UK competition guidance on sustainability agreements set to bring more certainty for businesses

The Competition and Markets Authority (CMA) has today published its long awaited Draft Guidance on Environmental Sustainability Agreements.

The Draft Sustainability Guidance is intended to provide more certainty on antitrust risk for businesses that enter into agreements aimed at achieving environmental goals and reflects calls by businesses and practitioners for more clarity amid concerns that legal uncertainty could chill legitimate efforts to work together to combat climate change.

The Guidance applies to environmental sustainability agreements and sets out the CMA’s approach to assessing when agreements between businesses aimed to achieve environmental goals will be found to restrict competition. Essentially the CMA will balance any harm to consumers (e.g. through increased prices or reduced choice of products) against the benefits of the agreement (e.g. reduction in greenhouse gas emissions, technical improvements to products or more sustainable supply chains). Importantly, the CMA has taken a progressive approach to the key points of debate and indicated that it will look broadly at the benefits including future and non-monetary benefits. It will also interpret the concept of consumer widely, looking not only at customers in the relevant market, but those in separate but related markets.

For Climate Change Agreements (agreements contributing towards the UK’s binding climate change targets), the CMA takes an even broader approach. For these agreements, it will exceptionally consider benefits to all UK consumers arising from the agreement. These agreements merit special treatment because of the exceptional nature of the harms (and therefore benefits to consumers from mitigating the impact of climate change).

Combined with its progressive approach, the CMA has also invited businesses to engage with it on issues that remain unclear after self-assessment. And it has indicated that it will not:

• take enforcement action against agreements that clearly correspond to examples in, and are consistent with the principles set out in the Guidance; or
• issue fines against parties that implement agreements discussed informally with the CMA in advance, where the CMA’s competition concerns (if any) were addressed by the parties (provided that the parties did not withhold any relevant information from the CMA during its assessment phase which would have made a material difference to the outcome).

The consultation is open until 11 April 2023. 

To learn more about the CMA Draft Guidance, you can take a look at our more detailed post on our LinkingCompetition blog. 

If you would like to discuss your response to the consultation or contribute to the Linklaters response, please get in touch with the authors or your usual Linklaters contact.