What protection is offered to consumers when businesses are guilty of ‘greenwashing’? - Scott Rodger

The ethical consumer market in the UK has increased four-fold since 1999, and is now conservatively estimated at over £40 billion per annum. Consumers are actively changing their behaviours in favour of more sustainable and ethical choices.

Scott Rodger is a solicitor in Shepherd and Wedderburn’s regulation and markets team.

This brings opportunities for businesses to create or adapt their offerings to appeal to ethical consumers. However, there is scope for consumer detriment, with the potential for companies to make spurious environmental or ethical claims, so-called ‘greenwashing’. What protections are in place to ensure businesses are not misleading customers who want to make eco-conscious decisions?

Expectations regarding the role of the Competition and Markets Authority (CMA), the UK’s competition regulator, in protecting consumers, including from spurious environmental claims, have been rising for some time. The CMA has responded by expanding its ‘core’ functions regarding competition law enforcement, emphasising its work in relation to ‘greenwashing’, and ramping up its research and enforcement efforts.

Regulation and consumers in the green economy

The CMA and sector regulators are becoming increasingly alert to consumer protection in relation to green issues. The CMA has undertaken research to inform its ongoing work into misleading ‘eco-friendly’ claims, with initial findings suggesting that up to 40 per cent of ‘green’ claims on firms’ websites could be misleading.

In the energy sector, regulator Ofgem intends to undertake work to ensure consumers are not misled by overinflated claims regarding ‘green energy’ tariffs, while the UK Government has made transparency a key pillar of its strategy for the wider reform of energy tariffs, as part of its proposals under the Energy White Paper.

As part of the CMA’s overall work on misleading environmental claims, in May it published draft consumer protection law guidance on the subject. This sets out six principles designed to give businesses greater clarity on how it thinks the law translates into practice around environmental claims. The CMA intends to publish its final guidance in September 2021.

Separately, the CMA is also conducting a study into the development of the market for electric vehicle charging infrastructure. While stopping short of further investigating the market under its competition law powers, we expect the CMA to publish some specific remedies for the market in the summer.

Many of these initiatives point to the CMA’s strategic objective of giving green issues a higher priority. So, what might the future hold?

Is the CMA a green champion for ethical consumers?

At first glance, the CMA does not come across as a natural ‘eco champion’ for the UK consumer. However, its recent activity shows it is more than willing to take an active look into consumer issues stemming from sustainability activities of businesses, and the trend towards the ‘greening’ of the economy.

How does its current regulatory toolkit tackle this? The CMA’s ‘big hitting’ competition law enforcement powers focus on just that – competition law concerns. Although the ultimate objective of this enforcement is to protect consumers, the CMA’s civil consumer law powers are weak by comparison. For example, to bring a case under consumer law, the CMA must go through the civil courts. This is in contrast to its investigatory and enforcement powers under the Competition Act and Enterprise Act, which are extensive.

This seems increasingly at odds with the expectations many have placed at the CMA’s doorstep around consumer protection and the growing number of consumer-focused initiatives that go beyond the traditional scope of its competition law enforcement role. This includes both its work on environmental issues and on securing assurances from companies in online advertising, court action in relation to the care homes sector, and warnings to companies on customer refunds in the package holiday market. We also await the commencement in law of the CMA’s new Digital Markets Unit– another string to the CMA’s bow.

There have long been calls to formally strengthen the CMA’s consumer powers in successive reports (see Lord Tyrie’s proposals and the Penrose Report). This seems to be the direction of travel. It is hoped we are on the cusp of a transformation in the way consumer protection is enforced in the UK, not only in relation to green and environmental issues but also beyond.

Scott Rodger is a solicitor in Shepherd and Wedderburn’s regulation and markets team.