CMA gives informal antitrust guidance in sustainability initiative

The CMA published its first ever response to a request for informal guidance received under the open-door policy set out in its new Green Agreements Guidance (“sustainability guidance”) last week. The open-door policy enables businesses, non-governmental organisations, trade associations and charities to approach the CMA for informal guidance on proposed agreements between businesses that promote environmental sustainability. 

The informal guidance, given by the CMA to Fairtrade Foundation UK (Fairtrade) in November 2023 but published only this month, relates to the Fairtrade Shared Impact Initiative (FSII) ( ‘Fairtrade guidance’). The FSII concerns the sourcing of Fairtrade banana, coffee and cocoa products by participating UK grocery retailers. The scheme aims to provide longer-term contractual stability that would enable producers the opportunity to invest in more environmentally sustainable farming practices, such as reducing monoculture. To achieve this, participating grocery retailers would agree to commit to purchase minimum additional Fairtrade volumes of bananas, coffee and cocoa from a pool of Fairtrade producers on long-term contracts. 

The Fairtrade guidance confirms that, in the CMA’s view, the FSII is unlikely to raise competition concerns.

According to the CMA, the food and drinks industry is responsible for nearly 10% of total emissions resulting from UK consumption. The FSII builds on existing participation by UK grocery retailers in Fairtrade initiatives. 

Competition law expert Tadeusz Gielas of Pinsent Masons said “The Fairtrade guidance marks the first time the CMA has applied in practice its new open-door policy relating to environmental sustainability agreements. The CMA’s active engagement with businesses in this manner, and the publication of its informal guidance, is a positive and commendable step that will help reassure businesses seeking to lawfully cooperate in the UK to achieve sustainability initiatives”.

“While the Fairtrade guidance relates to the grocery sector, which the CMA is also examining in other competition law and consumer protection contexts, it may also be useful for businesses or trade bodies contemplating similar cooperation projects in other sectors, by illustrating the CMA’s approach when formulating such informal guidance,” he said.

The CMA’s underlying sustainability guidance was issued in October 2023. It explains how competition law applies to environmental sustainability agreements between businesses operating at the same level of the supply chain and aims to help businesses act on climate change and environmental sustainability. The sustainability guidance complements broader CMA guidance on horizontal agreements which was separately published in August 2023.

“The sustainability guidance – including its practical application seen in the Fairtrade Guidance – is part of the CMA’s wider work on environmental sustainability, which aims to support the UK’s transition to a net zero economy”, said Gielas.

Sarah Cardell, CMA chief executive, said: “The Green Agreements Guidance enables companies to be confident they can fulfil their green potential without breaking the law. The agreement on which we’re giving guidance … is the latest update related to our wider work on environmental sustainability and will help grocery retailers further improve the green credentials of the Fairtrade products they place on shelves.”

“We encourage businesses in any sector to get in touch if they are considering entering into an environmental sustainability agreement but are uncertain on how the guidance would apply. We can provide insights to help them reach their environmental goals, while making sure their customers are getting a fair deal,” she said.

Sustainability continues to be a major focus for competition authorities across Europe at both EU and individual member state level, with the European Commission having extensively covered sustainability agreements in its new horizontal cooperation guidelines. Earlier this month, the Commission also adopted new competition guidelines for sustainability agreements in the agricultural sector.