Last week, the Competition and Markets Authority (CMA) published a response to three questions posed by the Government as regards to whether competition and consumer law is "fit for purpose" as the UK transitions to Net Zero. In providing its advice to the Secretary of State for Business, Energy and Industrial Strategy (BEIS), the CMA has drawn on feedback received from calls for input and public consultations into sustainability issues, as well as targeted stakeholder engagement.
Given the breadth of the topic, the CMA's advice is relatively high level, but notably announces a decision to establish a new Sustainability Taskforce. While the CMA considers that the Competition Act 1998 (CA98) regime is sufficiently flexible to permit co-operation agreements with sustainability objectives, the Taskforce will develop formal guidance and inform the CMA's overall organisational strategy on sustainability.
As part of its consideration of questions at the intersection of sustainability and competition law, the Taskforce will keep under review the case for legislative change. It remains to be seen whether, in addition to the general guidance, it will also provide bespoke guidance to businesses, such as comfort letters or short-form opinions (the announcement notes the Taskforce may "review requests for informal advice"). The CMA highlighted that it considers this to be a live discussion, and that the Taskforce's engagement with stakeholders is ongoing and its views will continue to reflect and respond to relevant market developments.
In addition to proposing changes to consumer law, the advice to BEIS addresses some of the key issues being debated around competition law and sustainability agreements. These issues were highlighted by our colleagues in October 2021, and include:
- how to assess when a sustainability agreement will not restrict competition, and therefore will not fall within the Chapter I CA98 prohibition against anti-competitive agreements. In this regard, the CMA has promised more practical guidance from the Taskforce, acknowledging concerns raised in its call for input that a lack of certainty could have a chilling effect on the pursuit of horizontal sustainability agreements. The guidance will aim to assist industry participants to self-assess the compliance of their proposed arrangements;
- similarly, more guidance will be issued on the question of how sustainability benefits can be measured (for example, against metrics such as price, variety or quality) and when such benefits will be sufficient to merit an exemption under Section 9 of the CA98, which requires, inter alia, that an agreement allows consumers a "fair share" of any resulting benefit. The CMA expresses the view that, in principle, environmental benefits to a broader group of consumers than those directly impacted by restrictions in an agreement could be taken into account in this assessment; and
- in the merger context, the announcement suggests a more nuanced approach to the weighing of environmental benefits, as "relevant customer benefits", against competition concerns. However, even if merger-specific environmental benefits can be clearly demonstrated, the challenge of gaining merger clearance on the basis of relevant customer benefits remains considerable; again, ongoing engagement with the Taskforce may assist in this regard.
In addition to the tailored guidance on CA98 for sustainability agreements, the CMA will publish its updated Horizontal Cooperation Guidelines, and has stated its intention to work closely with authorities and regulators in other jurisdictions in deciding best practice. At the same time, the European Commission is also consulting on its updated draft horizontal guidelines which include a chapter dedicated to sustainability agreements.