How UK competition and consumer law can support net zero goals: the CMA’s position

The climate change emergency has driven a worldwide response by governments and companies to set more ambitious sustainability targets. One of the UK Competition and Markets Authority’s (“CMA”) top priorities is to support a wider effort to make the UK economy cleaner and greener (see its Annual Plan for 2022/23 here). This has been reflected in its focus into electric vehicle charging both through a market study and subsequent investigation into the supply of electric vehicle charge points on or near motorways, which recently ended with formal acceptance of commitments.

The CMA has also published guidance aimed at helping businesses achieve environmental sustainability goals whilst complying with competition law. In its latest sustainability focussed efforts, the CMA has published advice to the UK Government based on three questions posed by the Government regarding the adequacy of existing UK competition and consumer law in supporting the UK’s transition to net zero. 

Drawing upon calls for input and targeted stakeholder engagement, the CMA’s advice concluded that the current competition and consumer law frameworks would not frustrate sustainability initiatives. Whilst a new legislative framework would not be necessary, the CMA considers that stakeholders would benefit from further clarity about how these frameworks will be applied in an environmental sustainability context. 

To that end the CMA announced plans to launch a Sustainability Taskforce. The Taskforce will be cross-organisational and will focus on consumer and competition issues in relation to sustainability. Whilst continually reviewing the possible case for legislative change to the Competition Act 1998 and help further the wider objective of supporting the UK’s transition to a low carbon economy, the Taskforce will focus on providing formal guidance on the CMA’s organisational strategy on sustainability, as well as lead engagement with industry, Government and partner organisations to continue the dialogue regarding environmental sustainability issues. The Taskforce will focus first on developing guidance for competition law issues.

The CMA’s key recommended actions for the Government to consider are: 

• Standardise legal definitions for vague environmental terms  

• Requiring mandatory disclosure of information relating to the sustainability impact of goods and services 
  
  This is both in the consumer and B2B contexts and is a push by the CMA to encourage supply chain transparency. The mandatory requirements would require companies to disclose the sustainability impact of their products/ services and is aimed to address issues where green claims are made across a supply chain. This marks a shift from the current legislative position, whereby business may choose to make claims about the environmental impact of their product, provided such claims are not misleading.
  
  The CMA’s advice highlights its Green Claims Code guidance which emphasises that the omission of environmental impact information can be a breach of consumer protection law, where for instance, a claim is made which highlights only the positive environmental aspect of a product, without saying anything of the overall environmental impact of the product.
  
  The CMA suggests the move could be achieved by amendments to the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”) and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCRs”), which will enable consumers to make more informed decisions when distinguishing between what products are more or less environmentally harmful. 
  
  
• Adding to the list of banned practices under consumer law to further deter misleading/unsubstantiated environmental claims 
  
  To further tackle the practice of misleading/unsubstantiated environmental claims known as “greenwashing”, the CMA proposes that the Government do more and add misleading or unsubstantiated “green” claims to the list of automatically prohibited practices in Schedule 1 of the CPRs.
  
  
• Legislative amendments
  
  The CMA has proposed amendments to consumer law legislation to improve transparency and consumer awareness, in particular, the CPRs and/or the CCRs, as well as amendments to B2B legislation such as Business Protection from Misleading Marketing Regulations 2008 (BPRs).  
  
  The CMA wants to incentivise businesses to improve their environmental credentials and so has proposed amendments to the BPRs to improve transparency for consumers in supply chains by: 
  
  
  • making expressly clear that businesses are protected against misleading omissions of material environmental impact information by their suppliers; and
    
    
  • requiring suppliers to make environmental claims to disclose the evidence which substantiates the claim to their customers.

Next steps 

From an international perspective, the CMA will publish its updated Horizontal Agreements Block Exemption Orders as well as related horizontal cooperation guidelines and has stated an intention to work closely with regulators in other jurisdictions; while at the same time, the European Commission is consulting on its updated draft horizontal guidelines which include a chapter dedicated to sustainability agreements. 

Overall, the CMA has found that more clarity about what is, and is not, legal would help firms work towards sustainability goals without worrying that they are breaking the law in the process. The international debate around the circumstances in which agreements that restrict competition can qualify for exemption under competition law is especially pertinent. Businesses may wish to work together to help reduce waste or improve biodiversity, but need to understand how they can safely collaborate without infringing the competition rules. For an agreement to be exempt from competition law, the businesses’ customers should receive a ‘fair share’ of the resulting benefits, which may typically be through lower prices or higher quality goods. 

The CMA considers there is some flexibility under the current rules to take environmental benefits into account when considering exemptions for agreements that restrict competition. This is just one area where the CMA will bring forward more detailed guidance, which is much needed.

For more information, please contact Saskia King, Ariane Le Strat or Amena Charles.  

Co-authored by Amena Charles.