Dear colleague
GOVERNMENT SUPPORT FOR COMMERCIAL SUPPLIES OF CO2
Government announced on 1 October that we would temporarily suspend competition law for CO2 firms to further ensure supplies to UK businesses and to allow collaboration on a sustainable market-based solution. This intervention formed part of our wider package of measures in response to the disruption to the UK’s commercial carbon dioxide supply chain as a consequence of the global rise in gas prices due to increased demand as economies across the world recover from the pandemic.
To facilitate the development of such a solution it was necessary for CF Fertilisers, the main UK supplier of commercial carbon dioxide, and its distributors to agree purchasing arrangements from CF Fertilisers that would ensure that CF Fertiliser’s production of commercial carbon dioxide remained financially viable during the disruption caused by increased fuel prices. This required CF Fertilisers and the distributors to share information about costs, prices, expected purchase volumes, customers and contract term lengths during this period. This was done with the knowledge and agreement of the UK Government to enable a rapid and effective resolution to this exceptional situation. Additionally, the Government has recognised that it may be necessary for the distributors to engage in further coordination and information sharing between themselves if there are further disruptions in the supply chain.
These actions could ordinarily breach competition law. Under UK law, the Secretary of State has the power to disapply UK competition law where there are exceptional and compelling reasons of public policy to do so. He considered this high threshold to have been met as a continued carbon dioxide shortage would have had significant impacts across wider industry, including in animal welfare, food processing, and use in nuclear and healthcare.
I am writing to confirm that the Government has now laid the Statutory Instrument for the Exclusion Order: https://www.legislation.gov.uk/uksi/2021/1169/contents/made. The legislation will come into force on 15 November but will apply retrospectively to relevant collaboration which occurred from 30 September 2021. The exclusion is limited to agreements and concerted practices necessary to deal with the effects of the disruption to the UK’s commercial carbon dioxide supply chain. It is also time-limited, and the Order will expire on 31 January 2022 or when revoked, if earlier.
The use of an Exclusion Order was a proportionate and limited measure informed by the Government’s engagement with industry and intent to enable the development of a sustainable market-based solution. However, we are clear that business practices that undermine or restrict competition in markets are a threat to consumer interests, productivity, and the wider economy. Suspending competition law longer than necessary could be harmful to consumers and the economy, and so the Government will continue to use such measures only where necessary and appropriate.
