to disclose certain “material” environmental information about products and services that could influence the transactional decision making of consumers. However, they are now proposing to go further and create an express positive statutory obligation to disclose environmental information.
It proposes to achieve this by amending the definitions of “material information” in the CPRs to confirm explicitly that environmental information must be provided to consumers, thereby putting beyond doubt the requirement to disclose such information in all circumstances.
The CMA also proposes to create statutory definitions of commonly used environmental terms, such as ‘biodegradable’, ‘compostable’ and ‘carbon neutral’. It says this would enable consumers to more easily compare products and stop unscrupulous businesses deliberately misusing these terms.
The CMA has emphasised the importance of considering the whole life cycle of the product when making green claims. However, there is currently no statutory obligation for businesses to assess or publish information on the environmental impact of their supply chains.
While the CMA does not propose going as far as making full supply chain transparency mandatory, it has proposed amendments to the BPRs in order to make it expressly clear that businesses are protected against misleading omissions of material environmental impact information by their suppliers. Suppliers would also be required to disclose any evidence which substantiates their environmental claims to their business customers (not just end consumers).
The CMA is concerned that the “average consumer” and “transactional decision” tests pose unnecessary and unhelpful legal requirements. It says that complete and accurate environmental claims are extremely important for enabling consumers to make sustainable choices, and in turn have a wide impact on sustainability and Net Zero goals.
It is therefore proposing to make it a standalone offence to make a misleading or unsubstantiated green claim – which would in turn make it easier for the CMA to evidence a breach of consumer law during an investigation. One way of achieving this would be to create a new “banned practice” under Schedule 1 of the CPRs or, alternatively, create freestanding legislation to prohibit misleading and unsubstantiated green claims.
The Government has already consulted recently on changes to the CMA’s enforcement framework, which includes the introduction of an administrative system (with the CMA itself deciding whether breaches of consumer law have occurred) and the imposition of civil financial penalties, potentially up to 10% of global turnover.
On top of this, the CMA is now recommending that the Government considers additional changes to the consumer protection remedies available for breaches of consumer protection law which harm the environment and hamper delivery of Net Zero and sustainability goals. One example would be requiring businesses to pay some form of redress to those who have been collectively harmed in environmental terms (not just economically) by the breach.
Producing products which are not “built to last” adds to waste and the CMA therefore wants to tackle planned or premature obsolescence as a means of progressing towards the goal of sustainable consumption. While producing lower quality or less resilient products at a lower price point is unlikely to become a regulatory issue, the CMA is concerned about businesses that knowingly reduce the lifespan of their products.
In order to tackles this issues the CMA proposes either expressly prohibiting planned premature obsolescence (again by adding it to the list of banned practices under Schedule 1 to the CPRs) or through freestanding legislation. It has also considered broadening of the ‘right to repair’ under the Ecodesign for Energy-Related Products and Energy Information Regulations 2021 to include other categories of product.
Date published
16 March 2022
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