On 11 May 2023, members of the European Parliament’s internal market (IMCO) and civil liberties (LIBE) committees agreed their final text on the EU’s proposed AI Act. After MEPs formalize their position through a plenary vote (expected this summer), the AI Act will enter the last stage of the legislative process: “trilogue” negotiations with the
The Climate Crisis
This week’s report by the World Meteorological Organisation makes for alarming reading. The report warns there is a 66% likelihood of exceeding the 1.5°C threshold in at least one year between 2023 and 2027 and notes that such a rapid change in global temperatures will take the world into ‘uncharted territory’, with an anticipated El Nino weather system likely to push already high temperatures even higher this year. Since we have already seen the impact of a 1.1°C rise, the conclusions of the WMO report are deeply uncomfortable.
This blog looks at some of the data which give context to the Report’s conclusions.
Gas
Russia is the world’s largest natural gas exporter; the second-largest exporter of crude oil; and the third-largest producer of crude oil. The Russian invasion of Ukraine spooked global gas markets and pushed prices to record highs – the TTF European gas price peaked at a record €343/MWh in August (equivalent in oil terms to more than $500 a barrel). But as world gas markets have adjusted, the price has fallen – €75 per megawatt hour at the end of December and under €50/MWh by the end of April 2023.
Like global markets, the EU has demonstrated remarkable agility in its response to Russia’s invasion. In 2020, Russia supplied nearly 43% of all EU energy imports. The EU set itself the target of reducing Russian gas imports to 55 bcm/year by March 2023 (down from 158 bcm in 2021). At the time, this seemed ambitious, but in the event, the EU easily exceeded that target and, by October 2022, the EU’s Russian gas imports had fallen to 38 bcm (12 % of the EU’s energy consumption).
Last spring, the EU required that Member States’ winter storage be 90% full by the end of autumn. Again, at the time, that seemed a tough ask in the face of global constraints on alternative supplies. But in any event, the EU easily exceed the target, reaching 96% by the beginning of November 2022.
A combination of factors means the outlook for the EU is more positive than expected:
- A mild winter meant the EU emerged with record high gas inventories (EU storage was 56% full);
- The success of demand-side efficiencies (the Commission set a cross-EU efficiency target of 15% reduction in demand: the EU reduced demand by an average 19%);
- Global gas markets have been nimble in responding to EU demand for non-Russian gas. New and alternative supplies flowed in from Norway, Qatar, the US and (importantly) Algeria through existing, but under-used pipelines and new LNG capacity;
- The EU has built new LNG infrastructure at record speed – with Germany opening its first LNG jetty in November 2022.
Sustainability Agreements: Potential Divergence between Authorities
Various national competition authorities (“NCAs”) are continuing to consider sustainability arguments in competition cases. However, NCAs are increasingly diverging in their approach as to whether, and to what extent, they are willing to allow sustainability considerations in the competition law framework. This blogpost highlights a few recent developments in jurisdictions on both sides of the Atlantic.
Belgian approval of an initiative in the banana sector
On 30 March 2023, the Belgian Competition Authority (“BCA”) approved a sustainability initiative concerning living wages in the banana industry. This marks the first initiative based on sustainability grounds approved by the Belgian NCA.
The IDH Sustainable Trade Initiative, a social enterprise working with various entities towards facilitating sustainable trade in global supply chains, and five Belgian supermarkets proposed a collaboration scheme aimed at closing the gap between actual wages and living wages in the banana sector. The collaboration will consist of meetings and discussions where the companies’ internal conduct will be assessed and further developed with the aim to better support living wages for workers in the participants’ banana supply chains.
The collaboration will involve the exchange of certain data and information which the BCA did not consider anticompetitive. The participants have committed to not set mandatory or recommended minimum prices and to not communicate any changes in costs relating to their supply chains. IDH will supervise the collaboration and any data shared will be verified by an independent third party.
Similar initiatives concerning the banana sector have been proposed in Germany, the Netherlands and the UK. The German NCA has already approved the proposed initiative. Neither the Belgian nor the German NCA considered the initiatives in question to infringe competition law. There is, however, a fine line between such agreements falling in or outside the scope of competition law, and potentially amounting to an infringement. For example, clauses which lead to non-negligible price increases for end-consumers could raise questions and potentially be considered to have anticompetitive effect. It can therefore be expected that that NCAs will periodically monitor the implementation of such initiatives.
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Italian Garante Fines Digital Marketing Company Over Use of Dark Patterns
On April 17, 2023, the Italian Supervisory Authority (“Garante”) published its decision against a company operating digital marketing services finding several GDPR violations, including the use of so-called “dark-patterns” to obtain users’ consent. The Garante imposed a fine of 300.000 EUR.
We provide below a brief overview of the Garante’s key findings.
Background
The sanctioned company operated marketing campaigns on behalf of its clients, via text messages, emails and automated calls. The company’s database of contacts was formed by data collected directly through its online portals (offering news, sweepstakes and trivia), as well as data purchased from data brokers.
Key Findings
Dark patterns. The Garante found that, during the subscription process, the user was asked for specific consent relating to marketing purposes and sharing of data with third parties for marketing. If the user did not select either of the checkboxes, a banner would pop-up, indicating the lack of consent, and displaying a prominent consent button. The site also displayed a “continue without accepting” option, but this was placed at the bottom of the webpage – outside of the pop-up banner – in simple text form and smaller font size, which made it less visible than the “consent” button. The Garante, referring to the EDPB’s guidelines (see our blogpost here), held that the use of such interfaces and graphic elements constituted “dark patterns” with the aim of pushing individuals towards providing consent.
Double opt-in. The Garante noted that consent was not adequately documented. While the company argued that it required a “double opt-in”, the evidence showed that a confirmation request was not consistently sent out to users. The Garante recalled that double opt-in is not a mandatory requirement in Italy, but constitutes nonetheless an appropriate method to document consent.
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The Green Claims Global Drive: Developments in the UK, US and EU
2022 and 2023 may be remembered as pivotal years for efforts against so-called “greenwashing.” In this article, we look at some recent developments in the regulation of “green claims” in the UK, the US, and the EU that corporates should be aware of. We provide a broad summary and comparison snapshot of the UK, US and EU regimes to help companies navigate these rules. Now is a critical time for companies to get up to speed: authorities in all three jurisdictions are focusing more and more intently on this issue; company reputations will increasingly rise and fall with the strength of their green claims, and national regulators are set to get new powers (including the power to levy significant fines) to tackle companies found in breach.
I. Summary of recent developments: What’s new in greenwashing?
In January 2022, the UK’s Competition & Markets Authority (“CMA”) launched a sector‑by‑sector review of misleading environmental claims. The CMA started with the fashion sector, and called out a number of high‑profile, fast‑fashion companies for their practices. Twelve months later, the CMA announced that it was expanding the investigation to greenwashing around “household essentials”, including food, drink, toiletries and cleaning products. The CMA’s review is the first concerted application of the CMA’s new Green Claims Code, published in September 2021, which gives guidance for any business (wherever based) making environmental claims in the UK.
Meanwhile, in December 2022, the US Federal Trade Commission’s (“FTC”) launched a review of the “Guides for the Use of Environmental Claims” (“Green Guides”), which was last updated in 2012. The initial comment period closed on April 24, 2023. The FTC plans to update the Green Guides to reflect developments in consumers’ perception of environmental marketing claims. As a part of its ongoing review, the FTC also announced a workshop to examine recyclable claims. The workshop is scheduled for May 23, 2023 and the public can submit comments on the subject of recyclable claims through June 13, 2023. For more detail on the review, please see our dedicated blog post, here.
Finally, the EU has proposed two Directives to modernize and harmonize the rules on green claims across the bloc (together, the “EU Green Claims Proposals”). Currently, EU law does not specifically regulate environmental claims. Instead, environmental claims are subject only to general consumer protection and advertising rules (set out in Directive 2005/29 on Unfair Business-to-Consumer Practices and Directive 2006/114 on Comparative Advertising). Admittedly, the EU has published guidance on interpreting and applying the general rules in the context of green claims (see the guidance here, and see our previous blog post discussing the guidance here). However, in practice, EU Member States approach interpretation and enforcement in a variety of different ways. On March 3, 2022, the European Commission published a Proposal for a Directive Empowering Consumers for the Green Transition, also known as the “Greenwashing Directive.” The Greenwashing Directive amends the EU’s existing consumer protection rules, and bans a number of general green claims, such as “climate neutral” or “eco-friendly.” It also imposes some rules on the use of non-environmental sustainability claims or “social impact” claims, such as “locally produced” or “fair labour.” One year later, on March 22, 2023, the European Commission presented a Proposal for a Directive on Green Claims (“Green Claims Directive”), which we discussed here. The Green Claims Directive proposes a new and strict framework, applicable to all companies operating in the EU/EEA, to harmonize the rules on the substantiation of voluntary green claims.
Below, we outline the key aspects of the different legislative frameworks.
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EU Pharma Legislation Review Series: Temporary Emergency Marketing Authorizations
Following the COVID-19 pandemic and the relatively slow approval of vaccines in the EU versus other key jurisdictions, as part of the EU’s General Pharmaceutical Legislation amendment proposal, published on 26 April 2023, the European Commission has proposed to introduce temporary emergency marketing authorizations (“TEMAs”) for use when there is a “public health emergency.” The TEMA will be an “agile, fast and streamlined” process to allow products to be developed and made available as soon as possible in emergency situations. However, it remains to be seen whether in practice the TEMA process will provide a faster procedure than existing routes for early and expedited approval of medicinal products, such as conditional marketing authorizations (“CMAs”) or Member State procedures for temporary approval.
Reason to Introduce the TEMA
The EU took a coordinated approach to approval and procurement of vaccines during the COVID-19 pandemic. In the EU, COVID-19 vaccines were approved using the CMA procedure combined with a rolling expedited review. According to the European Medicines Agency (“EMA”), CMAs were the “the most appropriate tool to grant access to COVID-19 vaccines to all EU citizens at the same time and to underpin mass vaccination campaigns.” Vaccines approved with a CMA included Comirnaty, Nuvaxovid and Spikevax (amongst others).
However, the approval of COVID-19 vaccines in the EU was slower than in other jurisdictions. For example, the UK MHRA granted Comirnaty a temporary authorization on December 2, 2020. The US FDA gave the vaccine an Emergency Use Authorization on December 11, 2020. Whereas, the Commission did not grant a CMA for the vaccine until December 21, 2020.
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EU Pharma Legislation Review Series: Supply Security and Shortages Control
As part of the EU’s General Pharmaceutical Legislation amendment proposal, published on 26 April 2023 (“theProposal”), the European Commission (“Commission”) has introduced a series of measures aimed at securing the supply of critical medicinal products across the EU and at preventing shortages. In particular, there are new obligations for Marketing Authorization Holders (“MAH”) and competent authorities are given more power to better monitor and control the availability of medicines on the market.
As we have discussed previously, these measures aim to tackle the broader problem of security and robustness of pharmaceutical supply chains, which became especially prominent during the COVID-19 pandemic. In this blog, we briefly explore some of the changes introduced by the Proposal.
Preventing Supply Disruptions and Shortages
Critical Medicinal Products
The Proposal expands the monitoring of “critical medicinal products” beyond emergency situations. Now, medicinal products “for which insufficient supply results in serious harm or risk of serious harm to patients” will be included in the “Union list of critical medicinal products” (“Union list”), and the Commission will have the power to implement measures such as stockpiling of active pharmaceutical ingredients or finished dosage forms.
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Green Groceries: Key ESG Issues for the FMCG Industry (including FBOs)
Those in the business of fast‑moving consumer goods (“FMCGs”) are likely aware of the plethora of environmental and product stewardship regulations applicable to the FMCG sector. These laws are set to increase and expand in application. What FMCG companies also need to get to grips with are a range of broader (and also fast‑moving!) environmental, social and governance (“ESG”) developments and consequent risks and opportunities. Companies need to understand how the new world of ESG impacts their supply chains, key ingredients and components, consumer choice and confidence, competitive advantage, market accessibility, and marketing.
Designed as a ‘primer’ for FMCG companies, in this piece, we cover a range of key trends in the emerging UK and EU ESG legal landscape as relevant for the FMCG sector, from farmers to Food Business Operators (“FBOs”) and from manufacturers to retailers. We also discuss some key legal and reputational risks; as well as pointers to help companies decipher and prepare for the ESG storm.
We focus on the UK and the EU (first movers on many ESG issues), but the landscape in other jurisdictions (including, for example, the US) is also evolving and becoming more complex.
Key ESG Issues for FMCGs
We think there are four categories of key ESG developments for FMCGs to watch: (I) corporate reporting and disclosure regimes; (II) green/sustainability claims and labelling; (III) supply chain obligations; and (IV) product packaging and presentation.
Many emerging ESG frameworks cut across sectors. This may be efficient for regulators, but can make identifying sector-specific risks and opportunities more challenging. We have sought to do that below.
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The Implications of the Windsor Framework
The relationship between the UK and the Republic of Ireland (ROI) came into sharp focus recently, as US President Joe Biden visited ROI. Biden’s visit coincided with the 25th anniversary of the Belfast (Good Friday) Agreement 1998 (GFA) which brought an end to 30 years of Troubles in Northern Ireland (NI). The UK government will have welcomed the fact that President Biden described the Windsor Framework (WF) as one of two pillars (along with the GFA) which are key to future peace and prosperity in NI. The WF is also fundamental to the recent improvement of the tripartite UK-EU-ROI relationship.
The Northern Ireland Protocol (NIP) was part of the UK’s withdrawal from the EU and sought to square the circle of respecting the GFA, whilst maintaining NI’s place in the UK Single Market. But the Unionist community in NI felt the NIP left NI being treated differently from the rest of the UK – a feeling which led to the 2022 suspension of the Stormont Assembly. The negotiation of the WF demonstrated a new and welcome willingness of the UK and the EU to negotiate mutually acceptable solutions to some of the problems created by Brexit (even if the WF has not (so far) achieved one of its objectives of re‑starting power-sharing at Stormont).
What has Changed under the WF?
The WF addresses a number of the difficulties with the NIP — including arrangements for medicines, cross‑border transport of plants and pets, and the power of the NI Government to raise objections to EU legislation that applies in NI (the “Stormont Brake”). The WF also creates a “Green Lane” (for agri‑foods being traded only into NI) and a “Red Lane” (for agri‑food products ‘at risk’ of leaving the UK’s Single Market and being traded into the EU’s Single Market). Green Lane goods will be required to carry new labelling stating ‘not for sale in the EU’ and, in comparison with the checks on such goods required under the NIP, Green Lane goods will be subject to reduced customs checks and procedures.
Regulating the Metaverse in Europe
There is a flurry of new EU initiatives to regulate the metaverse. Last week, the European Commission launched a public consultation (open until May 3, 2023) to “develop a vision for emerging virtual worlds (e.g. metaverses), based on respect for digital rights and EU laws and values” such that “open, interoperable and innovative virtual worlds … can be used safely and with confidence by the public and businesses.” This initiative follows closely on another EU public consultation on allocating costs of expanding network infrastructure (open until May 19, 2023). As explained by the EU’s internal market commissioner, Thierry Breton, the increased data required by new technologies such as the metaverse necessitate transforming the underlying digital infrastructure. Separately, Commission President Ursula von der Leyen launched last September a non-legislative initiative on the metaverse. Similarly, the European Parliament is also working on its own-initiative report on opportunities, risk and policy implications for the metaverse.
As EU officials grapple with potential regulatory constraints as well as policy building blocks for the metaverse, they will need to address issues common across the globe: how to take advantage of the technological inflection point offered by the metaverse, while ensuring competition, privacy, and cybersecurity, among the many legal topics raised by the metaverse.
Metaverse Prospects
This rapidly increasing regulatory attention is unsurprising as the metaverse is estimated to generate up to $5 trillion in global market impact by 2030 and already in 2022, investments into the metaverse doubled compared to the previous year, reaching over $120 billion. As a multifaceted and complex digital ecosystem, the metaverse provides a wide array of investment opportunities as, in principle, nearly anything done physically could be done meta.