NEW YORK – A class action complaint was recently filed against Swedish fashion giant H&M over its use of Higg Sustainability labels on garments. Plaintiff Chelsea Commodore claims H&M used Higg scorecards to justify charging premium prices for its ‘sustainably-made’ clothing. Commodore argues the majority of products H&M markets as being sustainably made are, “no more sustainable than items in [its] main collection, which are also not sustainable.” This, she argues, means customers pay a premium, “in the belief that they are buying truly sustainable and environmentally friendly clothing.”
Readers can view the full case here: https://www.classaction.org/media/commodore-v-h-and-m-hennes-and-mauritz-lp.pdf
What happens next with this class action? Is it likely to succeed? What will be the consequences for H&M? And is the outcome of this action likely to set a precedent? We put these and several other issues to lawyers in the United States, where the complaint was lodged, as well as getting a UK legal perspective.
There was general agreement among those we spoke to that this case will likely be a wake-up call for the fashion industry in terms of how ‘sustainable’ clothing lines are marketed. All fashion brands may need to consider tightening up the language their marketing teams use around sustainability, especially if they are making very specific claims.
What makes the case particularly interesting is that the plaintiff specifically references clothing purchased containing Higg Scorecards, which have been in the dock in recent weeks due to a decision by Norway to ban their use. This has led to the Sustainable Apparel Coalition pulling these scorecards from the market.
Steve Sidkin, partner, Fox Williams LLP Solicitors told us: “I consider that if the case proceeds it will turn out to be a determination of the credibility of the Higg Index as distinct from whether or not H&M was correct to pin its sustainability claims to the Higg Index.”
Alan Behr is a partner in the Corporate & Business Law department and Intellectual Property Practice, and chairman of the Fashion Practice at Phillips Nizer LLP. Like Sidkin, he believes H&M’s reliance on Higg is problematic. He told Apparel Insider: “[Higg’s] development for reliable use is very much a work in progress, and full reliance on it at this time as a metric of environmental good citizenship (without accurate and detailed analyses of context) may indeed be premature. In short, as typically employed, the Higg Index likely cannot yet be called a product of exact science.
“The key learning is: unless you and you alone really can be sure that what you are doing is better for the environment than what you could otherwise be doing, maybe you should keep doing it, but it is far too early in all this to start boasting about it in your marketing materials. Since no one can be entirely sure about the environmental impact of much of fast fashion at this time, making a point of it again until science has done more groundwork could well lead to more troubles like this. Remember, if there is a weakness in what you are doing commercially, whatever it is, there is probably someone out there in the USA ready to sue you for it.”
So what happens next with this case? Kiran Nasir Gore is international disputes lawyer and adjunct law professor at The George Washington University Law School. She told us: “The next major step will be for the Court to assess whether the complaint can proceed as a ‘class’. The plaintiff has already claimed to represent a class and provided a description of it but the judge will decide on this. It will be important for the plaintiff’s lawyers to demonstrate that a true group with similar grievances exists. If the class is certified by the judge, then the Court would work with the parties to figure out precisely who the class members are and a notification and opt in/ opt out system would need to be devised.
“After it’s decided whether the case progresses as a class action, it will enter discovery. It will be important for the plaintiff to seek and obtain evidence proving their claims – including that H&M’s marketing was misleading or mistaken, that it sought to capitalize on consumers’ green-based interests, and that those consumers were wronged and would not have made these purchases if they had known better. These will be tricky claims to prove because there’s a lot of discretion in what is considered ethical marketing.
“Once all of this information is available to the parties, H&M may wish to settle the case, or the case would go in full (or part) to trial.”
Most people we spoke to suggested it is very unlikely this case would reach trial as H&M would be keen to settle out of court with the minimum amount of fuss – and public exposure – possible. Moreover, if the case did make court, it could take three years given current backlogs in US civil proceedings.
What kind of criteria will be considered in deciding whether H&M has a case to answer? A key issue here is the concept of ‘puffery’. The UK’s Advertising Standards Authority states: “Some claims … are unlikely to be interpreted as objective claims, or taken literally by consumers, either because they are clearly a subjective expression of the marketer’s opinion, or because they are clearly obvious exaggerations (‘puffery’). These types of claims are unlikely to be capable of substantiation, and are acceptable, provided they do not materially mislead.”
We see puffery all the time in advertising but there is often a fine line between puffery and false advertising. Rania Sedhom, managing partner, Sedhom Law Group, PLLC, tells us puffery is permitted in marketing and advertising but misleading consumers via specific claims is not. In this case, she points out that H&M was making very specific claims – via its Higg labels – about water use in its garments rather than puffery.
The actual case itself is worth quoting at length here. The case states: “As another example, the following images show that H&M’s website showed a particular product as being produced with 30% less water, but the Higg website showed that the item was ‘actually made with 31% more water, making it worse than conventional materials. In other words, the data in the Sustainability Profile was thus presented incorrectly because ‘more’ was misrepresented as ‘less’. H&M conveniently, and egregiously, ‘ignored negative signs in Higg Index scores,’ and simply presented them as ‘positive’ results in every instance (i.e., using ‘more water’ was turned into ‘less water’ when H&M presented the scorecards). This was a uniform practice for each and every Sustainability Profile scorecard.”
This seems a remarkable oversight by H&M. Could this be a genuine mistake on their part? Could it be they simply did not understand the Higg tool sufficiently? One lawyer we spoke to asked the rhetorical question: “Does anybody actually understand Higg?”
More broadly, this highlights the risks of effectively outsourcing the labelling of products in this way to third parties.
Elaborating, Sedhom said: “Brands in general need to be crystal clear about what they are doing and not doing [around sustainability] if they are going to charge a premium. What does the term sustainability mean, what does eco-friendly mean and what are the parameters for using these labels?
“The crux of the matter is whether the judge perceives the wording on clothing tags as sales puffery versus whether they were misleading.”
There is some precedent here. As we previously documented, Norway’s authorities recently wrote to H&M warning the company its use of Higg labels on clothing is likely to breach its Marketing Control Act. Sedhom suggested the Norway case would likely be brought forward as anecdotal evidence.
Jason Stiehl, is a partner in Crowell & Moring’s Chicago office, where he is a member of the firm’s Litigation and Technology & Brand Protection Group.
He gave us some legal insight specific to New York regarding how this case might play out. He said: “The New York statutory causes of action have notoriously loose requirements that make them difficult to defeat at the pleadings stage, requiring only ‘consumer-oriented’ conduct, that was materially misleading. However, the pleading is very light on the idea of what damage the consumer has suffered (alleging only that they would not have bought the product). This seems ripe for targeted argument. In addition, it does appear that the index relied upon (Higg) quickly pulled down their programme, which likely would support a defense that H&M reasonably relied upon this index in making its determination.”
Perhaps worth noting in this context is that the Higg MSI website – data from which was used to underpin H&M’s consumer-facing Higg labels – remains live. The SAC has declined to comment on whether this will remain the case moving forwards.
What about actual damages? What is the likely financial and otherwise impact of this case for H&M? On this, Behr told us: “Typically, in settlement (which is nearly always the goal), counsel for the plaintiff gets a good reward, the plaintiff gets something to make it worth their time, and the rest of the class get coupons or certificates for courtesy amounts – and many of those are either never claimed or are tossed away.
“There might be copycat lawsuits against H&M by competing firms that vie to become lead counsel for whatever class is ultimately certified. Whoever controls the litigation likely has something to gain to make the process worthwhile.
“Winning or losing does not matter that much except for the temptation to file something similar against another brand if the class is certified. If someone else sees a brand that makes a sustainability claim that can be challenged, and if it looks potentially profitable, you could well see more cases.”
Steve Sidkin suggests while damages against H&M could be “significant” adverse publicity would be the greater concern for the business. He said: “I still recall what adverse publicity did to the jewellery chain Ratners. If the defendant was, say, Marks & Spencer then as a UK plc it would be exposed to the possibility of: securities litigation where a public company which has acted in breach of the law resulting in a drop in its share price and a loss being incurred by its shareholders may be sued by its shareholders; or a derivative action which may be brought by a shareholder against a company as a result of an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.
“I consider that this would be of particular concern to those fashion businesses which are public companies and are found to have infringed the Green Claims Code following the start earlier this year of a derivative action by ClientEarth against the board of directors of Shell plc.”
Looking ahead, Kiran Nasir Gore suggested this case could be a watershed, regardless of the outcome. He told Apparel Insider: “H&M is a big global retailer so there’s a lot of opportunity here for people who care about sustainable development in the fashion and retail industry to use this as an example or test case. We may see similar cases against other retailers. Or we may see a shift in the marketing style and tone used by other retailers to protect themselves from future claims.”
Jason Stiehl, meanwhile, suggests the case reinforces the need to beef up internal systems as regulators and ESG investors place marketing claims under growing scrutiny. “These cases reinforce the need for internal regulation of these claims rather than relying on third party industry rankings, and companies should ensure that internal or outside counsel reviews marketing claims (as well as those placed in any consumer-facing document) when making statements in the sustainability and broader ESG space,” he said.
FURTHER COMMENT – Q and A with, David Baay, Eversheds Sutherland: https://us.eversheds-sutherland.com/mobile/People/David-A-Baay
What is your overall take on the H&M class action?
The allegations in the lawsuit are a classic example of what making unverified sustainability and “eco-friendly” representations can lead to in the fashion industry or any industry for that matter. Consumers and various federal and state agencies are taking a particular interest in greenwashing allegations (misrepresentations) and statements about sustainability made by large companies.
The H&M case is even more interesting considering the fact that H&M made these sustainability claims specifically and directly, displaying them on their products by publishing “environmental scorecards” and “eco-friendly” tags.
However, this case is in its early stages of litigation, and we do not have the benefit of H&M’s answer yet, so it is too soon for us to draw any conclusions. The Complaint does have the benefit of having the Quartz investigation, which laid the groundwork for the underlying class action claims in the lawsuit. The Quartz investigation raised some real questions about H&M’s “green” fashion lines, and it will be interesting to see if H&M produces its own data to back up the claims it has made about its products. As always, in false-advertising claims H&M’s best defense is the truth.
How do you see the case playing out, and do you think there is a case to answer by H&M?
Class action lawsuits are procedurally very complex, and I would imagine that we will see H&M fight largely on procedural grounds to defeat the class action certification. For example, H&M could argue that this lawsuit is not appropriate for class action resolution because consumers received different representations for different products or that some consumers did not buy for environmental reasons, etc.
In addition, the case could end in a quick settlement, as many greenwashing cases have. In some instances, it’s more beneficial for defendants to settle greenwashing claims to avoid further reputational harm. Once a company’s sustainability claims are labeled as greenwashing, they really have to be addressed, or else consumers often assume the worst.
Regardless of outcomes, do you think this case will have wider ramifications in terms of how fashion markets its ‘green’ lines – e.g., tightening up the language they use, etc.?
Absolutely. The reality is that the fashion industry has a high demand for green products and the need to market its products as “eco-friendly.” Everyday consumers are demanding more and more eco-friendly and sustainable practices when it comes to fashion retailers, and retailers that fail to keep up with consumers’ demand for eco-friendly products lose out on market share. This case should be a wake-up call for retailers, sending the message that they should make sure that their sustainability claims can be verified and matched by underlying data—in other words, sustainability marketing should not only be tightened but also verified.
