Narrowing The LENs: Latest CMA Informal Guidance A Missed Opportunity For Sustainability Agreements?

The CMA has published its fourth piece of informal sustainability guidance, on the 3Keel LENs 2.0 scheme (the 3Keel Informal Guidance), pursuant to its Green Agreements Guidance (the Guidance) and associated "open door" policy.

This CMA policy is designed to facilitate collaboration on sustainability initiatives by providing comfort around the extent to which such proposals comply with competition law.

Unlike previous initiatives looked at by the CMA, the scheme in this case involves a commercial intermediary facilitating joint purchasing/selling and issuing guide prices, giving rise to the potential for information exchange between competitors. It therefore offered the CMA an opportunity to engage with the kinds of arrangement that are more likely to test the boundaries of competition law in a sustainability context.

However, the resulting guidance, while offering some useful practice points on scheme design, stops short of endorsing the proposal and therefore does not provide the deeper reassurance the relevant businesses needed.

In our previous article on the Builders Merchants Federation (BMF) informal guidance, we observed that businesses may feel they are "still waiting for guidance that truly moves the dial." As we explain below, it appears the wait continues.

The LENs initiative

Landscape Enterprise Networks (LENs) is a scheme operated by 3Keel, an environmental consultancy, designed to connect businesses with a stake in the natural environment - food producers, water companies, insurers, local authorities (Funders) - with farmers and land managers (Farmers) who can help protect and restore the land.

3Keel acts as an intermediary: pooling money from Funders, evaluating proposals from Farmers, and allocating the best-matched regenerative agriculture projects to Funders. As multiple Funders will contribute to the costs of a single project, and multiple Farmers collectively deliver a project, LENs involves elements of both joint purchasing and joint selling - and it is these features that gave rise to the competition law questions at the heart of the 3Keel Informal Guidance.

Sustainability initiatives may be relevant parameters of competition

3Keel argued that LENs should fall within the CMA's safe harbour for agreements that are unlikely to infringe the prohibition on anti-competitive agreements, on two grounds.

1. The operations and agreements within the scheme do not relate to the way in which Funders compete with each other in their primary markets, nor the way in which Farmers compete.
2. LENs enables parties to do something jointly that none could do individually, as no single Funder has the resources to fund landscape-scale regenerative agriculture on its own.

The CMA rejected both arguments.

On (i), it noted that sustainability activities can themselves represent a parameter of competition - businesses increasingly compete on their environmental credentials, and the purchase of ecosystem services can feed into the quality of products and the ability to meet environmental targets.

On (ii), the CMA said the test cannot be applied in the abstract: whether a particular Funder genuinely lacks the resources to act alone depends on the specific parties and projects involved, and if some Funders could independently carry out certain projects, the safe harbour would not apply to that cooperation.

The CMA therefore concluded that it could not treat LENs in its entirety as falling within the safe harbour. Though it is possible that individual project agreements might qualify, this would be something the parties would need to self-assess on a case-by-case basis.

The CMA was however more comfortable with 3Keel's approach to the scheme's eligibility criteria for Funders wishing to join - including geographic relevance, genuine sustainability goals, a multi-year commitment (to justify the significant cost of onboarding each new participant), and a financial threshold. On the supply side, 3Keel had kept things open, as there were no formal eligibility criteria for Farmers. The CMA considered that the demand-side criteria appeared objective, non-discriminatory, and capable of being met by a wide range of businesses. It emphasised, however, that 3Keel must keep these criteria under regular review, ensure they do not unreasonably exclude smaller businesses, and - on the supply side - ensure participation is promoted broadly rather than limited to existing contacts.

Could guide prices for Farmers create a focal point for pricing proposals?

3Keel provides non-binding guide prices for some measures, calculated on the basis of historic LENs prices, publicly funded scheme prices, and agronomic advice on the fair cost of inputs. Farmers are free to price above or below these figures, and there are no penalties for deviating. The rationale behind the guide prices is to mitigate the risks that pricing for a nascent market could be too low (thus risking viability) or too high (reducing Funders' willingness to invest).

Although, based on the information available, the guide prices did not appear to amount to an agreement or concerted practice between Farmers to price at a certain level (a restriction of competition "by object"), the CMA was concerned about potential vertical effects between 3Keel and individual Farmers. In particular, there was a risk of the guide prices acting as a focal point, which could soften competition or facilitate collusion between Farmers.

The exemption provided for in the Vertical Agreements Block Exemption Order could not be relied upon to address these concerns, as 3Keel's share of the intermediary market could well exceed 30%. However, the CMA noted that the use of guide prices could still be permissible, either as an "ancillary restraint" (one which is necessary to implement the wider agreement and proportionate to its objectives) or, failing that, if it satisfies the individual exemption criteria under section 9 of the Competition Act 1998 (CA98). Unfortunately, however, 3Keel had not addressed either of these points in their submissions, and so the CMA was unable to assess them further.

The CMA did however seek to provide guidance on mitigations that 3Keel could put in place to assist it in managing the focal point risks. These included: (i) considering, ahead of each funding cycle, whether guide prices are necessary and if price ranges would suffice; (ii) ensuring guide prices are clearly non-binding with no disincentives for deviation; and (iii) refraining - along with "supply aggregators" that act as intermediaries vis-à-vis Farmers - from making statements to Farmers as to whether guide prices are likely to be relied upon in practice by specific Farmers. In addition, the CMA directed 3Keel to put in place safeguards to avoid any preference being shown to Funders who also use 3Keel's consultancy services.

Highlighting information exchange risks

The CMA also considered that the LENs scheme could give rise to a risk of competitively sensitive information (CSI) being shared, whether directly (e.g. at the contracting stage of a project, when Funders can see the identities of the other Funders, which measures each is funding, and the price for each measure) or indirectly.

The CMA was concerned that where Funders compete in downstream product markets, disclosure of this type of information could amount to an anti-competitive exchange of CSI – particularly given that the purchase of ecosystem services may itself be a parameter of competition between Funders.

The CMA recognised that such exchanges would not be standalone, but would take place in the context of joint purchasing agreements and could therefore, in principle, be permissible as an ancillary restraint or under s9 CA98. However, because the analysis is highly fact-specific, turning on which Funders are involved in a given project and the nature of their competitive relationship, this is again something the parties would need to self-assess on a case-by-case basis, and could not be addressed by simply looking at the overarching structure of LENs.

The CMA did, however, provide some guidance on how these CSI risks could be mitigated, indicating that Funders should only access information about other Funders' purchasing to the extent necessary to understand what they themselves are purchasing, and its environmental impact. The CMA also suggested other safeguards such as the use of clean teams (employees not involved in day-to-day commercial operations), independent third parties or trustees to manage information flows on a need-to-know basis, and providing information in aggregated or anonymised form wherever possible.

Implications for LENs and green initiatives more generally

The CMA ultimately concluded that it does not expect to take enforcement action against the LENs 2.0 scheme framework (provided 3Keel continues to comply with the conditions discussed above). However, this comfort is limited as it extends only to the overarching framework: the individual joint purchasing and joint selling agreements, and any associated exchanges of CSI, remain matters for the parties to self-assess.

Although the CMA's approach can in some ways be seen as a missed opportunity, it is not surprising that the CMA would need more details on the specific underlying projects before providing the comfort sought by 3Keel. It remains to be seen whether 3Keel will seek further informal guidance from the CMA on a specific project, which would enable the CMA to engage with the relevant details in a way that it was unable to here. Any such guidance would be welcome, as it should provide a meaningful insight into the CMA's approach to assessing joint selling initiatives and to applying the s9 CA98 exemption (including the weight that can be placed on various factors, such as climate change-related benefits flowing to all UK consumers, in such an assessment).

The CMA's 2026/2027 Draft Annual Plan, dated the same day as the 3Keel Informal Guidance, identifies environmental sustainability agreements as a priority. And the CMA's open door policy remains in place. However, the 3Keel Informal Guidance should serve as a reminder of the importance of taking competition advice at an early stage, and of ensuring that arguments around pro-competitive benefits and/or ancillary restraints are appropriately articulated in all submissions to the CMA - even if the parties consider that their arrangement is unlikely to give rise to competition concerns.

Trainee solicitor Mihaela Lekova contributed to this article.

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