The Competition and Markets Authority (CMA), the United Kingdom’s competition authority, recently published guidance to help businesses understand how they can lawfully collaborate on environmental sustainability goals without infringing antitrust or competition laws. [1]
The new ‘Green Agreements Guidance’ explains how competition laws apply to environmental sustainability agreements among businesses.
In the first of this new series from Pogust Goodhead’s Global Competition and Antitrust team, we will set out how these guidelines may influence enforcement trends, and how this may also presage similar developments in the United States.
Environmental sustainability and competition laws
Environmental sustainability agreements are commitments between competitors which are aimed at preventing, reducing, or mitigating environmental harm. These could include agreements aimed at improving air or water quality and promoting the sustainable use of raw materials.
Generally, antitrust and competition laws prohibit agreements among competitors. These could include price-fixing cartels or agreements to allocate customers among competitors
Antitrust enforcers have considered whether environmental sustainability agreements run afoul of antitrust and competition laws. This requires a balance of two important policy goals – maintaining competitive markets and ensuring environmental sustainability.
In the UK, the Green Agreements Guidance provides businesses with greater clarity on how they can cooperate on environmental sustainability issues without infringing competition law. Significantly, the guidance states that ‘competition law does not impede legitimate collaboration between businesses that are necessary for the promotion or protection of environmental sustainability.’ [2] This is in line with prior statements by the CMA noting that ‘environmental sustainability is an issue of critical importance and that supporting the transition to low-carbon growth is a strategic priority’. [3]
The guidance includes principles and examples of cooperation that businesses can use to shape their decisions when working together on environmental sustainability initiatives. The CMA also operates an open-door policy where businesses, trade associations, and non-governmental organizations can approach the CMA for informal guidance on proposed environmental sustainability agreements.
Sarah Cardell, the Chief Executive of the CMA, described the importance of this Guidance: “We know that tackling climate change and promoting environmental sustainability matters, and supporting businesses to do this is a priority for the CMA. So, we have developed the Green Agreements Guidance for all companies who are considering collaborating so they can understand how to agree to green goals without breaking the law.” [4]
The European Commission’s guidelines
Like the CMA, the European Commission has also taken steps to develop guidelines that encourage initiatives related to environmental sustainability by providing direction to businesses about how these agreements can be structured so as not to violate competition laws. They recently added a chapter in their ‘Guidelines on Horizontal Cooperation Agreements’ that specifically addresses sustainability agreements. [5]
The new European Commission guidelines clarify that their antitrust rules do not necessarily stand in the way of agreements between competitors that pursue sustainability objectives.
Sustainability agreements are defined as the ability of society to consume and use the resources available today without compromising the ability of future generations to meet their own needs. The agreements include activities that:
- address climate change
- uphold human rights
- ensure a living income [6]
The new chapter provides guidance to business for determining how their joint sustainability agreements and initiatives can comply with the competition rules. Importantly, the chapter provides that where sustainability agreements do not negatively affect parameters of competition, such as price, quantity, quality choice or innovation, they are not to be regarded as raising competition law concerns. [7] This is similar to a ‘block exemption’ in other areas of EU competition law.
Unlike the CMA and European Commission, authorities in the United States such as the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) have not yet provided clear, general guidance to businesses that want to cooperate to achieve shared sustainability goals. Rather than providing guidelines for business to pursue joint environmental or sustainability goals, antitrust scrutiny of this type of cooperation in the United States has unfortunately been plagued by partisan politics.
In November 2022, five Republican Senators authored a letter to law firms advising them to inform their ‘clients of the risks they incur by participating in climate cartels and other ill-advised ESG schemes.’ [8]
Republican State Attorney Generals have also attacked asset managers and insurance companies warning that the companies’ environmental, social and governance policies may violate the antitrust laws. As a recent article in an insurance journal explained, certain Republican politicians have been using ‘antitrust rules as a lever through which to vilify ESG.’ [9]
While leaders of the FTC and the Antitrust Division of the DOJ have stated that there are no special exemptions to the antitrust laws for ESG initiatives [10], it will be interesting to watch how courts in the United States interpret various forms of cooperation on ESG issues that incorporate safeguards designed to comply with U.S. antitrust laws.
Antitrust and competition laws promote competition and protect consumers from anticompetitive conduct. Competition provides consumers with:
- lower prices
- better quality goods and services
- greater choice
- innovation
Cooperation among competitors to preserve resources like clean air and water for future generations often do not harm competition or consumers and, therefore, is not necessarily in conflict with antitrust policy goals.
The CMA’s new Guidelines provide an excellent balance between two critical policy goals – protecting competition and protecting the environment – and provide businesses with the ability to address issues relating to environmental sustainability and climate change without infringing antitrust and competition laws.
At Pogust Goodhead, we are committed to protecting consumers and businesses from anticompetitive conduct that violates antitrust and competition laws in jurisdictions across the world. Likewise, we are committed to protecting the environment and will hold companies accountable for their illegal business practices that harm the environment.
Jeffrey Gittleman is a Partner and Chair of Pogust Goodhead’s Global Competition and Antitrust Law practice. He is based in Philadelphia, Pennsylvania
[1] Green Agreements Guidance, 12 October 2023, Competition & Markets Authority
[2] Green Agreements Guidance, 12 October 2023, Competition & Markets Authority
[3] https://www.gov.uk/government/publications/environmental-sustainability-and-the-uk-competition-and-consumer-regimes-cma-advice-to-the-government/environmental-sustainability-and-the-uk-competition-and-consumer-regimes-cma-advice-to-the-government
[4] https://www.gov.uk/government/news/cma-launches-green-agreements-guidance-to-help-businesses-co-operate-on-environmental-goals
[5] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52023XC0721(01)
[6] Id §9.1.
[7] Id. §9.2.
[8] https://www.grassley.senate.gov/imo/media/doc/cotton_grassley_et_altolawfirmsesgcollusion.pdf
[9] https://www.insurancejournal.com/news/international/2023/05/24/722123.htm
[10] https://www.judiciary.senate.gov/meetings/oversight-of-federal-enforcement-of-the-antitrust-laws
