17 February 2021

Green competition: how consumer law can help prevent misleading sustainability claims

The European Green Deal seeks to achieve climate neutrality by 2050. As increased public awareness is not enough to reach this goal, all stakeholders are contributing, with companies taking corporate social responsibility seriously. They increasingly offer green products and services. But how can customers assess sustainability claims? And how can consumer authorities prevent "greenwashing"? The European Commission recently coordinated a market survey by the national consumer authorities of all 27 member states that focused on sustainability claims. Meanwhile, the Dutch competition and consumer authority (the ACM) issued guidelines on how to ensure that sustainability claims comply with consumer law. In related news, there has been a call for more competition-related guidance at EU level. This guidance is needed where businesses risk flouting cartel prohibitions by jointly pursuing sustainability objectives.

False claims

Consumer and competition law go hand in hand, also when it comes to sustainability. Undertakings do not only compete on price, but also on quality. Sustainability claims are part of competing on quality aspects of a product or service. False claims therefore distort competition and mislead consumers at the same time.

EU-wide market survey of sustainability claims

The European consumer authorities have marked sustainability as a priority in their oversight of markets and consumer interests. The European Commission recently announced the results of a coordinated "sweep" by the 27 markets and consumer authorities in the EU. They simultaneously checked the sustainability claims in advertisements and on products that were offered online. They concluded that, in the majority of cases, traders did not provide sufficient information or evidence allowing consumers to check the claim’s accuracy in an easily accessible way. This lack of good practice may qualify as a prohibited unfair commercial practice under the Unfair Commercial Practices Directive.

Dutch regulator gives guidance

The Netherlands Authority for Consumers and Markets (ACM) recently issued guidelines on sustainability claims from a consumer law perspective. These guidelines contain rules of thumb and practical examples on how to ensure that sustainability claims are not misleading. According to the ACM, information to consumers should follow five rules:
  1. Traders should make clear which sustainability benefit their products/services offer.
  2. The claim should be substantiated with up-to-date evidence (the EU sweep showed this was missing in the majority of cases).
  3. When it comes to competition, comparison is key – comparisons with competing products/services, or undertakings should be fair.
  4. Businesses must be honest about their sustainability efforts and as specific as possible: clear, concrete and verifiable.
  5. Visuals used in offering products/services, such as labels, logos and pictograms, should be informative and not confusing for the consumer.
This guidance on sustainability fits the ACMs focus on the energy transition in the Netherlands to achieve carbon neutrality by 2050.

Enforcement is next

This makes clear that consumer authorities, like the Commission and national competition authorities, are also prioritising sustainability. In our view, the results of the EU-wide market survey are likely to form the basis of enforcement actions by national consumer authorities. It will be important to get follow-on investigations right. With too little enforcement, false sustainability claims will remain prevalent. With too much enforcement, suppliers may be dissuaded from pursuing environmental goals, particularly where the costs of evidencing such claims are high, with a proportionately larger burden being placed on smaller producers.