The UK’s new consumer law strengthens powers to act on false green marketing – Inside track

This post is by Sophie Tuson, environment and climate change lead at the international law firm RPC.

At the start of April, a new era for consumer regulation began. Important sections of the UK’s new Digital Markets, Competition and Consumers Act 2024 (DMCC Act) came into force, giving the UK’s consumer watchdog, the Competition and Markets Authority (CMA), significant new enforcement powers.

But what does this mean for green claims? Over the last five years, there has been a steep increase in the CMA’s scrutiny of businesses’ green advertising and marketing claims. This is likely to be a continued area of focus under its new enforcement regime. The changes introduced by the DMCC Act will make it easier for UK consumer regulators, like the CMA, to take action against businesses for alleged ‘greenwashing’. These new enforcement powers, including the ability to fine companies up to ten per cent of their global turnover, are likely to embolden the CMA.

Consumer law has been revamped
The DMCC Act revokes and then restates (with some major changes) the provisions of the Consumer Protection from Unfair Trading Regulations 2008 which have governed green claims since 2008. This gives the CMA greater scope and flexibility to act in relation to consumer law breaches, including greenwashing, which is deemed to be an “unfair commercial practice”, and therefore unlawful.

Specifically, the following two changes apply to green claims:

1. Broadening consumer law concepts
The DMCC Act broadens definitions. For example, ‘commercial practices’ now extend to statements (including green claims) made about another company’s products. This might apply to the claims retailers make about third party branded products they stock. The CMA has separately indicated in guidance that all businesses in a supply chain are potentially liable for misleading green claims and that they must have robust processes in place to ensure suppliers can back up the claims they make.

2. Changing legal tests
The act lowers certain legal tests to make it easier for the CMA to act. For example, where a business provides product and price information to a consumer (eg via advertising) to help them decide whether to buy a product, it will now be automatically unlawful to omit material information and the CMA will no longer need to show that the omission is likely to impact the transactional decisions of average consumers. This could apply where the omission relates to material information about the product’s environmental impact.

Look out for a tougher enforcement regime
Under the DMCC Act, the CMA will now be able to directly enforce UK consumer protection law, meaning it can decide whether consumer law has been breached and issue penalties accordingly, without having to go through the courts.

In terms of penalties, the CMA’s sharpest ‘teeth’ are its new power to issue significant fines of up to £300,000 or ten per cent of global annual turnover (if higher) for the most serious breaches. Any such fines will be based on the company’s turnover, the seriousness of the breach, the level of culpability and the harm caused. Fines can be appealed in the courts meaning we’re likely to see greater litigation in this space. The CMA has published helpful guidance on its approach to using the new enforcement powers.

The CMA’s new powers may prove to be a meaningful deterrent for businesses who repeatedly breach consumer protection law (including intentional greenwashing) but which have, to date, managed to avoid sanctions because of the lengthy processes involved in investigating and taking court action where necessary. Equally, for the many businesses genuinely investing in sustainability, the new powers may help ‘level the playing field’ by protecting them from unfair competition by businesses who overstate their green credentials to gain advantage.

Greenwashing is likely to be a higher CMA priority
The CMA will publish its list of enforcement priorities for the first 12 months of the new regime. Reading between the lines, it’s likely to prioritise tackling greenwashing. Addressing misleading green claims has been part of the CMA’s annual plan every year since 2020. It has indicated that early enforcement action will focus on addressing “behaviour where the CMA has already put down a clear marker through its previous enforcement work”.

Early test cases and the launch of new green claims investigations are very likely once the new powers kick in and the CMA has issued repeated warnings about this over the past year.

However, it has also stressed that it will initially focus on “egregious breaches”, in line with the ‘pro-growth’ mandate it’s been given by the government. This, combined with the more general global push for competitiveness, growth and deregulation, means the exact speed and direction of travel of action remains to be seen.