CMA investigate Unilever GreenClaims - A small needle in a large haystack?

Just a few days ago we provide an article to #nutraingredients on the upcoming changes to how Green Claims and Greenwashing will be assessed in the United Kingdom and the EU (http://tinyurl.com/2dchbkwe). Right on cue we now (Tuesday 13th December 2023) see the UK regulator the CMA (The Competition & Markets Authority) begin a formal investigate into Unilever, a company with an annual turnover of >60bn Euro in 2022. Is this the 1st investigation into Food Products on this scale?

Some clarity needed from CMA statements

At present the CMA have made clear that Unilever have not been shown to have broken consumer protections laws (in this case Consumer Protection from Unfair Trading Regulations (CPUTRs)) but are under investigation. Such detail is important for a publicly traded company, as perception is everything in value (as todays announcement seems to have made no impact on share price which closed up by end of day trading).

In that light the CMA announcement does not make clear the scope of the investigation, saying only it applies to FMCG, which of course includes foods as well as cosmetics and cleaning products and others.

What are CMAs concerns & next steps?

The concerns raised emanate from initial investigations are around generic green claims such as “natural” “recyclability” and related imagery and logos which give products the halo of being “Environmentally friendly”. Such issues have been considered to be misleading when viewed as overly vague or when the claims result in an exaggeration. The most likely time such claims mislead consumers is where they do not consider the whole lifecycle of the product or focus on one aspect of a products (such as lid when the rest maybe not recyclable). Similar, total environmental impact can be ignored unless close attention is paid to the farm to fork of products. An example could be new packaging that that now uses recycled cardboard from plastic but the change means the products have to be transported an extra 600miles. The result could be much higher emissions and therefore still harm the environment.

The next steps will be for the CMA to provide Unilever with its initial findings and concerns in writing as it continues its investigation and information-gathering powers.

Possible outcomes?

The CMA green claims code came into effect in September 2021 and given force of law under the CPUTRs. Its 6 key principles behind use and substantiation of such claims are yet to be tested in the courts but are now looking like we are seeing the CMA being to act.

The outcomes will be really dependant on when and what is in the final report but at present there are possible consumer redress, contractual breaches, as well as possible fees and indictments if regulations 8-12 of the CPUTRs are breached. However the bigger concern is once the Digital Markets, Competition and Consumers Bill (the Bill) comes into force (Likely Autumn 2024) as this provides penalties up to 10% of global turnover if the claims are false or misleading. We need point to the potential impact such penalties may have on a company with the turnover of Unilever.

The alternative is Unilever fully defend its position and any claims it makes as part of the CMA investigation are found to be in compliance with the green claims code. Based on Unilever comments to the Financial Times that it rejects the criticisms and says: “Its claims are responsible, transparent and clear” this would be it’s expected outcome. Whatever, the outcome it will be a learning exercise for general businesses operating in the FMCG space as well as the regulator.

To give some context to timelines, then in the case of investigations already underway on green claims by the CMA (ASOS, Boohoo and Asda) these date back in July 2022 (some 15 months ago). As such this is likely not going to be a quick process. Although Unilever maybe one of the 1st that may have the merits of its green claims assessed, it won’t be the last. We have seen a green claim review by the CMA finding 40% of online claims as misleading and the European Commission found >53% of green claims are vague, misleading or unfounded and 40% completely unsubstantiated.

This should be a warning shot for the wider industry to being to get their house in order and being to consider the requirement of what claims can be made an importantly substantiated.

Sources:

CMA statement: https://www.gov.uk/government/news/unilevers-green-claims-come-under-cma-microscope

Turnover: https://www.statista.com/statistics/269190/global-revenue-of-the-unilever-group-since-2007/

Stock price: https://www.londonstockexchange.com/stock/ULVR/unilever-plc/company-page

Digital Markets, Competition and Consumers Bill (the Bill) - https://bills.parliament.uk/publications/53073/documents/4037

FT commentary from Unilever: https://www.ft.com/content/a62d2893-6608-4d0f-8fe6-b3d78b971dfb

ASOS, Boohoo and Asda investigation by CMA: https://www.gov.uk/government/news/asos-boohoo-and-asda-investigated-over-fashion-green-claims

CMA review into online green claims: https://www.gov.uk/government/news/global-sweep-finds-40-of-firms-green-claims-could-be-misleading

European Commission 2020 green claims: https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_1693#:~:text=Companies%20operating%20in%20the%20European,friendly%20than%20they%20truly%20are.