UK competition regulator issues first informal guidance on sustainability collaborations
Published on 19th Dec 2023
Open-door policy can provide businesses with competition law certainty on proposed green agreements
The UK's Competition and Markets Authority (CMA) has issued its first informal advice on the application of its green agreements guidance. This demonstrates its commitment to its open-door policy to discuss with businesses how to structure environmental collaborations with competitors in compliance with competition law.
In addition to setting out guidance and examples of the types of agreements that are likely to be compliant and those likely to infringe competition law, the CMA also invited businesses to approach it for informal guidance through its open-door policy. Its objective is to ensure that uncertainty around the application of competition law is not a barrier to green agreements in the UK.
In its first informal guidance, the CMA gives reassurance to the Fair Trade Foundation that its "Shared Impact Initiative" is unlikely to raise competition concerns. That initiative involves grocery retailers committing to purchase minimum additional Fairtrade volumes of bananas, coffee and/or cocoa from a pool of Fairtrade producers on long-term contracts. The aim of this is to increase contractual stability for producers and enable them to invest in more environmentally sustainable farming practices, such as reducing monoculture.
Osborne Clarke comment
A key benefit for businesses of seeking informal guidance is that the CMA has promised not to impose sanctions in relation to an initiative where it has indicated, through informal guidance, that the initiative is compliant with competition law, even if it subsequently finds that the initiative has anti-competitive effects.
This first example of informal guidance demonstrates how businesses wanting to engage in a project that does not fall neatly within the Green Agreements Guidance can benefit from the certainty afforded by the open-door policy and be shielded from competition law sanctions. For others wanting to do the same, it has been interesting to see the evidence provided to the CMA that, alongside delivering sustainability benefits, the arrangement was not expected to have any significant impact on competition either between the retailers involved or the Fairtrade producers.
If your business is exploring green agreements with competitors, speak to one of our experts for advice on framing the project to fit within the Green Agreements Guidance or to seek informal guidance from the CMA.