Panic at the pumps

Competition law suspension: what happened?

Pursuant to paragraph 7(1), Schedule 3 of the Competition Act 1998, the Secretary of State can exempt certain agreements (or any agreement of a particular description) from the Chapter I prohibition of competition law on exceptional public interest grounds.

Given recent supply chain pressures at petrol forecourts in some areas of the UK, the Business Secretary met with senior executives from the fuel industry to discuss issues caused by supply chain disruptions and peaks of local demand. Consequently, it has been agreed that 'The Downstream Oil Protocol' will be implemented to enable the Government to work with fuel producers, suppliers, hauliers and retailers to ensure minimised disruption to the fuel-industry. The industry will be allowed to share information more easily in order to prioritise the delivery of fuel to the areas of the country which need it the most, or other strategic locations.

An Order, made under the Competition Act provisions, was issued in 2012 and provided that a Chapter I prohibition would not apply to any "Qualifying Protocol", which for these purposes is an agreement between the Secretary of State and designated persons that concerns the distribution of fuel in the event of a supply disruption. The Downstream Oil Protocol is activated in accordance with the 2012 Order; Business Secretary Kwasi Kwarteng reassured the public that the Order forms part of a long-standing contingency plan, and thus does not rely on the creation of new legislation.

The relevant legislation, The Competition Act 1998 (Public Policy Exclusion) Order 2012, is found in here, and an explanatory memorandum on the Order can be found here.

Previous Schedule 3 exclusion orders - a new crutch for the UK government?

As an exceptional measure, Schedule 3 exclusion orders are, unsurprisingly, only rarely used and their implementation is not done lightly. 

There have only been a handful of Schedule 3 exclusion orders since the Act came into force over 20 years ago, and notably of these, five orders were implemented in the last year in response to the coronavirus crisis. From March 2020 onwards, these exclusion orders covered the grocery sector, the Isle of Wight ferry services, health services and the dairy sector.

What we might be seeing, therefore, is an increasing reliance on Schedule 3 orders by the UK government in response to a turbulent and fast-changing economy.

The future of competition law suspensions: is collaboration over the climate crisis in the public interest?

The increasingly generous approach to the use of Schedule 3 orders to suspend competition law in certain industries, largely in response to potential shortages, might signal more competition law suspensions to come, particularly given the potential (and perceived) ramifications of Brexit on consumer behaviour.

Given this acknowledgment that collaboration between businesses can be the only short-term solution to remedy widespread public interest issues, it should be questioned whether this is also an appropriate approach to climate issues. This extreme measure may be only appropriate in the short-term, and is often made under duress. The climate crisis, however, is a long-term issue, so perhaps rather than suspending competition law we should look to amend it to include collaborative measures within a legal framework, rather than in the absence of one.

There is growing pressure to consider collaboration as a viable method to promote green initiatives and practices, especially if one were to view the climate crisis with the same level of severity as the various crises that have influenced past Schedule 3 suspension orders. Our article on the EC Competition Policy in Support of Europe's Green Ambition reflects on this divergence between finding innovative and competitive solutions to promote green objectives, and the (somewhat anti-competitive) need for businesses to collaborate to support the Green Deal. The Netherlands' competition authority in particular have set out a more ambitious approach to balancing anti-competitive behaviour with wider sustainability goals - that it should be possible for an agreement between competitors to be allowed where it benefits wider society through greener initiatives, even if a portion of consumers are left worse off.

Along a similar vein, a member of the UK Competition Appeal Tribunal observed that, whether or not the recent Schedule 3 order was the right decision, it is ironic that competition law may be suspended to ensure the steady flow of fossil fuels, and yet competition law cannot be updated to help companies to cooperate to reduce the use of such fossil fuels in everyday practice. Whether or not the UK authorities are open to change is yet to be seen: the CMA has launched a consultation calling for inputs to help inform the government on how competition and consumer regimes could better support the UK's Net Zero and environmental sustainability goals (see here), which closes in November.

It is also worth noting that the suspension of competition law might not be the most effective way to promote healthy collaboration between companies in a way that would serve the public interest; clearer guidance or the incorporation of cooperative measures into the existing legal framework might be considered to be a longer-term (and more forward-facing) solution for both short and long-term crises. Such beneficial collaborative measures might fit better in specific legislation, rather than come about through its suspension.