UPDATED 24 May 2024 – the Digital Markets Bill was passed on 24 May as part of the “Wash-up” period following the announcement of the UK General Election 2024. It is expected to come into force by the autumn.
The UK regulator responsible for enforcing the Green Claims Code has recently been empowered with the ability to issue fines directly. When this comes into effect, it will be a major shift in the regulatory landscape. It’s important that businesses advertising and selling to UK consumers understand what the Digital Markets Bill means for green claims, and that they get prepared now.
With fines of up to 10% of global turnover on the table, businesses should be prioritising Green Claims Code compliance now.
The Digital Markets, Competition and Consumers Bill is currently (as of May 2024) at final stage amendments before receiving Royal Assent and becoming law. (Update: it has now been passed into law).
This new legislation is designed to create a regime to empower the Competition and Markets Authority (CMA) to regulate and increase competition in digital markets and address the far-reaching market power of a small number of tech firms.
However, while the focus of the Bill is on big tech, the new enforcement powers will have a significant impact in the world of sustainability too.
What the digital markets bill means for the green claims code
Released in 2021, the Green Claims Code is a piece of guidance designed to help businesses talk about their eco credentials and sustainability efforts under existing trading standards legislation.
It’s illegal to sell a product or service to a consumer using misleading claims or information, and the Green Claims Code is clear that a strong and quantifiable evidentiary basis is required to support green claims.
Currently, however, the CMA is restricted in terms of the penalties it can directly impose on companies which breach the Code.
There are no specific financial sanctions available, and the CMA has, to date, not had direct enforcement powers – so it would need to take a firm to court to enforce breach of consumer law.
The Digital Markets Bill will change this.
enforcing green claims code compliance
With new enforcement powers, the CMA will be able to fine businesses:
– up to £300,000, or 10% of a businesses’ annual turnover (whichever is higher), for breaching consumer laws
– up to 5% of a business’s annual global turnover, with an additional daily penalty of 5% of daily turnover during non-compliance, for failing to comply with a direction
Serious cases where a premium has been charged because of green claims may also be subject to the Proceeds of Crime Act, which could mean that all the money made as a result of unlawful labels and untrue claims may have to be surrendered.
There are already existing criminal penalties (punishable by fines or imprisonment of up to two years) for individuals found to have engaged in misleading commercial practices or engaged consumers in unfair contractual terms.
In its Draft Strategic Steer 2023, which informs how the CMA sets its priorities for the coming years, the government specifically directed the regulator to protect consumers from misleading environmental claims – so this is highly likely to be a priority area for the CMA when their new powers come into force.
So far this year we have already seen the regulator set out clearer guidance for the fashion industry, following an extensive investigation into greenwashing in the sector. It has also been undertaking a compliance review in the Fast Moving Consumer Goods (FMCG) sector too.
New enforcement powers are imminent, and it is clear that regulatory action on greenwashing in the UK is only just beginning. (the Financial Conduct Authority has also recently introduced measures aimed at reducing greenwashing in sustainable investment products).
All companies must take their eco responsibilities and the risk of enforcement seriously, and prioritise Green Claims Code compliance now.
Download your free Green Claims Code guide here.
This article has been prepared for general informational purposes only and is not intended as legal advice.
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