CMA cautions fashion retailers on greenwashing risks and accepts undertakings from ASOS, Boohoo and Asda

On 27 March 2024 the UK Competition and Markets Authority (CMA) published an "open letter" to all businesses in the fashion retail sector highlighting the need to consider obligations under consumer protection law when making environmental claims. The letter draws attention to the CMA's "Green Claims Code" guidance (published in September 2021, see our previous blog post here) and emphasises that promoting environmental sustainability remains a priority for the CMA.

At the same time, the CMA announced that it has agreed formal undertakings with fashion retailers ASOS, Boohoo and Asda to change the way they display, describe and promote their "green" credentials when marketing their products to consumers. This brings to a close the CMA's investigation into environmental claims made by these retailers, without any finding of infringement of consumer law. The investigation was originally launched by the CMA in July 2022 following a more general review of such claims in the fashion retail sector as part of its ongoing wider investigation into potentially misleading environmental claims in various sectors (see our previous blog post here).

The CMA has also stated that it plans to build further on its Green Claims Code to include additional information that will be tailored to the fashion sector.

The CMA's open letter to businesses in the fashion retail sector

Formal investigation of green claims made by fashion retailers has so far been limited to the investigation launched into claims made by ASOS, Boohoo and Asda. However, it is clear that the CMA is concerned about protecting consumers from misleading environmental claims in the fashion retail sector more generally.

The open letter issued to all businesses in the sector reiterates that the CMA wants to give businesses the confidence to make accurate and truthful environmental claims that reflect investment in the environmental performance of their products and services, whilst also protecting consumers from misleading claims and businesses from unfair competition.

The letter emphasises the importance of putting in place robust internal compliance processes to ensure that any environmental claims comply with consumer protection law. It reminds businesses of the six key principles that environmental claims must comply with, namely that they:

• are truthful and accurate;
• are clear and unambiguous;
• do not omit or hide important information;
• compare goods or services in a fair and meaningful way;
• consider the full life cycle of the product or service; and
• are substantiated.

The CMA makes clear that it will continue to monitor green claims being made in the fashion retail sector – alongside other sectors – and will consider any intelligence (whether by way of a complaint or otherwise) that businesses may not be complying with consumer protection law, with a view to taking possible enforcement action where appropriate.

It also reminds businesses that the Digital Markets, Competition and Consumers Bill (expected to receive Royal Assent in April, see our previous blog post here) envisages the introduction of significant fines for breach of certain consumer protection legislation, including in respect of misleading green claims (up to 10% of a business' worldwide turnover).

Key features of the formal undertakings agreed with ASOS, Boohoo and Asda

The undertakings secured by the CMA from ASOS, Boohoo and Asda commit those retailers to making what the CMA describes as "landmark changes" to their approach to making environmental claims, which should be considered as a "benchmark" for how fashion retailers should be marketing their products.

The detail of the undertakings signed by each company is tailored to fits its individual business model, but the key features are the same for all three retailers.  In particular, the agreed set of rules covers:

• Accuracy of green claims: Any green claims made by the retailers must be accurate and not misleading. Key information must be expressed in plain language, easy to read and clearly visible to shoppers.
• Statements about fabrics/materials used in environmental collections/green ranges: Statements about materials must be specific and clear (e.g. "organic" or "recycled", which can only be used if the product meets certain criteria), rather than using vague terms such as "eco", "responsible" or "sustainable" without any further explanation. Clear criteria must be applied to decide which products are included in such environmental collections.
• Appropriate use of "natural" imagery/logos: The retailers must not use "natural" imagery (such as green leaves) or logos or icons which suggest that a product is more environmentally friendly than it actually is.
• Claims about environmental targets: Any such claims must be supported by a clear and verifiable strategy. Customers must also be able to access further details about the strategy, including what the target is aiming to achieve, the date by which it is expected to be met, and how the company in question will seek to achieve the target.
• Accreditation schemes and standards: Any statements about accreditation schemes and standards must not be misleading, and the companies must make clear whether an accreditation applies only to particular products or to the company's wider activities.

These undertakings are legally binding. All three companies are required to provide regular reports to the CMA setting out how they are complying with their obligations and taking steps to improve their internal processes.