UK Watchdog Promises Not to Target Firms in Climate Alliances With Antitrust Law

A man climbs stairs on day two of the COP 26 United Nations Climate Change Conference at SECC in Glasgow, Scotland, on Nov. 1, 2021. (Ian Forsyth/Getty Images)

The UK’s competition watchdog published new guidance on Thursday, promising not to go after firms over environmental collaborations using antitrust law.

It come after the United Nation’s Net-Zero Insurance Alliance lost almost two-thirds of its members this year after some Republican attorneys general in a number of U.S. states alleged members of climate clubs may be breaching U.S. antitrust laws.

The Green Agreements Guidance, published by the Competition and Markets Authority (CMA) on Thursday, said the regulator “considers that a more permissive approach to exemption is appropriate in relation to agreements which contribute to combating climate change” when enforcing the Competition Act 1998.

The guidance “sets out the key principles” the businesses can use to inform and shape their collaborations on environmental sustainability initiatives including on climate change, biodiversity, and pollution, the CMA said.

The CMA said it doesn’t expect to take enforcement action against such collaborations as long as the deals don’t violate the principles set out in the guidance.

The guidance applies to collaborations such as research and development pacts, agreements on choosing suppliers or clients with better climate credentials, joint advertising campaigns to “raise awareness about environmental sustainability issues,” and “joint lobbying for policy or legislative changes, such as on carbon pricing.”

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It also included an “open-door policy,” allowing companies to run agreements through the CMA when in doubt.

As long as companies consult the watchdog, it “would not expect to take enforcement action” or “raise any competition concerns” about an agreement, the guidance said. And if the watchdog later decided the agreement does violate the Competition Act following further probe, it “would not issue fines” unless the companies have withheld crucial information from the watchdog.

Sarah Cardell, general counsel at the CMA, said the watchdog wants to make it “as easy as possible for businesses and, ultimately, shoppers to make choices which are better for the environment.”

“That’s why we plan to shine a light on what businesses can and can’t do under current competition and consumer laws, as well as advising the government on changes that will help people shop more sustainably,” she said in a statement.

Ms. Cardell added that a new CMA task force will lead the effort to “make sure the UK’s economy not only serves the interests of consumers but also delivers on its environmental responsibilities.”

The CMA promised to publish guidance on environmental collaborations in March last year after the government asked it to advise on how competition and consumer law frameworks could be used to support net zero and sustainability goals.

Climate Clubs Scrutinised in US

Some environmental collaborations are led by the U.N., which convened groups such as net-zero alliances of bankers, insurers, asset owners, and asset managers under an umbrella group called the Glasgow Financial Alliance for Net Zero (GFANZ).

One of the clubs, the Net-Zero Insurance Alliance, has come under scrutiny in the United States.

Members of the alliance pledged to transition all of their portfolios to net-zero emissions by 2050 and adopt measures such as ESG ratings into their risk management frameworks.

Earlier this year, the UK’s Ministry of Defence launched an investigation into the impact of ESG rules on the defence industry, which has been facing difficulties in accessing bank accounts or insurance.

After some U.S. attorneys general alleged insurance companies may have broken antitrust laws, members of the U.N. club have fled from the group, including France’s AXA and SCOR, Germany’s Allianz, and the UK’s Lloyd’s.

In March, the alliance had 30 members. Its website now lists 11 members.

Alec Burnside, a partner at law firm Dechert, told Reuters in April that antitrust guidance in the UK and the European Commission were “relatively timid,” and called on governments to provide “explicit safe harbours for companies.”

Last month, 22 U.S. attorneys general also wrote to members of another GFANZ club, the Net Zero Financial Service Providers Alliance, alleging their collective action against the fossil fuel industry may violate state and federal antitrust laws.

A few days later, the U.S. Treasury Department released its “Principles for Net Zero Financing and Investment,” encouraging banks, insurance companies, and asset managers to unite behind U.N. climate goals.

According to the Financial Times, the European Commission also published new guidelines in June, providing a “safe harbour” from prosecution for companies entering climate agreements.

Kevin Stocklin contributed to this report.