Competition law ‘barriers’ to climate collaboration to be eased in UK

The Competition and Markets Authority’s chief executive Sarah Cardell delivered a speech at the Scottish Competition Forum on Tuesday evening (24 January), confirming that the body will consult next month on strategy changes designed to enable business collaboration on initiatives that would reduce emissions or improve climate adaptation across the economy.

She said the changes will “ensure that competition law is not an unnecessary barrier to companies seeking to pursue environmental sustainability initiatives”, as the UK works towards its legally binding 2050 net-zero target and as many business work to tighter timescales.

“We hear increasingly that firms want to tackle these issues but are worried that competition law may prevent or impede them from working together to address them,” said Cardell.

“Given the scale of the challenge to address environmental sustainability and particularly climate change concerns, and the degree of public concern about it, we think it is important that firms are not unnecessarily or erroneously put off collaborating in this space by fears about competition law compliance. This is particularly important because industry collaboration is likely to play an essential part in delivering net-zero ambitions. “

Cardell said she was not in a position to disclose full details of the CMA’s proposals, but did state that climate change mitigation and adaptation could fall under the “fair share” exemption to antitrust rules which prevent business-to-business collaborations which may undermine competition in the market.

Currently, companies are banned from entering into anti-competitive agreements unless the benefits outweigh the harms and customers receive what is considered a fair share of benefits.

“Traditionally, the assessment of whether consumers receive a fair share of the benefits from the restrictive agreement has focused on the benefits flowing to consumers in the relevant product market – that is, to customers of the products or services covered by the agreement,” Cardell explained.

“However, the CMA is proposing to take a different approach for climate change agreements. This reflects the fact that climate change represents a special category of threat: the sheer magnitude of the risk that climate change represents, the degree of public concern about it, and the binding national and international commitments that successive UK governments have entered into, set it apart.”

The change is intended to help businesses collaborate with increased ease on issues like scaling nascent low-emissions technologies or running public awareness-raising campaigns.

Cardell also spoke of the other ways in which the CMA could intervene to ensure that fast-growing markets for clean technologies and sustainable products and services – such as electric vehicles, heat pumps and retrofit packages – are “founded on strong competitive dynamics”.

She said that it will take a hybrid approach, including government, regulatory and industry advocacy as well as implementing binding changes to its own rules.

The speech comes as the EU and US continue to engage over the latter’s $369bn subsidy package for climate action, which the former has argued may undercut its own market for technologies like electric cars without stronger competition considerations. The EU is now on the verge of launching its own subsidy package to compete, which will be called the ‘Net-Zero Industry Act’.

Greenwashing clampdown

As low-carbon markets grow, Cardell acknowledged, consumers are asking more questions about clean technologies and, specifically, seeking reassurance that they will be protected as they would be when using other products and services.

September 2022 saw the CMA launching an exploration of consumer protection issues in the heat pump sector. Cardell confirmed that the Authority is now “carefully considering the next steps” and will set out plans to improve information on offer and to address common tactics businesses may be use to mislead consumers.

Speaking of consumers being misled, Cardell spoke of how, through the development of the Green Claims Code, the CMA has provided businesses with “clear guidance” on ensuring that their environmental claims do not fall foul of consumer law.

The Code launched in late 2021 and covers issues such as omitting important information, using vague jargon terms that are not widely understood, and exaggerating positive impact. The CMA conducted its first major investigation into whether company claims comply with the Code last summer, targeting three large fashion businesses in the first instance. Cardell confirmed that further investigations in other sectors will be launched this year.