CMA Takes action against ASOS, Boohoo and Asda

With its 27 March 2024 announcement concerning action against ASOS, Boohoo and Asda, The Competition and Markets Authority (‘CMA’) has burnished its credentials as an effective ESG regulator.

The CMA has been investigating the three retailers since July 2022 having concerns about the eco-friendly marketing of its products to consumers. At the time it launched the investigation, the CMA commented that the fashion sector generally produced potentially misleading green claims, including “a number of companies creating the impression that their products were ‘sustainable’ or better for the environment – for example by making broad claims about the use of recycled materials in new clothing – with little to no information about the basis for those claims or exactly which products they related to”.

Having concluded its investigation, the CMA has obtained signed undertakings from each retailer. The undertakings have been accepted by the CMA arising out of its power in s219 of the Enforcement Act 2002. This legislative basis for the undertakings indicates that, as a result of its investigations, the CMA concluded that the Retailers have been engaging in conduct which infringes the Consumer Protection from Unfair Trading Regulations 2008 (although the “voluntary” aspect of the undertakings, and non-admission of infringement within them should be noted). The undertakings comprise an agreement to take long list of steps (ASOS gives 40, Boohoo and Asda 38), but in its press release the CMA picks out the following:

• To ensure all green claims are accurate and not misleading, clear and prominent and in plain language;
• In relation to fabrics, to avoid using unexplained ambiguous terms (‘eco’, ‘responsible’, ‘sustainable’) and to clearly display the percentage of recycled and organic fibres
• To clearly set out the criteria for products’ inclusion in environmental collections
• To not use ‘natural’ imagery to suggest a product is more environmentally friendly than it actually is
• To ensure that product filters (used when in online stores) are accurate, only showing items that meet the filter requirements
• In relation to environmental targets, to make available to customers, a clear and verifiable strategy underlying such targets
• To ensure that statements made about accreditation schemes and standards are not misleading.

On the same day as the announcement of the undertakings, the Consumer Protection Director published an open letter to the fashion retail sector. She reminded the sector of the key principles originally set out in the CMA’s 2021 Green Claims Code and that businesses should take all necessary steps to ensure that any environmental claims they make comply with consumer protection law. She also suggested that further sector specific guidance on the Code will soon be available. However, even before the publication of this guidance it’s clear that businesses in this and other consumer sectors should study the undertakings provided by ASOS, Boohoo and Asda, as these will form green claim benchmark standards so far as the CMA is concerned.

Harsher penalties are on the horizon. Should the Digital Markets, Competition and Consumers Bill become law, the CMA will assume powers to impose fines for breach of certain consumer protection legislation up to a maximum of 10% of worldwide turnover.