UK competition regulator issues fresh guidance on green collaborations for sustainability

The Competition and Markets Authority (CMA) has provided new guidance on a collective agreement between leading UK supermarkets that aims to reduce greenhouse gas emissions in grocery supply chains.

Informal guidance

The UK competition regulator published its second informal guidance on 19 March under the "open door" policy contained within its Green Agreements Guidance.

The informal guidance relates to a proposal to extend joint commitment between the WWF and leading supermarkets. This proposal aims to reduce greenhouse gas emissions in grocery supply chains by requiring supermarket suppliers to set science-based, net-zero targets by an agreed date.

This is the second informal guidance issued by the UK competition regulator, following initial advice on sustainability collaborations published in December last year.

Benefits outweigh risks?

The CMA noted that, while there may be some competition risks associated with the proposal, such as potential cost increases or reduced product range, the potential benefits, including significant environmental benefits and cost savings for consumers, could outweigh any potential harm to competition.

The competition regulator's assessment of the proposal made use of the new and substantially more permissive approach when assessing the benefits of "climate change agreements."

Phasing-out agreements

The informal guidance mentions that the proposal shares similarities with a phasing-out agreement, which involve the gradual elimination over time of non-sustainable products or processes.

The guidance also states that phasing-out agreements are unlikely to raise competition concerns if they do not result in an appreciable increase in price or reduction in product quality or choice for consumers and do not have the objective of eliminating or harming competitors or market sharing.

Osborne Clarke comment

The competition regulator's assessment involved multiple rounds of information requests to WWF-UK, with the initial request for informal guidance submitted in March 2023. While the CMA acknowledged that it may not have had access to all the desired data, it recognised the limitations and uncertainties inherent in the assessment process.

The approach can be described as a "light touch review," which is beneficial for businesses as waiting for confirmation that an agreement poses no risk to competition would be even more time-consuming.

Overall, the CMA's willingness to provide guidance provides businesses with an opportunity to obtain clarity and assurance for their own agreements with competitors. The CMA has pledged not to fine the parties to an agreement it has approved under its Green Agreements Guidance, even if it were to subsequently conclude that the arrangements infringed competition law.

If your business is exploring green agreements and collaboration initiatives with competitors, speak to one of our experts for advice on framing the project to fit within the Green Agreements Guidance.