Going green - the CMA publishes final guidance on how competition laws apply to environmental sustainability agreements

With the aim of ensuring "that competition law does not impede legitimate collaboration between businesses that is necessary for the promotion or protection of environmental sustainability”, the Guidance explains the circumstances in which collaboration between competitors, through so called environmental sustainability agreements, may not be considered anti-competitive under the Chapter I prohibition in the Competition Act 1998. In so doing, the Guidance aims to provide clarity to businesses so that they can make decisions with confidence about how to collaborate with other business to achieve environmental sustainability goals. 

Environmental sustainability agreements

The structure of the Guidance remains unchanged from the earlier draft, that is, the Guidance provides a clear steer, supported with examples, on environmental sustainability agreements that:

1. Are unlikely to infringe the prohibition against anti-competitive agreements
2. Could infringe the prohibition against anti-competitive agreements, unless they benefit from an exemption, and
3. Can benefit from an exemption

More detail on the CMA’s approach can be found in our briefing on the draft version of the guidelines.

Climate change agreements

The Guidance also confirms that the CMA will take a more permissive approach to exemption in relation to climate change agreements. It is worth noting, however, that the Guidance goes further than the earlier draft; the Guidance no longer defines these agreements as those which contribute towards the UK’s binding climate change targets, but adopts a broader definition of agreements that contribute to combating climate change. This is a welcome change. 

Mixed agreements

The CMA has also now recognised that there will be some instances whereby an environmental sustainability agreement could generate both climate change benefits and other environmental benefits, for example, an agreement between businesses to eliminate deforestation from their supply chains. As forests can be an important source of carbon storage, it could result in climate change benefits, as well as providing other environmental benefits such as biodiversity.  

In order to assess a mixed agreement, the CMA will carve out the climate change benefits that arise from the agreement and review these in accordance with the principles that apply to climate change agreements, with any other remaining environment benefits being assessed using the general approach for environment sustainability agreements.

Open door policy for businesses seeking guidance

The CMA states that it is “determined to help businesses who genuinely try to do the right thing in relation to environmental sustainability”. In support of this, the Guidance confirms that the CMA will operate an open-door policy, whereby businesses who are considering entering into an environmental sustainability agreement can seek informal guidance on the application of the Guidance. The CMA encourage businesses to approach the CMA at an early stage by contacting [email protected], highlighting any issues which are not clear from the Guidance. It should be noted that the CMA would expect, having regard to any confidentiality concerns of the parties, to publish a summary of agreements with an assessment of risks and solutions with the view of supporting similar agreements in the future.    

Wider awareness campaign

The CMA has also launched a video and roadmap as part of  a wider awareness campaign. The roadmap is intended to help businesses identify different categories of risk, including initial steps that should be considered, prior to reading the guidance in full and/or seeking legal advice.

Comment

The Guidance provides clarity and certainty to businesses about when competition laws will apply to environmental sustainability and climate change agreements, whilst the open door policy is also a welcome initiative to encourage businesses to seek informal advice from the CMA about proposed agreements and collaborations. 

The Guidance therefore represents a positive step forward for businesses that wish to work together to pursue environmental sustainability initiatives in the UK.