1. Introduction
Environmental sustainability is an issue of critical importance and considerable urgency. The discussions at last years UN Climate Change Conference (COP 26, held in Glasgow) underlined the scale of the challenge facing humanity, and the need for everybody to play their part.
Supporting the transition to low-carbon growth has been, and continues to be, a strategic priority for the CMA.[footnote 1] It has been the focus of a number of our projects in recent years, including:
Sustainability has been a major topic of discussion in international competition and consumer fora like the OECD, the International Competition Network (ICN), the International Consumer Protection and Enforcement Network (ICPEN) and UNCTAD. The CMA believes it is important to play an active part in this debate around the interplay between sustainability and competition and consumer regimes, and we aspire to be an international thought-leader in this area.
Consumer law and competition law can produce outcomes that have significant sustainability benefits. For example, consumer law helps consumers to make informed and confident decisions and can therefore help them to consume more sustainably where they choose to do so. Competition law helps to ensure that resources are efficiently allocated and used. Competition is also a key driver of the type of innovation that is required to ensure that the production of goods and service is more sustainable.
There may be instances where, even if consumers are well-informed and competition is functioning properly, a market will operate in a way that is less environmentally sustainable than might be required to support the transition to Net Zero. Where this is the case, regulation may be the best way to address this market failure. Even in such cases, it is critical that consumer and competition law does not present barriers to the proper functioning of the market.
The Government has been active in supporting the transition to Net Zero through a wide range of policies.[footnote 2] These policies will, over time, contribute to changing market dynamics and consumer behaviour across the UK, and shape the economy in which businesses and bodies like the CMA operate. During the preparation of this advice, we have sought to understand these initiatives and ensure that our advice is informed by the Governments overall strategic direction.
In this context, the CMA strongly welcomes the opportunity to provide advice to the Secretary of State for Business, Energy and Industrial Strategy (BEIS) on how the competition and consumer protection regimes can better support the UKs Net Zero and sustainability goals (including climate adaption).
Our advice to the Government is set out below in section 2, structured around the 3 questions posed by the Secretary of State in his letter of July 2021. Our advice is based on our previous work in this area, responses to a call for inputs (CFI) which we conducted in the Autumn of 2021[footnote 3] and further targeted stakeholder engagement. We have also drawn on the work of our fellow competition and consumer authorities, regulators, academics, and other international bodies.
This a fast-moving area and our thinking and advice must continue to develop too. In section 3, we set out a series of actions that the CMA will take, in light of the conclusions we have reached. We hope these will make a significant contribution to moving this agenda forward in the UK and internationally.
2. CMA advice to the Government
In this section we set out our responses to the 3 questions that were posed in the letter from the Secretary of State.[footnote 4] We also briefly summarise some of the issues raised in responses to our CFI that fall outside the immediate scope of the Secretary of States commission but may still be of interest to the Government. Our advice includes some recommendations for further action for the Government to consider, specifically:
- changes to consumer law to make it easier for consumers to make sustainable choices and to support effective enforcement against breaches of consumer law that may give rise to environmental harm
- encouraging greater consistency and coordination across sectors and regulatory regimes in the approach to tackling climate change
- identifying other ways of promoting more sustainable consumption
Question 1: If, and how, do current competition and consumer legal frameworks constrain or frustrate initiatives that might support the UKs Net Zero and sustainability goals?
We have not seen sufficient persuasive evidence from the responses to our CFI and in the course of our other relevant work to conclude that the current competition and consumer law frameworks are themselves an obstacle to sustainability initiatives such that fundamental changes to those frameworks are necessary.[footnote 5]
As we explain in the information document on environmental sustainability which we published for businesses see introduction section, many initiatives aimed at achieving sustainability goals can fully and lawfully take place under the current competition law framework. This is also the case under the mergers and markets regimes.
However, stakeholders have underlined the need for further clarity about how competition law will be applied in an environmental sustainability context.
Competition Act 1998 regime
In relation to the Chapter I prohibition in the Competition Act 1998 (CA98) – which prohibits agreements that prevent, restrict or distort competition – many stakeholders asked for detailed guidance on the circumstances in which sustainability agreements would not restrict competition. Stakeholders also asked for guidance on how sustainability benefits might be weighed against competition concerns in relation to cooperation between businesses, and in which circumstances parties might benefit from an exemption from the prohibition under section 9 CA98.[footnote 6]
Stakeholders emphasised that a lack of certainty about how competition law would apply to sustainability initiatives, including how the criteria of section 9 would apply to sustainability initiatives made it difficult to self-assess whether a given agreement would merit exemption. This lack of certainty could lead to a chilling effect inhibiting cooperation agreements that might improve environmental sustainability.
To address the concerns raised by stakeholders about a lack of clarity, the CMA intends to bring forward guidance to provide greater clarity and certainty. In particular, we will provide more guidance on;
- when sustainability agreements will not restrict competition
- the concept (and measurement) of benefits in section 9 in a sustainability context
- the issue of what constitutes a fair share of benefits for consumers
In order for an agreement to benefit from exemption under section 9, the CA98 requires (among other things) that consumers receive a fair share of the resulting benefits (the improvements or efficiencies generated by the agreement). There has been significant international debate on how to assess a fair share for consumers, particularly among European competition authorities with competition law frameworks similar to the UKs.
On one side of this debate are those who consider that this exemption criterion can in certain limited circumstances give preference to society-wide environmental benefits over the competition harm felt by the consumers affected by the agreement. Full compensation of these consumers would therefore not be necessary for the exemption to apply (the broad interpretation). They contend that, as a matter of policy, this broad interpretation is needed to avoid competition law being an impediment to important commercial arrangements that promote environmental goals.
On the other side of the debate are those who consider that the exemption criterion requires that the consumers harmed by the agreement are fully compensated for the harm suffered, without prioritising society-wide benefits (the narrow interpretation). They argue that, as a matter of policy, a broader interpretation risks opening the door to trading off other public policy goals against competition and leaving groups of consumers worse off in pursuit of those broader goals, which is not normally the role of unelected and politically independent competition authorities.
Our view is that, if a particular agreement or practice restricting competition leads to environmental benefits to a broader group of consumers than just those adversely affected by the restriction of competition, such benefits, in principle, can be taken into account in the fair share assessment under section 9 CA98. This is because the harmed consumers are also part of the broader group of consumers that receive the environmental benefits. However, based on existing case law,[footnote 7] a share of those benefits must accrue to those consumers who suffer from the restriction of competition,[footnote 8] and those consumers must also be fully compensated for the detriment they suffer. This suggests that the fair share assessment would not, in principle, permit a situation where benefits to 1 group of consumers are offset against net harm to an entirely different group of consumers (without sufficient benefit accruing to the harmed consumers). Notwithstanding this limitation under the existing case law, the CMA considers that the current framework gives scope to take into account environmental benefits as part of the assessment under section 9 CA98. Existing precedents show that the fair share criterion has been applied flexibly in practice in light of specific circumstances of each case.[footnote 9] Moreover, this is an area where the case law may evolve further in the future, including in light of the scope for the CMA and courts to depart from EU precedent[footnote 10] in certain circumstances under section 60A CA98, which potentially provides additional flexibility.[footnote 11]
Overall, we think that there is some flexibility under the current legal framework to accommodate environmental benefits brought about by agreements that restrict competition. This flexibility, assisted to a material extent by guidance on the application of section 9 CA98, should address the concerns expressed by stakeholders. We note that this guidance cannot provide complete certainty for all scenarios and particularly outside the public enforcement context (in private litigation). If the Government considers it appropriate to be more explicit about how environmental benefits can or should be taken into account, it could amend the existing legal framework. We note that such an approach has been taken in Austria.[footnote 12] Additionally, if there are situations where the flexibility proves insufficient and there are exceptional and compelling reasons of public policy to do so, it remains open to the Government to consider instead the use of exclusion orders.
Mergers and markets regime
Some stakeholders also asked for more guidance on the weighing exercise that the CMA can conduct under the mergers and markets regimes. In both regimes the CMA can weigh relevant customer benefits (RCBs) against competition concerns (and also, in the merger regime, can factor in rivalry-enhancing efficiencies). While stakeholders welcomed the guidance already provided in recent updates to the Merger Assessment Guidelines, they suggested that more guidance could be helpful to give businesses certainty to pursue opportunities and projects. We plan to continue to engage with stakeholders to consider what practical guidance we can usefully provide.
Consumer regime
We have not seen evidence from our CFI or other work of the consumer law enforcement framework itself acting as an obstacle to sustainability initiatives. We believe that much can be done within the current regime, including, for example, tackling misleading environmental claims and the mis-selling of home energy efficiency products and services.
Again, however, stakeholders responding to our CFI explained that there was a need for greater clarity in some areas to enhance the existing framework. Drawing on this feedback and on our wider work on misleading green claims see above we have identified possible legislative proposals and further policy actions. We have set our thinking in these areas in the response to Question 2 below.
Question 2: Are there changes to the UKs competition and consumer law that would help to achieve the UKs Net Zero and sustainability goals?
We do not see the need for immediate significant changes to the competition and consumer legal frameworks at this stage to remove obstacles to achieving the UKs Net Zero and sustainability goals (since, as mentioned above, we have not identified compelling evidence of any such obstacles).
However, this question invited us to consider changes that could help to achieve these goals which we have interpreted to include not just the removal of obstacles but also, proactive changes to enhance the existing framework.
Consumer regime
We do consider that some amendments to consumer law could clarify the existing framework to enhance its ability to support the UKs Net Zero and sustainability goals. In particular, respondents to our CFI explained that there was a need for more clarity or standardisation in some areas, which could be addressed or reinforced through legislative changes.
The key changes which we believe would be beneficial and that the Government might wish to consider are as follows:
- legislating to create standardised definitions of commonly-used environmental terms, to which businesses must adhere in marketing and labelling their products[footnote 13]
- confirming in legislation a requirement for mandatory disclosure of certain information (such as environmental impact, recyclability, repairability and durability) [footnote 14]
- legislating to require businesses to provide better environmental information to their business customers
- adding misleading and/or unsubstantiated environmental claims to the list of banned practices under consumer law
- extending consumer protection remedies to address the harm to the environment caused by commercial practices directed at consumers
Our recommendations focus on changes which could be made to existing consumer (and business) protection rules. However, we recognise that, in some cases, bespoke legislation would allow for a more tailored or targeted approach to implement changes to consumer policy. Further details on the rationale for these recommendations are included in Annex I.
Some of the stakeholder feedback we received suggested more extensive changes to the consumer law regime to more fully tackle planned obsolescence[footnote 15] and over consumption. We note also that there are already policy initiatives in place to address planned obsolescence, for example through the so-called right to repair. Although we are not yet satisfied that we have sufficient evidence at present to merit recommending changes to the current consumer protection law framework, future action in this area could more directly encourage sustainable consumption. This is explained in more detail in Annex I.
Additional considerations
Although we have not seen sufficient evidence to merit recommending changes to competition law at this stage, we note that if there are situations where the flexibility under the current framework proves insufficient and would prevent sustainability initiatives of critical importance to take place, the current framework includes provisions allowing the Secretary of State to intervene.[footnote 16]
Our view of whether additional legislative change is ultimately necessary in relation to either of the consumer or competition law frameworks may evolve over time in light of further evidence and/or our developing experience in this area.[footnote 17] Furthermore, as firms increasingly turn their attention to sustainability issues, and consumers are more interested in the impact of their purchases, we expect to see new and innovative sustainability initiatives which may reveal the limitations of the existing framework.
For example, we may see evidence of a distinct category of sustainability agreements that are considered likely to satisfy the requirements for exemption under section 9 CA98 and so would be suitable for a block exemption.[footnote 18] Similarly, it may become apparent that the concept of relevant customer benefits in the mergers and markets regimes should be expanded to explicitly include sustainability, or that a new sustainability public interest consideration should be added.[footnote 19]
Question 3: Are there other opportunities within the UKs competition and consumer policy toolbox that would support the UKs Net Zero and sustainability goals, which the government should be considering?
The CMA is firmly of the view that more can and should be done with the UKs competition and consumer policy toolbox to support the UKs Net Zero and sustainability goals. We have a number of broad and flexible tools such as market inquiries and consumer investigations which we can use to look at sustainability in the context of competition and consumer protection.
In section 3 we set out a number of actions we intend to take, to increase the positive impact of the competition and consumer regimes in this area. We are also committed to continuing to work closely with BEIS and the rest of the Government on an ongoing basis to test whether more could be achieved.
Other considerations falling outside of the scope of the Secretary of States questions
Some CFI respondents highlighted contextual factors outside of competition and consumer law which they considered would limit the contribution of the regimes to sustainability goals, or where they saw opportunities to maximise that contribution.
A number of stakeholders emphasised that a more coherent landscape of initiatives by UK governments and public bodies (including the CMA) would help in maximising the opportunity to further sustainability goals. Uncertainty about how initiatives led by different bodies overlap, interact or even conflict is another reason that businesses may be hesitant to take action. For its part, the CMA is committed to working more closely with the Government and the CMAs partner organisations to ensure a joined-up approach to environmental sustainability issues – see below. In view of the feedback we received, which encompassed the wider regulatory landscape of which the CMA is a part, we recommend that the Government consider whether there are any further policy tools, not specific to the consumer and competition regimes, that could be used to nurture greater coordination and alignment across sectors and regulatory regimes.
On a related theme, although not explicitly mentioned in the Secretary of States letter, some stakeholders highlighted the relevance of the CMAs subsidy control and UK internal market functions to the UKs environmental sustainability goals. As we note below, the CMA will develop its thinking on environmental sustainability in relation to all its functions.
Some commentators also argued that, without fundamental changes to the way that our economy operates, the contribution that the competition and consumer regimes can make to the UKs Net Zero and sustainability goals will necessarily be limited. They observed that the prices paid by consumers for goods and services often do not reflect their environmental impact. Furthermore, some respondents expressed the view that societys tendency towards overconsumption was inherently unsustainable, and there was a need to move away from a focus on growth and GDP as measures of economic success.
As outlined above, we believe there is scope for the consumer law regime to support consumers to make more sustainable choices, but also recognise that there may be scope outside of the existing consumer protection regime (or the changes that we recommend) for the Government to promote more sustainable consumption. This could include, for example, consumer education campaigns or bespoke legislation to address some of the issues identified, such as mandatory disclosure of environmental impact information.
3. Actions for the CMA
Below we set out a series of immediate actions the CMA proposes to take across its tools to help ensure that the competition and consumer regimes best contribute to Net Zero and sustainability goals.
Launch of a Sustainability Taskforce within the CMA
We have decided to establish a cross-organisational taskforce dedicated to sustainability issues.[footnote 20] The Sustainability Taskforce will be a focal point in the CMA for policy issues relating to sustainability, and will:
- lead engagement with relevant stakeholder, government and partner organisations (including, where relevant, to review requests for informal advice)
- develop formal guidance relating to sustainability across the CMAs functions where it is needed and keep under review whether there is a case for legislative change, particularly in light of market developments
- continue to develop the CMAs thinking on the relevance of sustainability issues in relation to other aspects of its functions not addressed in this advice (for example, Chapter II CA98)
- maintain a network of experts (internal and external) with an interest in these issues to inform the CMAs work going forward
- contribute to overall organisational strategy on sustainability, and the wider national and international discussion of environmental sustainability issues.
Continued engagement
The CMAs engagement with stakeholders to inform this advice is the start of an ongoing conversation on a topic which is itself evolving. We plan to continue our proactive engagement with a wide range of interested stakeholders across the nations and regions of the UK, including the devolved administrations, to inform the subsequent phases of our work to support the transition to a low carbon economy. This also includes firms (including SMEs), non-governmental organisations, consumer bodies, academics and research institutes.
More specifically, the Sustainability Taskforce will engage with stakeholders who provided examples of the chilling effect competition law could have on sustainability agreements. We are keen to better understand and build on the examples they provided, to help us tailor guidance on the application of CA98 to ensure it is as useful as possible.
We appreciate that some stakeholders may want to speak to us about specific, novel issues concerning environmental sustainability. Although the CMA cannot provide legal advice, we are very keen to engage to understand the issues stakeholders are facing, and potentially provide informal guidance in relation to these issues where appropriate.
We are mindful of the feedback we received from stakeholders that a more joined-up approach to sustainability across public bodies would be beneficial to the firms we engage with. As already mentioned under Question 3 above, we are therefore committed to working even more closely with our partners to share experience and ensure a joined-up approach. It is also essential that we draw more on the expertise of other organisations to further inform our own work for example the significant cross-sectoral knowledge of the Climate Change Committee.
Sustainability issues transcend borders. The CMA will continue to be an active participant in the international debate on environmental matters, and will aspire to be a thought-leader whilst continuing to share experience, and best practice with our counterparts in other jurisdictions. We are conscious that firms themselves may take a global approach to environmental sustainability issues, and that the approach taken in different jurisdictions can support or hinder greater ambition in this respect.
Formal guidance
The Taskforce will initially focus on developing guidance in relation to the CA98, including providing examples of when sustainability agreements will not restrict competition and how the exemption criteria in section 9 might apply to sustainability agreements (including the issue of fair share, mentioned above.[footnote 21]
In other areas, the CMA has more recently published guidance relevant to environmental sustainability. For example, we have already provided advice on making environmental claims on goods and services,[footnote 22] and addressed sustainability considerations in our most recent update to the Merger Assessment Guidelines.[footnote 23] We will however keep under review where further guidance in relation to any of our functions could better support businesses in their transition towards Net Zero and consumers to move towards more sustainable consumption patterns.
Keep under review the case for legislative change
As noted above, our view of whether additional legislative change is necessary may evolve, in light of further evidence and/or our experience in this area. We will keep the question of legislative change under active review.
Develop the CMAs thinking
The CMAs proposed Sustainability Taskforce will support the development of the CMAs thinking on environmental sustainability in relation to all the CMAs functions, identifying commonalities and opportunities for synergy. For example, the CMA is already in the process of carrying out research on how green claims impact on consumer decision making. We will undertake further research on consumer behaviour to inform our work and provide global thought leadership on using the consumer protection framework to help consumers move towards sustainable consumption patterns. This work will also be relevant for our competition functions.
Identify Net Zero-relevant markets to review under the markets regime and launching at least 1 market study in 1 of these markets
The CMAs recent market study into electric vehicle charge points sought to drive change in a market of critical importance for the transition to a lower carbon economy. On the back of that study, we have taken subsequent enforcement action to tackle specific competition concerns in relation to electric vehicle charging points at motorway service station areas. Mindful of the value and impact of our markets tools to provide cross-market insights and drive change, we are committing to a public target of launching at least 1 new market study in a Net Zero-relevant market in the next financial year.
Annex I Proposed changes to consumer law
Legislative changes that we recommend
Disclosure of environmental sustainability information
The existing consumer protection regime requires that environmental (and indeed any) information provided to consumers is not misleading. This, combined with the prohibition on misleading omissions under the regime, means that, in many circumstances, businesses will have to provide certain environmental information, for example on the composition, durability or recyclability of products. Nonetheless, a significant number of stakeholders responding to our CFI,[footnote 24] and to the CMAs previous consultation on making environmental claims,[footnote 25] flagged challenges relating to environmental information.
Many stakeholders felt that, to ensure consumers are properly informed, they need consistent information. This includes ensuring that commonly used terms, such as biodegradable, compostable or recyclable, and carbon neutral or negative, have standard definitions.
There was support among stakeholders for a requirement for businesses to provide environmental information in all circumstances, not just where businesses choose to make a claim about the (comparatively) positive environmental impact of their product. There were also some concerns raised that the placing of additional information requirements on businesses would be disproportionate and unnecessary, and that any attempt to do so should at least reflect on the range of information requirements already imposed on businesses under other regimes.
Our guidance on making environmental claims already emphasises that the omission of environmental impact information may, in some cases, be a breach of consumer protection law. We will continue to look for opportunities to clarify the law on provision of environmental information, through guidance, compliance and enforcement activity.
However, it remains potentially difficult for businesses to know if their use of certain terms or the omission of information on the environmental impact of a product will mislead (or be likely to mislead) consumers in any given case.
On balance, the evidence we have seen indicates that there are likely to be significant benefits from creating standardised definitions of commonly-used environmental terms to which businesses must adhere in marketing and labelling of their products. We also consider that, on balance, there is merit in imposing a positive obligation to provide information about the environmental impact of products to consumers.
The CMA recommends that the Secretary of State considers the following changes to the consumer protection framework:
- Create statutory definitions of commonly used environmental terms, such as biodegradable, compostable and carbon neutral. We believe this could be achieved either by amendments to the CPRs and the Consumer Contracts (Information. Cancellation and Additional Charges) Regulations 2013 (CCRs), or through another appropriate legislative vehicle. This would enable consumers to more easily compare products and stop unscrupulous businesses deliberately misusing these terms.
- Confirm an express positive obligation to disclose environmental information. We believe this could be achieved by amending the definitions of material information[footnote 26] in the CPRs and CCRs to confirm explicitly that environmental information must be provided to consumers. This would put beyond doubt the requirement to disclose such information in all circumstances. This would be particularly helpful for consumers to identify less environmentally-friendly products which might not otherwise disclose their impact.
Supply chain transparency
For consumers to get the right information at the end of the supply chain, information needs to flow through the supply chain. A number of stakeholders who responded to our CFI and stakeholders we have engaged with through our work on misleading environmental claims commented that this does not happen in every case. This is driven, in part, by unwillingness on the part of some businesses to share information because of its commercial sensitivity or because retailers are also their direct competitors.
There is currently no statutory obligation for businesses to assess or publish information on the environmental impact of their supply chains. The Business Protection from Misleading Marketing Regulations 2008 (BPRs) are designed to prevent businesses actively misleading the business with whom they trade. However, this regime applies less directly to misleading omissions than its consumer law counterpart. This means that the BPRs do not contain a clear and specific obligation, express or otherwise, to disclose to their business customers the information which businesses might otherwise reasonably use to decide which supplier has the better environmental impact.
Some CFI respondents pointed out challenges that could potentially arise from an explicit positive disclosure obligation. This included the need to avoid potential competition concerns resulting from the exchange of competitively sensitive information and the need to consider carefully the international nature of supply chains. It is possible that guidance or other solutions might need to be developed in addition to, or as part of, the CMAs published information on sustainability agreements guidance.[footnote 27]
Internationally, there is ongoing work to address supply chain transparency. The OECD Guidelines for Multinational Enterprises encourage businesses to promote higher levels of awareness among customers of the environmental implications of using the products and services of the enterprise, including, by providing accurate information on their products.[footnote 28] Germany has introduced legislation which obliges companies to establish and implement due diligence procedures to improve compliance with environmental degradation protection measures in supply chains.[footnote 29]
The CMA recommends that the Secretary of State considers legislative changes to improve supply chain transparency. We believe this could be achieved through amendments to the BPRs to:
- make expressly clear that businesses are protected against misleading omissions of material environmental impact information by their suppliers
- require suppliers making environmental claims to disclose the evidence which substantiates the claim to their customers
Alternatively, Government may wish to consider introducing separate legislation on supply chain transparency, which could potentially provide a more detailed framework for disclosure and due diligence than amendments to the BPRs could achieve.
Changes to the list of banned practices under consumer law to deter use and support enforcement of misleading and unsubstantiated environmental claims
The CPRs currently require an assessment of:
- firstly, whether or not an act or omission is misleading (or otherwise unfair)
- secondly, whether the practice causes or is likely to cause the average consumer[footnote 30] to take a different economic (or transactional) decision than they would otherwise have taken
Whether a practice is misleading often turns on factors which the consumer cannot know, such as whether there is evidence to substantiate the claim or whether important information has been omitted. The environmental impact of a product or service may also be just 1 of a number of factors that affect the decisions that consumers make.
As a result, when consumers are faced with making judgments about attributes of a product or service that are difficult to assess, (for example, its environmental friendliness amongst other factors), they tend to substitute an easier attribute (for example, whether the product makes a green claim or not) in its place. This means that a broad category of consumers might be deceived by greenwashing when choosing products and services.
Such deception risks causing considerable harm both to those consumers who would otherwise make sustainable choices and to the achievement of sustainability and Net Zero goals. This is particularly so where new markets are emerging as a result of the rapid transition to Net Zero, where consumers are likely to lack the knowledge and experience to make informed decisions.
In the CMAs view, it is arguable that the average consumer and transactional decision tests pose unnecessary and unhelpful legal requirements. 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. There would be benefits to simplifying consumer law, and its effective enforcement, by removing these tests when applying the law to environmental claims. Such a modification of the law may be commensurate with the potential for harm that such claims carry.
We did not specifically address this topic in our CFI, and we have not therefore gathered specific stakeholder feedback on this proposal at this stage. It is, however, 1 that we have considered carefully in preparing our guidance on making environmental claims on goods and services. We believe it is an area which merits attention and which others are looking at internationally. For example, the EU is considering whether the Unfair Commercial Practices Directive could be rendered more effective by including on its blacklist unfair practices in the area of green advertising claims.[footnote 31]
There is precedent for this approach in existing law. Schedule 1 to the CPRs contains a list of 31 commercial practices which are automatically considered unfair (banned practices), because they are intrinsically harmful. The Government is already considering amendments to Schedule 1, as part of its recent consultation on reforming competition and consumer policy.[footnote 32]
For these reasons, the CMA recommends that the Secretary of State considers:
- adding misleading and unsubstantiated green claims to the list of banned practices under Schedule 1 to the CPRs
- creating freestanding legislation to prohibit misleading and unsubstantiated green claims
- in the event that it is not considered necessary to add misleading or unsubstantiated environmental claims to the banned practices list, adding the use of specified environmental claims shown to be particularly confusing, to the list of banned practices under consumer protection law. This would again require an amendment to Schedule 1 to CPRs. Further research would be needed to identify which specific claims should be banned.
Strengthening the CMAs enforcement powers and refocusing consumer law to support sustainable consumption
Our CFI did not explicitly raise the question of the CMAs enforcement powers and the remedies available for breach of consumer protection law in the context of sustainability. However, a number of CFI respondents commented on the need to ensure that the CMA and other enforcers had adequate powers and resources to deal with such breaches.
The Government has consulted recently on changes to the CMAs enforcement framework. These proposals include 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 for such breaches.
The CMA recommends that the Secretary of State consider 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. We expect that this could be achieved by amending provisions on enhanced consumer measures in Part 8 EA02 to allow a Court to order payment of redress in the collective interest where there is wider environmental harm caused by practices such as the sale of products using misleading environmental claims or which become prematurely obsolete.
Possible legislative changes that we do not recommend at this stage, but BEIS may wish to consider in the future
Planned or premature obsolescence
In our CFI we asked questions about the need to address planned or premature obsolescence as a means of progressing towards the goal of sustainable consumption.[footnote 33] A small number of respondents to our CFI made submissions on planned or premature obsolescence.
We note that progress has been made in the existing regime with the recent implementation of the so-called right to repair for certain goods.[footnote 34] This means that for certain goods, manufacturers are required to make spare parts available for an extended period of time. The list of products to which this right applies is, at present, limited and there is no restriction on the price of the spare parts. Some stakeholders responding to our CFI suggested that the right to repair could be extended.
We are aware, and CFI respondents highlighted, that there can be particular issues with electronic devices (for example, mobile phones and laptops) and with Internet of Things or smart devices (for example, internet-connected televisions and smart speakers) which rely on regularly updated software to continue functioning. Producers of these products may offer software support for a relatively short period of time, or for shorter times than consumers might reasonably expect when purchasing the product. The withdrawal of support can render a product which could otherwise continue functioning useless, unsafe or insecure.
Some CFI respondents suggested an extension of the statutory guarantees in the Consumer Rights Act 2015, as a means of incentivising businesses to design longer-lasting products. Other jurisdictions have taken a different approach, banning premature obsolescence altogether.[footnote 35]
While the CMA does not yet have sufficient evidence to recommend specific changes to consumer law at present, the Secretary of State may wish to undertake further work to explore potential benefits of changes to the law to:
Possible measures to shift from over-consumption to sustainable consumption
United Nations Sustainable Development Goal 12 is sustainable production and consumption. The UNs Guidelines for Consumer Protection expressly encourage Member States to create or strengthen effective regulatory mechanisms for the protection of consumers, including aspects of sustainable consumption.
To shift consumption patterns, it is important to ensure that consumers are educated and supported to make sustainable choices. The CMAs work on greenwashing, and the legislative changes proposed above, would assist in this.
Existing consumer protection law can already be used to tackle some dark patterns (manipulative online choice architecture which misleads consumers into buying things they dont need, or that doesnt meet their needs). These methods can lead to consumers buying more than they reasonably need.
However, we are also aware of a wide range of other practices which (assuming they are presented in a non-misleading way) will not be prohibited under consumer protection law as it currently stands. These can include things like conditional promotions, buy now, pay later schemes, free and easy product returns and free with purchase offers.
In some cases, such offers can be beneficial to consumers. There may be cost savings to be made by buying in bulk, and lower income consumers who may need to spread the cost of a purchase can do so easily.
In some cases, however, these practices might have significant environmental costs. The proliferation of tactics designed to make citizens buy more seems likely to make it harder for consumers to shift towards more sustainable patterns of consumption.
We received only a small number of CFI responses on this issue. Some of these gave support to the ideas that the consumer protection framework should drive consumers towards sustainable consumption patterns and tackle businesses practices that may have a detrimental impact on consumers by targeting people with products they do not need or encouraging them to buy more than they need.
One stakeholder raised concerns that over-consumption might be difficult to define in legislation and suggested the only way to achieve this would be to implement a carbon limit per household. Others argued that more research was required to determine what practices businesses were using, whether or not dark patterns and other commercial practices impacted on consumer decision-making, and whether there was a causal link with over-consumption.
One response to the CFI expressed significant doubts that this was a matter for consumer protection law.
It is clear that there is some concern about using the consumer protection framework as a tool for reducing levels of consumption. We are not therefore recommending any legislative changes in this regard at this stage. However, Government may wish to explore:
- the use of behavioural insights to nudge consumers towards sustainable consumption patterns
- incorporating issues of sustainable consumption into consumer education campaigns
Depending on the success of less interventionist measures, it may be necessary to consider where the line should be drawn between acceptable marketing practices and those which drive over-consumption.
