The European Green Deal seeks to achieve climate neutrality by 2050. As increased societal awareness is not enough to reach this goal, all stakeholders are contributing, with companies taking corporate social responsibility plans seriously. However, when undertakings join together to pursue sustainability objectives, they risk flouting cartel prohibitions. Policy trade-offs are being contemplated to ensure that prohibitions do not become an unnecessary obstacle to pro-sustainability cooperation.
The Dutch competition authority (the ACM) is leading the way. After publishing draft guidelines on the role of competition law in promoting sustainability, it has now issued a revised draft following public consultation. The UK competition authority, CMA, has also published information to assist businesses in achieving sustainability goals. A number of other agencies support similar flexible antitrust approaches, including factoring the environmental implications of mergers. Now, to reach pan-European consensus…
The European Commission’s call for feedback in shaping next-generation green policies has attracted a range of views, including from national competition authorities. The input received will feed into the updated Commission guidance on horizontal cooperation and vertical supply agreements, which is expected to be confirmed later this year.
Information exchange, joint purchasing and standard setting are areas where the Commission will look to provide clarification. New rules on state aid for environmental initiatives are also being anticipated, while existing rules are being directed to stimulate government investment in renewable energy sources. Sanctioned state aid is attracting robust private investments in green projects (for example, developing greener batteries), and it is also helping industries that face the risk of carbon leakage cope with the EU’s emissions trading system’s higher electricity prices.
Commission guidance on designing government support programmes for clean energy is being extended to address emissions-cutting technologies, such as hydrogen power and energy storage. In addition, there is a growing consensus that careful attention must be given to acquisitions of small firms pursuing green innovation in merger cases. Going forward, the Commission will actively apply competition policy as a complement to other regulation aimed at combatting climate change. This will entail a combination of rewriting current rules, as well as reprioritising available resources. A crucial area of focus will be balancing public interests, such as environmental concerns and consumer welfare in competition law assessments.
The Netherlands Authority for Consumers and Markets (ACM), championing a progressive and practical stance towards pro-sustainability cooperation, is extending an open invitation to companies to discuss if their joint proposals can be permitted. In July 2020, the ACM developed guidelines (see our previous article) explaining its new approach to assessing sustainability agreements. Now it has released a second draft version. The ACM reaffirms that it will not impose fines on sustainability agreements that turn out to be incompatible with competition rules if these agreements were discussed with it beforehand or if companies followed the guidelines in good faith.
The ACM, together with the Greek Competition Authority, also commissioned a technical report listing techniques (drawn from environmental economics) for substantiating efficiency gains in a quantitative manner. The ACM plans to make this report a scientific premise for a more open approach to sustainability agreements in competition policy. Unsurprisingly, the ACM’s leading role was specifically referred to in the Commission’s conference of 4 February 2021, which addressed how competition policy can contribute to the European Green Deal.
In its revised guidelines, the ACM retains the three categories of initiatives that do not fall foul under the cartel prohibition:
The revised guidelines expand and further explain the application of the cartel prohibition to sustainability agreements between undertakings. The ACM’s approach is novel in distinguishing between “environmental-damage agreements” and “other sustainability agreements”. The ACM points out that these agreements are only necessary if they address market failures. Businesses thus need to first consider if they may realise the sustainability gain on their own. If businesses are required to cooperate, the agreement should be tailored to address an identified market failure. For example, if consumers simply desire greater reliability of sustainability claims, a joint certification programme should suffice instead of more far-reaching engagement.
The ACM has not published a final version of its guidelines, as discussions on how best to assess sustainability agreements are still being held across Europe. In this context, the ACM prefers an EU-wide harmonised competition policy, although it will use these draft Guidelines in the interim as a reference instrument in its review of sustainability initiatives. Nonetheless, a lack of consensus regarding the application of competition rules to sustainability initiatives would result in multinational companies finding it difficult to benefit from the ACM guidelines. For example, while the positive effect on society of an “environmental-damage agreement” will be taken into account in the Netherlands, the same agreement might attract fines in the UK, which intends to continue taking the traditional narrow approach, considering benefits only in terms of the affected consumers (see below).
In response to the consultation regarding how competition policy can support the Green Deal, several EU antitrust authorities concur with the ACM that the wider benefits to society should be reflected in the competition assessment of sustainability agreements. The Finnish competition authority advocated the view that regulators should recognise the broader positive effects of sustainability cooperation between businesses. France’s authority agreed that such projects could benefit from a presumption that they benefit wider society. The Greek authority, second only to the ACM in seeking a more flexible approach, suggested a “competition law sustainability sandbox” allowing “industry to experiment with new business formats that involve cooperation between competing undertakings so as to efficiently realize sustainability goals.” The Spanish authority, in contrast, has insisted that reconciling competition law with sustainability is a question of authorities’ priorities rather than changing current rules. The director general at DG Competition has rightly observed that the “degree to which the EU’s competition rulebook will be adapted in order to tackle climate change will ultimately be a political decision”.
Across the Channel, the UK’s CMA recognises the difficulties in maneuvering the existing competition law framework, particularly in terms of sustainability initiatives. This state of affairs could result in sustainability initiatives that are considered unproblematic or exempted in some EU member states being abandoned. The CMA has issued information to help businesses reach environmental goals without breaching competition law. It is meant to support businesses’ understanding of competition law by outlining the current framework for self-assessment and highlighting the points that companies and trade associations should bear in mind when making sustainability agreements. The CMA’s approach – in contrast to the ACM’s guidelines – is relatively cautious and in keeping with convention. The CMA appears unwilling to exempt sustainability initiatives from competition rules beyond those cases where the benefits outweighing antitrust concerns are shared with the immediate set of affected consumers. There is no mention of fines being waived if undertakings follow the CMA’s information document in good faith. Instead of inviting business for open discussions of their proposals, the CMA asks them to seek legal advice to determine whether their agreements fall under an exemption. In practice, this could be extremely difficult given the lack of precedents to follow.
Meanwhile, the Irish, Spanish and Swedish Authorities – among several others – have indicated that the environmental implications of mergers should be taken into account in competition reviews. These could result in preventing “killer acquisitions” of disruptive sustainable competitors by entrenched players, supporting mergers with green objectives which are not likely to raise competition concerns, and taking into account sustainability aspects as part of the efficiency analysis.
The European Commission will “publish a report on the learnings from the consultation process and all the input to the debate” before the summer. It remains to be seen whether – and, if so, to which extent – the other European competition authorities will adhere to the Dutch authority’s progressive approach. For the green deal to be a success, we expect competition policy – hand in hand with consumer law (see the related news) – to play a significant role, as reflected in policy documents and guidelines, preferably harmonised throughout the EU.
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