On 17 January 2024, the European Parliament adopted the Directive on empowering consumers for the green transition (COM(2022) 143). The Empowering Consumers Directive contains new market communications requirements designed to support the green transition in the EU, particularly by means of unfair competition law. With the European Council believed to be ready to give its approval, it’s worth taking an advance look at what changes the new Directive contains.
Background
The new Empowering Consumers Directive is part of a comprehensive package of measures implementing the European Green Deal, and aims to strengthen the position of consumers – to whom the EU ascribes an active role in accelerating the green transition.
The Empowering Consumers Directive will limit the following practices in particular:
- Misleading environmental claims (“greenwashing”)
- Early obsolescence practices (i.e. the premature failure of goods)
- Unreliable and non-transparent sustainability labels and information tools
The EU’s overarching goal is to promote competition in favour of more sustainable products and to reduce negative impact on the environment. To this end, the role of unfair competition law is to be extended beyond its original function of ensuring undistorted competition to that of an instrument for enforcing political objectives.
Prohibiting misleading claims
The Directive introduces strict requirements for environmental claims throughout the EU via the Unfair Commercial Practices Directive (“UCP Directive”). An “environmental claim” means any commercial communications (e.g. advertisement) not mandatory under the law that “states or implies that a product, product category, brand or trader has a positive or zero impact on the environment or is less damaging to the environment than other products, brands or traders, or has improved its impact over time” (Article 2(1), letter (o) Draft UCP Directive) – a very broad scope. With consumers’ environmental awareness increasing, statements like these are often used as a marketing tool – and would be subject to the new Directive in future.
Generic environmental claims are generally prohibited – that is, without further review of their relevance to a consumer’s decision – if the trader is not able to provide evidence of the excellent environmental performance advertised (Annex I, point 4a Draft UCP Directive). Such prohibition is a particularly blunt instrument, and will cover many terms used in advertising – including “green”, “natural”, “ecological”, “environmentally friendly”, “climate neutral”, “carbon neutral” and “energy efficient”. Even using terms such as “conscious” or “responsible” to suggest particular environmental performance is prohibited – alongside advertising environmental performance that bases on offsetting environmental impacts, for example by acquiring emissions credits.
The planned tightening of environmental claims about future environmental performance will likely also have considerable practical impact. The draft explicitly considers environmental claims made without clear, objective, publicly available and verifiable commitments to be misleading (Article 6(2), letter (d) Draft UCP Directive). Such commitments must be set out in a detailed and realistic implementation plan that includes measurable and time-bound targets and other relevant elements necessary to support their implementation (for example, the allocation of resources and the regular verification by experts whose findings are made available to consumers). Similarly strict requirements have previously only applied to advertising the results of independent product testing and to specific products with particular health implications (such as food and therapeutic products) – but even there, no comparable commitments are required for advertising.
The Directive also limits traders’ ability to advertise emissions advantages derived from offsetting. Traders are to be prohibited from advertising the “neutral, reduced, compensated or positive” impact of a product on the environment that is based on carbon offsetting (Annex I, point 4c Draft UCP Directive). Carbon offsetting itself will continue to be allowed and traders will be able to continue to advertise it (in image advertising, for example). However, products that are not carbon neutral across their entire lifecycles cannot be advertised as such.
The Directive also contains further additions and clarifications to the prohibition of misleading information:
- It emphasises individual aspects (“environmental and social impact”, “durability”, “reparability”, “reusability” and “recyclability”) as characteristics of potentially misleading business practices (Article 6(1) Draft UCP Directive). However, this amendment contains few changes for Germany, as section 5 Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, “UWG”) is already worded broadly enough to cover these aspects.
- Advertising a product’s adherence to statutory requirements that apply to all products in the category concerned is generally prohibited. This is essentially advertising with self-evident facts, which German law already prohibits; European law also already contains individual prohibitions in specific areas (for example, Article 7(1), letter (c) Food Information Regulation for food). The UCP Directive is now set to include advertising with self-evident facts as a generally prohibited business practice (Annex 1, paragraph 3, point 10a Draft UCP Directive). Where advertising a product’s benefits does not meet statutory requirements, but does correspond to common practice in the relevant market, that advertising is also prohibited – but only if it could impact consumer decisions (Article 6(2), letter (b) Draft UCP Directive).
- Environmental claims cannot be made about the entire product or the trader’s business when they actually concern only a certain aspect of the product or business (Annex I, paragraph 2, point 4b Draft UCP Directive).
Measures against early obsolescence
The EU wants to restrict practices where products are intentionally designed to have a limited lifespan (early obsolescence) – practices that would be detrimental to the consumer and have an overall negative impact on the environment in the form of increased material waste and increased energy and material consumption. The Directive’s measures against early obsolescence include the following:
- Traders must not induce consumers to replace or replenish the consumables of a good earlier than is necessary for technical reasons (Annex I, paragraph 4, point 23i Draft UCP Directive). As an example, the Directive cites the practice of asking users of printers to purchase new ink cartridges before the old cartridges are actually empty. This provision conflicts with the consumer’s interest in being notified in good time about the need for a new ink cartridge.
- Traders must provide information about the negative impacts of a software update on the use of goods with digital elements or certain features of those goods (Annex I, paragraph 4, point 23d Draft UCP Directive). That obligation also applies if the software update improves other functions. Software updates must not be presented as necessary if they only enhance functionality (Annex I, point 23e Draft UCP Directive). These requirements raise difficult practical issues, such as how specific the information must be when describing the product’s technical functionalities and how they would (potentially) be impaired by the software update.
- Introducing a feature that limits the durability of a good is generally prohibited (Annex I, point 23f Draft UCP Directive). As an example, the Directive cites software that limits the good’s functionality to a certain period of time.
- Falsely claiming that a good has a certain durability or reparability (Annex I, point 23g and point 23h Draft UCP Directive) is also generally prohibited. This creates an additional instrument for enforcing the durability and reparability requirements for goods under EU product law.
- Traders must neither make false claims about the impairment of the functionality of a product when consumables, spare parts or accessories not supplied by the original producer are used, nor withhold information about such impairment (Annex I, point 23j Draft UCP Directive). This intended to prevent superfluous products and thus superfluous flows of goods and repairs, and may restrict OEMs’ ability to recommend the use of original spare parts and accessories.
Restricting the use of sustainability labels
Sustainability labels evoke positive associations about the ecological and/or social aspects of a product, process or company. There are already a large number of different sustainability labels issued by various organisations and public authorities. The certifications differ considerably in terms of requirements and subject matter. The directive aims to authorise such seals only on the basis of strict criteria and after review by an independent body.
In future, a sustainability label may only be affixed if it is based on a certification system or has been established by public authorities (Annex I, point 2a Draft UCP Directive). The certification scheme requires an independent third-party verification scheme, which is defined in more detail in the Directive (Article 2, letter (s) Draft UCP Directive). Self-certification is prohibited.
This does not cover any mandatory labels required in accordance with EU or national law.
Additional information requirements
The Directive is intended to help consumers make better informed decisions and stimulate the demand for, and the supply of, more durable goods. Only informed consumers can play their part in promoting the EU’s green transition. To this end, further information requirements are to be incorporated in both unfair competition law and general contract law:
- The Directive introduces stricter information requirements for providers of product comparisons that inform consumers about environmental and social impact, durability, reparability, reusability or recyclability. They must also inform consumers about the method of comparison, the products compared and the suppliers of such products, and the measures employed to keep information up to date (Article 7(7) Draft UCP Directive). Whereas German law already stipulates that consumers and other market participants must be provided with all essential information about a service offered (section 5b(1), no. 1 UWG), this requirement is now being further amended to include certain additional information.
- In general contract law, the pre-contractual information requirements are extended to include information on the durability, reparability and availability of software updates (Articles 2, 5(1), 6(1) and 8(2) Directive 2011/83/EU). The European Commission is to develop a harmonised notice and a harmonised label. In future, retailers will have to inform consumers about the availability of environmentally friendly delivery options, among other things. However, they may only describe the delivery option as “environmentally friendly” if they can provide the requisite evidence for this generic environmental claim.
Outlook
If the European Council adopts the draft – as currently expected – the Directive will likely enter into force in spring 2024. Member States then have two years to transpose the new requirements into national law.
At the same time, the EU is currently working on a directive on environmental claims (Green Claims Directive), which also aims to strengthen the role of consumers in accelerating the green transition and establishing green markets in the EU. This will involve creating a complex system for assessing and reviewing explicit environmental claims. The Green Claims Directive also contains extensive information requirements in the case of explicit environmental claims.
The two directives would generally apply side by side, with companies often having to meet the requirements of both. The approval of an environmental claim under the Green Claims Directive’s assessment regime and the provision of the requisite information does not exempt businesses from complying with the aforementioned prohibitions on misleading statements under the Empowering Consumers Directive.
If the provisions of the two directives conflict, precedence is to be granted to the Green Claims Directive as the narrower norm (principle of lex specialis). The Green Claims Directive deals with “explicit environmental claims”, i.e. green claims that are in textual form or contained in an environmental label (Article 2, point (2) Draft Green Claims Directive). By this definition, “explicit” environmental claims could include claims that are implicit. In practice, the text form requirement is likely to merely exclude audio-only messages (for example on the radio) and videos without readable text on social media platforms such as YouTube and TikTok.
The European Commission did not choose the obvious route of a harmonised directive – apparently due to diverging responsibilities – and it remains to be seen how the directives will actually be implemented in Germany. It is generally questionable whether such far-reaching restrictions on commercial communications about the environmental impact of products and services will really help promote the Green Deal as envisaged by the Commission.
Either way, companies will in future face complex requirements when they provide information on the environmental impact of their products – something that they will be legally obliged to do in future under these the directives and national transposition acts. Companies should ensure they are ready for the new requirements.
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