UK competition regulator to relax rules for companies collaborating on climate

The Competition and Markets Authority announces consultation on new antitrust guidance for deals that seek positive environmental outcomes.

UK Competition and Markets Authority chief executive Sarah Cardell says the watchdog could relax competition rules that are seen as preventing companies working together to counter climate change.

Speaking to the Scottish Competition Forum on January 24, Cardell said the CMA “intends to depart from the more traditional approach to the ‘fair share’ assessment” for agreements related to climate change.

Under the current regime, the CMA focuses on whether any benefits of an agreement that might threaten the competitiveness of a market outweigh the costs of any restriction of competition, and the extent to which consumers share in these benefits.

It is proposing to recognise that the beneficiary of agreements focusing on climate may be society at large, irrespective of the specific consumer markets where the companies involved in the negotiations operate.

The threat of potential fines, which can be as high as 10 per cent of a company’s worldwide turnover, has deterred companies from working together on climate change, and groups representing banks, insurers and asset managers have raised these concerns to the regulator.

“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,” Cardell said.

“In the case of such [climate-related] agreements, the benefits are not always confined to any particular market, but may accrue to a larger group of beneficiaries or to UK society as a whole, including to consumers outside the relevant market,” Cardell said.

“Provided that consumers in the relevant market form part of the wider group of consumers who benefit from the agreement, we consider it appropriate, when assessing whether a climate change agreement may be exempt, to take into account the full benefits to UK society which derive from the agreement,” she said.

The benefits will need to be “substantial and demonstrable” and in line with “well-established” environmental goals, she added. 

Companies will be expected to demonstrate the benefits of any agreement, with the requisite analysis and evidence to be outlined in the CMA’s guidance, which is due for consultation in the coming weeks.

Guidance welcomed

The regulator’s remarks were welcomed by legal experts, who acknowledged the problems faced by firms under the existing regime.

“Clear CMA guidance explaining how businesses can jointly pursue sustainability objectives while remaining competition law compliant will be most welcome,” said Pinsent Masons senior competition lawyer Tadeusz Gielas. “Fears of possible antitrust non-compliance have deterred some businesses from pursuing such initiatives to date,” he added.

Ashurst UK head of competition law Duncan Liddell told Sustainable Views: “The spirit is really positive. For me, the key question comes into how it’s actually implemented in practice – because if parties do not have enough confidence that they are going to benefit from this relaxed regime, they’re still going to be deterred from entering into these agreements, because the downsides of getting it wrong are so great.”

However, Liddell warned that failure by the CMA to execute its proposals properly could be counterproductive. “If they don’t follow through with clear guidance that is followed in practice, then it could be damaging. It could actually put the whole initiative back, because businesses will lose faith that the CMA will implement the regime in a pragmatic way,” he said.