Green agreements guidance: how competition law applies to environmental sustainability agreements
Summary of the Green Agreements Guidance to help businesses understand how competition law applies to environmental sustainability agreements.
Environmental sustainability agreements are agreements between competing businesses that involve co-operation to achieve green outcomes, such as tackling climate change.
For example, businesses may decide to combine expertise to make their products more energy efficient. Or they might want to use packaging material that meets certain standards to reduce waste.
The CMA has prepared the Green Agreements Guidance to help businesses assess how the competition rules apply to environmental sustainability agreements.
Businesses should review the Green Agreements Guidance before entering into any environmental sustainability agreements with their competitors.
What to consider when entering into environmental sustainability agreements
When entering into an environmental sustainability agreement with another competing business you must ensure that you comply with competition law.
There are rules around how businesses can and cannot work together. These are important to ensure effective competition that enables innovation. This benefits people, businesses, and the wider UK economy.
When environmental sustainability agreements are unlikely to infringe competition law
There are many legitimate environmental initiatives that businesses can be comfortable do not infringe competition law. For example, the following types of agreements are unlikely to raise competition concerns (provided they comply with the principles set out in the Green Agreements Guidance).
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agreements about internal corporate conduct (for example, to eliminate the use of single-use plastic in the workplace)
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agreements to run joint campaigns to raise awareness about environmental sustainability (as long as it does not amount to joint advertising or joint selling)
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agreements to set non-binding industry-wide environmental sustainability targets or ambitions
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agreements to better enable businesses to monitor and report on their own environmental sustainability targets
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agreements to develop new products or carry out initiatives in circumstances where none of the parties could do the same thing individually
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agreements to participate in an environmental sustainability standard (such as a green labelling initiative) or to phase out unsustainable products
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agreements that cover less than 10% of the market and are not trying to restrict competition through for example, price fixing, market sharing or bid rigging
The competition law assessment may vary depending on the circumstances surrounding each agreement. Businesses should consult section 3 of the Green Agreements Guidance for further information about how these and other low risk environmental sustainability agreements can be safely used without infringing competition law.
When environmental sustainability agreements need further thought
Environmental sustainably agreements are likely to restrict competition if they are likely to result in:
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an increase in price
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a reduction in choice, quality, or output
You can find further information about how to assess environmental sustainability agreements that might restrict competition in section 4 of the Green Agreements Guidance.
Some agreements can be particularly harmful and are therefore very likely to be unlawful. These include:
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restrictions on the use or development of more environmentally sustainable products or services
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price fixing
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the allocation of customers or markets between competitors
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bid rigging
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limitations on quality or innovation
Find out more on how to avoid and report these practices.
When environmental sustainability agreements may benefit from an exemption
An environmental sustainability agreement that restricts competition may still be lawful if it meets the criteria for an exemption.
One of the criteria for exemption is that the benefits consumers receive from the agreement outweigh the harm caused by the agreement. For example, agreements that result in price rises (for example, because the more sustainable input is more expensive) may be permitted if businesses can show the benefits of the agreement to consumers who purchase the product or service outweigh the additional costs to those consumers. If an agreement helps to combat climate change, the benefits of that agreement for all UK consumers may be able to be considered.
You can find further information about how to assess the potential benefits of an environmental sustainability agreement and how to assess if an agreement is capable of exemption in sections 5 and 6 of the Green Agreements Guidance.
You should read the full guidance in all cases
Getting legal advice
You should seek legal advice before entering into an environmental sustainability agreement with a competing business.
You may wish to speak to a legal adviser about a sustainability agreement you are considering.
If you don’t have access to legal advisers, there may be other sources of advice you can turn to, such as the Competition Pro Bono Scheme. This scheme offers an initial free legal consultation. Other legal advisers may also offer advice on a similar basis.
Who to contact for further guidance
If having read the Green Agreements Guidance you are still unsure about how it applies to your agreement, you can also contact the CMA for informal guidance before entering into that agreement on [email protected].
You can contact us if you are:
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a business
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a trade association
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a non-governmental organisation
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a nominated representative for a business
You can find out more about our open-door policy in section 7 of the Green Agreements Guidance.