CMA’s recommendation on environmental sustainability a ‘positive step’

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Pinsent Masons’ Angelique Bret said the CMA’s advice on the matter so far has been “fairly limited”, adding that the regulator is likely to follow the new chapter of the EU’s draft horizontal cooperation guidelines to assess sustainability agreements between competitors when drafting them going to pay close attention to his own leadership.

Her comments come after the regulator released its response to questions it was asked last year in a letter from Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy (BEIS). Kmacheng asked whether the current competition and consumer law framework constrains or frustrates initiatives that could support the UK’s net-zero and sustainability goals, and whether changes to UK competition and consumer law could help achieve those goals.

The CMA said it could be more flexible in assessing whether agreements between competitors that pursue sustainability goals should be exempted under the 1998 Competition Act. It said it would assess whether the “fair share” of benefits to consumers from such deals outweighed the adverse effects on competition. In the wake of Brexit, the CMA added that UK courts may deviate from stricter EU precedents when assessing the wider benefits to consumers in agreements that could restrict competition.

Richard Snape of Pinsent Masons said: “The CMA has indicated that it is not interested in pursuing the introduction of a specific sustainability block exemption. Instead, the CMA has stated that sustainability agreements can be exempted on a case-by-case basis. A key factor in this assessment is whether consumers receive a “fair share” of the benefits of the arrangement to offset any competitive harm.”

“EU case law suggests that it must be those consumers who have suffered competitive harm who must receive their ‘fair share’ in order to qualify for an exemption. However, the CMA believes the benefit to society as a whole could be taken into account – potentially making the test more flexible and arguably breaking with EU precedent, which it is now able to do post-Brexit,” Snape added .

The CMA said it also plans to work with stakeholders to develop further practical guidance under UK merger and market rules to balance “relevant customer benefits” and competitive concerns arising from environmental sustainability initiatives. CMA’s new sustainability taskforce will also address stakeholders who suggested during their call for input last year that competition law could have a “dissuasive effect” on sustainability agreements.

The regulator told Kwarteng that it does not believe the current competition and consumer regulatory environment poses obstacles to achieving the UK’s net-zero and sustainability targets, which require “immediate significant changes”. However, the CMA proposed changes to the various consumer protection legislation after respondents to its consultation on environmental claim collection reported the need for consistent information to ensure consumers are properly informed.

The CMA recommended creating legal definitions of commonly used environmental terms such as “biodegradable,” “compostable,” and “carbon neutral.” She told Kwarteng that this could be achieved through amendments to the Consumer Protection Regulations 2008 (CPRs) and the Consumer Contracts Regulations (CCRs) 2013 or through other legislation. “This would allow consumers to more easily compare products and prevent unscrupulous companies from intentionally abusing these terms,” ​​the CMA said.

It also said that BEIS should introduce an “explicit affirmative obligation” for companies to disclose environmental information by changing the definitions of “material information” in the CPRs and CCRs to explicitly affirm that environmental information must be made available to consumers . “This would put beyond doubt the obligation to disclose such information in all circumstances. This would be particularly helpful for consumers to identify less environmentally friendly products that might otherwise not disclose their impacts,” the CMA said.

Bret said the reforms would “build on the CMA’s ongoing work, which includes misleading environmental claims and its recently launched Green Claims Code. The CMA has indicated that it is already conducting research into how green claims affect consumer decision-making. Her views on whether legislative changes to consumer or competition law systems are needed will continue to be shaped by future developments and her own insights and experiences,” she said.

In its response to Kwarteng, the CMA said it believes “more can and should be done” with competition and consumer law instruments to support the UK’s net-zero and sustainability goals, including through market studies and consumer research. The CMA plans to launch at least one new market study in a net zero relevant market in the next fiscal year. It also recognized the need for a more connected approach to sustainability across the country’s different public bodies and recommended that ministers consider whether other policy instruments – beyond consumer and competition rules – “encourage greater coordination and alignment between UK sectors and regulatory regimes”.

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