Transitioning the UK economy to net zero by 2050 is a huge but necessary task. In fact, the scientific community is of the view that net zero must be achieved much earlier than 2050 if the world is to avoid catastrophic climate breakdown. At this moment in time, all parts of the UK government have been aiming to support the transition to net zero, including through its competition law policy and enforcement.1 What the incoming conservative Prime Minister and refreshed cabinet may herald in terms of environmental policy and targets is, however, not yet clear and, more importantly, how this will impact Government departments and key agencies.
Certainly, sustainability is a strategic priority for the CMA, which means that it continues to prioritise cases to ensure business practices do not impede the successful transition to a low carbon economy. This article looks first at the work to date of the UK's CMA in the realm of sustainability, and secondly provides an outlook on what can be further expected.
1. The CMA's sustainability efforts to date
a) Green Claims Code and other consumer law developments
The CMA has focussed a lot of its efforts in ramping up consumer protection law with the adoption of a brand-new Green Claims Code in Autumn 2021. You can read our detailed article on the subject here. The Code supports existing consumer protection rules. It aims to make the use of environmental claims more transparent, accurate and clear. On the back of this, the CMA launched its first sector review targeting the fashion retail sector in January 2022, looking for evidence of consumer law breaches including in relation to the new Green Claims Code. This was shortly followed by the launch of an investigation into 3 fashion brands and their respective sustainability claims, namely ASOS' "Responsible edit", Boohoo's "Ready for the Future" range and George's "George for Good". The investigation is ongoing but is a salient reminder of the CMA consumer branch's laser focus on sustainability. Businesses would be wise to familiarise themselves with the new Green Claims Code at the earliest opportunity and make sure they are compliant.
b) Market study into electric vehicle charging
The roll out of electric vehicles will play a critical role in meeting net zero targets. The CMA concluded a market study into electric vehicle charging in the UK in July 2021. You can access the CMA case page here. In its final report, the CMA found that access to charge points varied heavily across the regions of the country, with rural areas being left behind due to a lack of investment. Charging points at motorway service stations also suffered from limited competition, with one competitor providing 80% of all public open access charge points at motorway service stations.
The CMA recommended that the UK Government support local authorities to boost the roll-out of on-street charging, especially in rural regions. It also suggested attaching conditions to its £950m Rapid Charging Fund ("RCF") to open up competition on charge points at motorway service stations.
In parallel, the CMA investigated long-term exclusivity arrangements between The Electric Highway and three motorway service operators - MOTO, Roadchef and Extra - which lasted between 10-15 years. The CMA was concerned that these arrangements made it difficult for other competitors to provide charge points at motorway service stations and thus lessened competition in that sector. The investigation was eventually concluded with secured commitments from Gridserve - the owner of The Electric Highway. These commitments include: a reduction in the length of some exclusive rights; a ban on enforcement at any site in receipt of funding under the RCF; and a sunset clause of November 2026. Gridserve must not take any other action that would undermine these commitments.
c) Information sheet on sustainability agreements
In January 2021, the CMA published an "Information Sheet" aimed at trade associations and businesses who wish to enter into sustainability agreements in compliance with competition law setting out an overview of key legal considerations. We discussed this information sheet in a podcast episode, which you can access here.
The CMA outlined the importance for competition law not to become an unnecessary obstacle to sustainable development and innovation agreements. Within the document, the CMA explains that cooperation on sustainability issues can be compliant with competition law due to the delivered benefits that can outweigh the potential consequence of restricting competition. To assess this, these agreements must be considered on a case-by-case basis, but certain points are universally applicable to maximise compliance:
- Avoid "by object" restrictions (e.g. price fixing output limitation, the sharing of markets and customers and bid rigging)
- Check whether market share allows benefit from special competition law allowances. That is especially the case where efficiencies which benefit consumers cannot be achieved with other economically practicable and less restrictive means, and the agreement will not lead to the elimination of competition in the market.
- Use a fair standard-setting process - this includes; guaranteeing participation from all competitors in the markets affected; ensuring access to the standard is on FRAND (fair, reasonable and non-discriminatory) terms; and, where relevant, full disclosure in good faith of any IP rights essential to implementing the standard.
- Reminder of what to avoid when setting standards, notably exchanging commercially sensitive information.
The information sheet is not a new piece of legislation nor did it contain any policy shift. It is however a useful and practical document aimed at facilitating competition law compliance and encouraging legitimate sustainability cooperation.
d) Advice to Government and plans for a sustainability taskforce
Following a request from the then Secretary of State for Business, Energy and Industrial Strategy (BEIS) asking for advice on how competition and consumer law could be enhanced to better support the UK net zero ambitions, the CMA published its recommendations in March 2022.
The CMA's key recommendations:
- Introducing standardised definitions of environmental terms commonly used such as "biodegradable", "compostable" and "carbon neutral"
- Mandatory disclosure of information relating to the sustainability impact of goods and services
- Banning misleading and/or unsubstantiated environmental claims
- Improving supply chain transparency by amending the Business Protection from Misleading Marketing Regulations 2008
The CMA also plans to launch a cross-organisational sustainability taskforce to guide its policy issues. The taskforce will develop guidance on relevant areas and lead engagement with stakeholders.
2. What is in store for the coming months?
a) Investigation into suspected anti-competitive conduct in ELV sector
In March 2022, the CMA launched an investigation into suspected anti-competitive conduct in relation to the recycling of old or written-off vehicles (end-of-life vehicles, "ELV"). Vehicle manufactures must offer their customers a free service for recycling ELVs which they often outsource to third parties. The case page is accessible here. The investigation concerns suspected infringement of Chapter I of the Competition Act 1998, which prohibits anti-competitive agreements. The investigation is ongoing but shows the continued prioritisation of cases with an environmental focus in line with the CMA's strategic priority.
b) CMA to enhance powers in consumer law enforcement
Looking ahead, the Queen's speech in May 2022 confirmed UK consumer law reforms creating enhanced powers for the CMA. You can read our full analysis here. It is currently expected that the Government will introduce legislation to strengthen the CMA's enforcements powers for consumer matters, including allowing the CMA to decide where consumer law has been infringed.
The Government will advance the following policies:
- Empower the CMA to directly issue turnover-based or fixed
monetary penalties for:
- failing to comply with CMA investigations and/or information requests without reasonable excuse (up to 1% annual global turnover and a 5% daily global turnover penalty for continued non-compliance); and
- breaching an undertaking or a direction imposed by the CMA without a reasonable excuse (up to 5% annual global turnover and a 5% daily global turnover penalty for continued non-compliance).
- Enable the CMA to decide where consumer law infringements have taken place, and to take actions such as awarding consumers redress and issuing fines for breaches of up to 10% of annual global turnover.
- A selection of civil penalties for non-compliance.
This potential game changer for consumer law enforcement will give the CMA a wide array of tools to enforce consumer law infringement and we expect misleading sustainability claims to be a clear target for stronger enforcement.
The past activities and future plans of the CMA indicate it has a strong commitment towards achieving net zero by 2050. Two trends are especially discernible:
- the creation of new guidance and codes of practice, as well as a strengthening of the existing rules; and
- a particular crackdown on practices with both anti-competitive and anti-environmental effects.
It will become clear soon whether the new Government under Liz Truss will upend these commitments.
1 Liz Truss the new Prime Minister of the UK has not yet announced her plans for net zero. The latest news reports put into doubt the Government's continuing commitment to achieving net zero by 2050. We will be watching this space.
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