CPSG Bulletin: Sustainable Development and Competition Law
Over the past year, different market players and competition regulators have shown increased interest and appetite for the interplay between sustainability and competition law. This has led to the development of commentary from different sources and guidance documents from some of the more proactive regulators. The movement is linked to the EU’s strong commitment to sustainability and the drive to become the world’s first climate neutral continent through the Commission’s ambitious European Green Deal.
There are a number of recurring issues that gain attention when it comes to calls for competition laws to support sustainable development initiatives. On the one hand, some players suggest that competition law slows down collaborative initiatives in the area of sustainable development. On the other hand, some regulators also pointed out that they had not been approached with concrete sustainability collaboration issues or proposals from the industry. A concern raised by regulators is whether companies would really be more environmentally friendly if competition rules were relaxed, or whether leaving “green” developments to the devices of a more competitive market would lead to greener results. In practice.
A central question is how to measure perceived “efficiency gains” against anti-competitive effects. Another is whether there is a real need to establish a “safe harbor” for “lasting” collaborative arrangements. Traditionally, competition law rules on collaboration examine the effects on the consumer relevant market (i.e. the consumer who bought the product). It is a question of assessing whether they have been fully compensated. However, the sustainability benefits are more likely to translate into a combination of a direct benefit to the individual consumer, with other advantages appreciated by society as a whole, or even by the future society as a whole. Aspects of sustainability arguments related to merger control and state aid are also receiving increased attention.
So now is the right time to take stock of where we are with the various initiatives and developments across Europe so far:
The Commission’s Competition DG has recently taken a closer look at sustainability and competition law. It is specifically recognized by EVP Vestager as part of the European Green Deal “All European policies – including competition policy – will have their role to play in getting us there”. EU competition policy already supports the goals of the Green Deal, but it has been recognized that as Europe’s ambitions evolve “at a higher speed, we need to see if competition policy could do more”. As a result, a number of consultations on existing competition law have been launched over the past year, involving potential aspects of sustainability. These included the review of the framework for horizontal and vertical agreements and the review of state aid rules.
Recently, DG Comp has also actively tackled the topic of sustainability as a topic in its own right. To this end, he launched a detailed consultation in the second half of 2020, titled “Competition Policy in Support of the Green Deal”, and encouraged all interested stakeholders to contribute. This initiative provided a series of insightful questions seeking views on state aid, anti-competitive agreements and merger control (while ruling out abuses of dominance). It published the 189 responses to the consultation received in January 2021.
DG Comp also hosted a half-day public webinar on Competition Policy and the Green Deal in February 2021. He discussed various issues including an opening speech by Executive Vice President Vestager and a keynote address by Executive Vice President Timmermans. It has also hosted a number of different panels on political ambition; innovation, green growth and competition rules; and what are the current rules on competition, merger control and state aid do deliver, and what they born.
A commitment has been made for the next three important follow-up steps of DG Comp’s sustainable development journey. the first is a public report on the contribution of the consultation and debate process on sustainable development, promised before the summer of 2021. The second is to feed into ongoing legislative reviews. Last but not the least, the the third is an opportunity to seek advice on sustainability through guidance letters or decisions under Article 10 (Regulation 1/2003).
At the moment, major changes in the EU legal framework seem unlikely. In his closing remarks for the webinar, DG Competition Olivier Guersent alluded to green adjustments and clarifications to reflect sustainability goals, rather than a relaxation of competition rules. The clarifications will concern in particular cooperation and information sharing. It is clear that we are not yet at the stage of specific EU guidelines committed to sustainability, and that there is still an important choice to be made on the way forward. However, DG Comp has clearly illustrated its seriousness and commitment to undertake a detailed and in-depth assessment of how to proceed.
The road to sustainability is paved with good intentions in the Netherlands. In the recent past, the Dutch Consumer and Markets Authority (“ACM”) had been accused of blocking sustainable development initiatives due to an outdated and overly rigid approach to competition law. In particular, he considered that the ban on the cartel prevented intersectoral cooperation concerning the sale of chicken meat produced under improved conditions and respectful of animal welfare (Chicken of Tomorrow) and prevented collaboration to close coal-fired power stations. polluting. This experience could have prompted the Dutch competition authority to play an innovative role in the European debate on sustainability and competition law.
In the summer of 2020, the ACM launched a consultation for revised sustainability guidelines, intended to replace its 2014 vision paper on competition and sustainability. This was quickly followed by another consultation on guidelines for (misleading) sustainability claims. In addition, in September 2020, he published a study that found “today’s chicken” is better and its meat more sustainable, even without cross-sector collaboration agreements.
The draft ACM guidelines on sustainability were seen as bold and sparked reactions, including from the European Commission. On January 26, 2021, a second draft revised ACM sustainability guidelines was released “ready for further discussions in EuropeACM announced that during discussions it would not fine companies that follow these draft guidelines in good faith.
In the final draft, the ACM makes a clearer distinction between “environmental damage” agreements and other “sustainability” agreements. Environmental damage agreements concern the reduction of damage to society (not included in the price of production) and a more efficient use of scarce natural resources. This includes environmental aspects like global warming and the reduction in biodiversity. Sustainability agreements are defined in the draft revised guidelines as aimed at identifying, preventing, restricting or mitigating the negative impact of economic activities on people, animals, the environment or nature .
One of the more interesting concepts from a competition law perspective is the ACM’s view that a different interpretation can be applied to the normal “efficacy claim” that users should see a fair share of the benefits of an agreement. In contrast, the ACM states that it should be possible to consider the benefits of parties other than direct users, such as the general public (eg with regard to the reduction of CO2 emissions).
It remains to be seen whether the final draft sustainability guidelines will receive the full support of the European Commission. Meanwhile, the ACM’s guidelines for (misleading) sustainability claims were launched separately on January 28, 2021 and will serve as the basis for enforcement by the ACM’s consumer rights department.
In the United Kingdom, the Competition and Markets Authority (“CMA”) has retained “climate change and support the transition to a low-carbon economy“as one of its priorities for 2021/2022. However, actions taken so far by the CMA have been limited. One of the priority areas has been consumer protection – the launch of a new work program at the end of 2020 to examine the misleading information The CMA has also launched a market study on the charging of electric vehicles, which will be completed by the end of 2021.
The CMA was one of the few competition authorities to issue specific guidance on environmental sustainability agreements and competition law. However, these guidelines only summarize the existing rules for self-assessment of competition law compliance and do not attempt to tackle some of the more difficult issues in this area. The CMA has recognized that this direction is an “interim step”, suggesting that it will likely take further action in this area.
In its recently updated merger assessment guidelines, the CMA has included environmental sustainability as a relevant and recognized possible ‘customer benefit’ (including for future clients) to be considered in the assessment of a merger. . This is an interesting development, and one of the first “nods” to the long-term merger arguments by competition regulators. The CMA confirmed that it was able to take into account a wider range of efficiencies and benefits of a merger when they apply to consumers and society in general, including whether a merger may result in a reduction in the carbon footprint of the company’s products.
Policy options on the application of competition law to sustainable development agreements are still open, with some national authorities (i.e. the Dutch ACM, but also the Greek competition regulator HCC) leading the way or at least giving businesses and the legal community thought.
As policymaking is increasingly supported at EU and national level through public consultations, market participants will have many opportunities to voice their ideas or concerns on this issue. of the future. Don’t miss the opportunity to make your voice heard!