Will the CMA give a green light to the green transition?

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Will the CMA give a green light to the green transition?

Will the CMA give a green light to the green transition?

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March 17, 2022

On 14 March 2022, the Competition and Markets Authority (CMA) published its advice to the Department for Business, Energy and Industrial Strategy (BEIS) on how the competition and consumer protection regimes can better support the UK’s Net Zero and sustainability goals.

The CMA has advised that the UK's current competition rules do not present an obstacle to sustainability initiatives, so they do not require fundamental change (although the CMA has proposed several changes to UK consumer law). Importantly, the CMA has made several commitments, as well as making various recommendations to and identifying thinking points for BEIS.

The table below summarises the headlines from the CMA's competition law recommendations and, where possible, compares it to progress made on the same issue by the European Commission (EC) (particularly in relation to the EC's draft Horizontal Block Exemption Regulations and draft Horizontal Guidelines, published on 1 March 2022).

Issue	CMA position	EC position
Definition of "sustainability"	The CMA advice is titled, and contains references to, "environmental sustainability" only. This approach is consistent with the CMA's approach in its initial Call for Inputs, which focused on "environmental sustainability" only.	The EC's draft Horizontal Guidelines define "sustainability agreements" very broadly to include economic, environmental and social (labour and human rights) development. The guidelines also give examples of "sustainability objectives" in agreements, including (amongst other things) respecting human rights, fostering resilient infrastructure and innovation, and ensuring animal welfare.
Formal Guidance	The CMA intends to bring forward guidance (during its review of the current Horizontal Guidelines) on: when sustainability agreements will not restrict competition; how to consider and measure "benefits" arising from sustainability agreements; and what constitutes a "fair share" of benefits for consumers - the CMA's preliminary view is that those benefiting from environmental benefits can include a broader group than just those adversely affected.	The draft Horizontal Guidelines – which are intended to enter into force on 1 January 2023 – include a chapter on sustainability agreements, including guidance on: when sustainability agreements will not restrict competition; the criteria for exempting sustainability agreements from competition law (see for example CMA points ii and iii); and introducing a "soft safe harbour" for standard-setting agreements.
Informal Guidance	In relation to specific, novel environmental sustainability issues, the CMA says it is "very keen to engage to understand the issues stakeholders are facing, and potentially provide informal guidance…where appropriate".	The EC's Competition Policy Brief in September 2021 stated: "the Commission remains ready to consider requests for individual guidance letters in relation to sustainability initiatives that raise novel issues".
Sustainability Taskforce	The CMA is establishing a cross-organisational Sustainability Taskforce. Its role will include, but is not limited to, leading engagement with all stakeholders and partner organisations, developing formal guidance and driving the CMA's sustainability strategy.	We are not aware of an equivalent taskforce in the EC (although various EC units and services are working on the Green Deal).
Potential future actions	Exclusion orders - the CMA reminded the Government of its powers to issue exclusion orders in situations where exceptional and compelling reasons of public policy require it. Block exemptions – the CMA says there may be a place for future specific block exemptions for certain categories of sustainability agreements. Legislative change - the CMA's view on the need for additional legislative change may evolve over time due to sectoral developments, evidence and/or experience (relevant precedents for change may include, for example, the EC's proposed derogation as part of the Common Agricultural Policy (CAP), and Austria's recent inclusion of sustainable benefits in its criteria for exempting agreements from competition law).	As part of the EC's CAP for 2023 to 2027, the EC is proposing a sector-specific derogation for certain agricultural sustainability agreements that meet mandated standards.
New Market Study in a Net-Zero market	The CMA has committed to launching at least one new market study in a Net Zero-relevant market in the next financial year.	The EC can carry out sector enquiries where it believes that a market is not working as well as it should.

The CMA's advice and recommendations represent the first step within UK competition law in helping to drive the UK's green transition. We wait, in particular, to see how practical and useful the CMA's formal guidance will be in enabling and encouraging future sustainability agreements in the UK.

The CMA emphasised that, post-Brexit, the UK can now depart from EU precedent in certain circumstances, which potentially provides additional flexibility. The CMA could therefore go beyond the EC's proposals and become an "international thought-leader" in sustainability and competition law. Time will tell if it will do so.