Defining the role of sustainability in EU competition law: A flurry of important developments
Dutch footballer Johan Cruijff once said “sometimes something's got to happen before something is going to happen”. This is definitely the case in relation to the role of sustainability in competition law, with authorities across the EU actively participating in the debate and considering new frontiers of cooperation between competing firms to achieve sustainability objectives.
Tackling climate change via meaningful progress on sustainability continues to rocket up the social and political agenda, especially in Europe. But to deliver initiatives of sufficient scale and to overcome potential “first mover disadvantages” that may currently be holding genuine initiatives back, cooperation between otherwise competing firms may well be required. So EU competition policy must play an increasingly important role in striking the right balance between encouraging necessary collective action by an industry to achieve sustainability objectives, and ensuring effective competition. Competition authorities across the EU are actively participating in the debate and, in line with the EU’s transition to carbon neutrality, are looking to define new frontiers for lawful cooperation between competing firms to achieve their sustainability goals.
Since our last blog post on this topic, there has been a lot of activity. Overall there is a growing consensus that competition law does need to factor in sustainability concerns and a sense that more comfort from agencies is coming. For those interested in this area, there are a range of consultations open or expected over the coming months which give scope to influence how application of the law might develop in this area.
- Along with the European Commission, we came out in support of the draft guidelines put up for public consultation by the Dutch Competition Authority (ACM) in July 2020. Given the inherent nature and importance of sustainability benefits, we think the ACM’s proposed framework helpfully focuses on the benefits of a sustainability agreement for society in a broader sense, rather than the short-term benefits for the consumers of the specific product or service. In our response to the ACM we have called for amendments which will: (1) make the guidelines more effective and (2) give companies and advisors more concrete tools to conduct a self-assessment with confidence.
- The ACM, in an effort to avoid misleading sustainability claims, has meanwhile drawn up five rules of thumb for sustainability claims that businesses use when selling their products and services. These rules of thumb aim to ensure that consumers have sufficient information and confidence so that they can take well-informed decisions when purchasing products or services.
- Of course, even if the ACM’s future decisional practice aligns with the draft guidelines, this may be of limited value unless other European competition authorities follow suit given the frequent (and desirable) cross border activity in this area. Companies could still be faced with the risk of heavy fines and other sanctions in jurisdictions other than the Netherlands. This concern appears to resonate with the European Commission. The Commission today opened a public consultation calling for contributions in order to shape the competition policy supporting the Green Deal. The Commission’s call for contributions notes that “EU antitrust rules already contribute to the Green Deal objectives” but acknowledges that: “The current debate aims to identify whether there are remaining barriers to desirable agreements supporting Green Deal objectives and if so, how such barriers can best be addressed.” We will offer our views to the Commission and are happy to get in touch with businesses wishing to contribute to the consultation. The deadline for responding to the consultation is 20 November 2020, and will be followed with a conference in the beginning of next year. We therefore expect guidance may come sooner than 2022. Senior DG COMP officials already acknowledged the importance of competition law in supporting sustainability.
- The Hellenic Competition Commission has issued a staff position paper stating that: “Undoubtedly, competition law can address sustainability issues”. It also recognises its own role to “facilitate the transition to a Green economy and support innovation within the Green economy taking into account possible externalities from generation to generation”. Its proposals include the idea of a “green sandbox” where companies could experiment with collaborations without risk of breaching the laws. The HCC is currently envisaging the adoption of sustainability guidelines, which will follow after gathering the views of the industry and other stakeholders.
- The UK Competition and Markets Authority (CMA) has recently suggested that the important learnings from the pandemic about how best to approach industry cooperation during a crisis could provide a framework for assessing agreements in the sustainability context, including the idea of a dedicated Task Force. This follows its Annual Plan 2020 to 2021 which identified “supporting the transition to a low carbon economy” as one of six key priorities for the next year. Albeit speaking in personal capacity, statements made by the CMA’s Chief Economic Advisor, Mike Walker, advocate that modifications to be made to competition law should be directed by the priorities determined by society as a whole. Mr. Walker accepted that the CMA has not been factoring sustainability into all of its cases as yet, but indicated that it is starting to think about the pertinent questions.
- The French Competition Authority (as stated in one of our previous blogposts) has been signalling its intention to target competition law infringements which jeopardise the protection of the environment. It also expressed its interest in joining talks at the European level to revise the EU Vertical Block Exemption Regulation as well as certain categories of R&D and other specialisation agreements in view of sustainability objectives.
- We are also looking forward to the OECD roundtable on 1 December 2020, which aims to bring clarity on three primary questions around the broader sustainability considerations and competition law: (i) “Is there a potential conflict between competition and sustainability goals?”; (ii) “How is competition law enforced in cases that present sustainability issues, and how have competition authorities taken those into account within the existing analytical framework?”; and (iii) “What tools exist and could be used by competition authorities or other public bodies to enable them to take into account sustainability concerns?”.
- Not all competition authorities are however following the ACM’s liberal lead. The German Federal Cartel Office (FCO) remains doubtful as to whether cooperation between private companies is a feasible way of attaining sustainability goals under current competition rules. The FCO identifies sustainability as an evolving competitive parameter and considers, where a conflict of competition law and sustainability objectives arises, that the legislator should take the balancing decision rather than a competition authority.
- And outside the sphere of co-operation between competing firms, EU chief competition economist, Pierre Régibeau, stated the Commission may be “more open to considering out-of-market efficiencies to consider whether mergers that threaten to push up prices might lead to environmental benefits such as reduced emissions”. At the same time, the EC is reviewing its guidelines on State aid for environmental protection and energy. These are expected to be put out for consultation in spring 2021. New guidelines should be ready by 2022.