The UK now has its long-awaited competition and consumer focussed legal guidance on Green Agreements. It’s a great step forward in encouraging environmental sustainability agreements without fear of breaching competition law.
Courtesy of the UK’s Competition and Markets Authority (CMA), as of last week we now have our very own UK Green Agreements Guidance.
Consumer-focussed ‘green’ guidance and legislation has been sprouting within Europe and further afield like proverbial cabbages over the past few years. Often in consultation form, then perhaps draft guidance until eventually legal and business communities can pore over a final product that can be applied to environmental initiatives.
However, the CMA has been at the vanguard of a progressive charge, starting with its Green Claims Code in 2021 as part of its consumer law armoury to protect consumers from false ‘green’ claims and progressing into recognising that joint environmental initiatives amongst competitors deserved a more nuanced application of competition law. Despite the view held by many (including me for what it’s worth) that competition law did not and should not have a ‘chilling effect’ on genuine environmental collaborations, there were audible concerns that it did. Something significant needed to be done.
The starting point with competitor collaborations is that they heighten the risk of serious consumer harms such as price fixing or a reduction in choice and/or quality of products and services. There can however be resulting ‘consumer benefits’ from such collaborations which in turn outweigh the anti-competitive effects (although price-fixing and the like are clearly always a no-no). If various tangible consumer benefit criteria are met, there can be an exemption route from competition law prohibitions. Consumer benefits have traditionally been assessed in economic terms (price, supply & demand etc) but, in line with major concerns regarding our environment and climate change, there has been a growing shift away from that basic starting point towards recognising more altruistic social and environmental benefits.
The Green Agreements Guidance is a comprehensive dive into which types of environmental sustainability agreement can meet the exemption criteria (think creating industry-wide environmental standards or joint phasing out of non-sustainable products).
Nevertheless, for the past 20 years or so any type of consumer benefit in this context has needed to accrue to the consumers of the products and services in question. For example, if all distributors of bananas in the UK decided jointly that their distribution vehicles must be fuelled by banana skins then any resulting environmental benefit would in the past have needed to be felt by those buying and eating the bananas.
Not so with the UK’s new Green Agreements Guidance.
The CMA has taken a relatively radical step (in competition law terms at least) of stipulating that where an environmental sustainability agreement also constitutes a ‘climate change agreement’, i.e. one which contributes to combating climate change, any resulting customer benefit can be seen to accrue to the population of the UK as a whole (and not just to those buying the bananas). The Green Agreements Guidance describes this rather formally as a ‘more permissive approach’. It’s a great step forward.
The Green Agreements Guidance is the final piece of the legislative jigsaw puzzle which governs the UK’s new Guidance on Horizontal Agreements post Brexit (i.e. agreements between competitors). In contrast, the EU has (with the notable exception of sustainability in the agricultural sector) maintained the status quo with its new Guidelines on Horizontal Cooperation where the benefit from a sustainability agreement must still accrue to the consumer of the particular product or service in question and there is no distinction for what could be interpreted as ‘climate change agreements’. This is despite efforts by certain EU member states, notably Holland and Austria, to change that view.
And there is so much more going on in the UK on the green framework front. Sadly, for every positive move forward in the sustainability march, there is the need to ensure that consumers are not being hoodwinked by unscrupulous soldiers. The CMA is continuing its consumer focussed investigations into ‘greenwashing’ in the fashion industry (is that top really made from sustainable cotton or recycled polyester?) and readying itself for increased consumer enforcement powers under the Digital Markets, Competition and Consumer Bill (see my previous articles here and here). This huge Bill is wallowing its way through Parliament, and it remains to be seen if ‘greenwashing’ becomes a specified ‘unfair commercial practice’ as proposed by various commentators or will it continue under the catch-all of ‘misleading’ commercial practices. The plethora of products which now carry green claims – from coffee pods to pensions – would seem to merit a special category and regulatory taskforce of their own.
A salutary final note however: whilst it seems that we in the UK are to benefit from a ‘more permissive approach’ to genuine climate change initiatives within business and an active enforcement regime against those who seek to take unfair advantage of positive changes in our consumer habits, inconsistency in the global approach to sustainability agreements and greenwashing is set to remain a real frustration for some time to come.