With substantial fines for breaching competition law, it's not surprising that many businesses are cautious about working with competitors. However, in its recently finalised Green Agreements Guidance, the UK Competition and Markets Authority (CMA) makes it clear that competition law should not prove a barrier to legitimate green collaborations between competitors. This is helpful news for the infrastructure sector because it should allow for greater burden sharing when it comes to the costs of transitioning to a cleaner, greener approach. So what does the Guidance say about what's permitted and what isn't?

Non-problematic agreements

Helpfully, the CMA provides a range of examples of Green Agreements which are unlikely to infringe competition law and will not be prioritised for review. These include:

  • databases to pool the green credentials of suppliers – provided that there is no commitment to (not) purchase from certain suppliers;
  • collaborations which are designed to ensure compliance with UK law – provided participants can exceed those legal requirements;

  • industry codes of conduct and targets – provided that these are open, transparent, allow participants to decide how to meet or exceed those standards etc. (specific guidance applies to more integrated industry standardisation.); and

  • joint R&D relating to environmental improvements which firms would be unlikely to pursue on their own due to the level of risk involved or the investment required.

Where collaborations fall outside these safe categories, the CMA's approach will depend in part on the type of arrangement at play. In another helpful move, the CMA's most permissive approach is reserved for a sub-set of green agreements – namely 'Climate Change Agreements' – which specifically combat climate change by, e.g., reducing the impact of greenhouses gases produced by the relevant firms' activities. However, the Guidance warns that the CMA is likely to take enforcement action against "sham" arrangements which use green objectives as a "smokescreen" to allow broader, anticompetitive information exchanges and collaborations to take place.

What's the relevance to asset managers, funds and other investors?

For asset owners, managers, pension funds and other financial services firms, of particular interest will be the CMA's new confirmation that agreements between shareholders to vote in support of corporate policies that pursue green goals (or against policies that do not) will be unlikely to infringe competition law, assuming that the relevant corporate changes lobbied for are themselves in line with the CMA's green guidance.

In circumstances where, as was seen in the US in particular, financial industry groups pursuing ESG goals (e.g., NZAM and Climate Action 100+) have been subject to allegations that their objectives and membership criteria breach antitrust laws, this extra guidance is welcome.

Beware 'collective withdrawal' from unsustainable customers/suppliers

However, caution does still need to be exercised when signing up to industry-wide pledges which include specific commitments to withhold custom, services or investment from non-sustainable firms. The Guidance confirms that such Green Agreements are unlikely to be treated as a 'by object' offence – i.e., akin to cartel conduct and illegal by their very nature - but clarifies that the anticompetitive effects of such 'collective withdrawal' agreements (and their benefits) will likely need to be assessed before getting comfortable. Further, the risk of a private challenge (in the UK or abroad) remains.

The CMA's open door

Finally, the CMA has made it clear that when it comes to providing informal comfort on potential green collaborations, it has an 'open-door policy' and is "determined to help businesses" to achieve their green objectives. Informal advice from the CMA is often helpful with more novel arrangements, so this is a very welcome commitment. That said, it should not be assumed that obtaining such guidance will necessarily be straightforward – especially when the CMA is being asked to look at something new.

To get full protection from enforcement action and fines, the CMA requires parties to jump through various hoops, including conducting an initial self-assessment, complying with any CMA recommendations and keeping their agreements under review. However, even without going through the informal advice process, the CMA has indicated that it will not pursue enforcement action against agreements which comply with the principles of the green guidance.

For more information, see our detailed briefing on the UK CMA Green Agreements Guidance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.