ACCC's draft guide cautiously encourages sustainability collaborations  

ACCC has clear mandate to take sustainability benefits into account

What you need to know

• The Australian Competition and Consumer Commission (ACCC) has released long-awaited draft guidance for businesses interested in collaborating on sustainability initiatives.
• The draft guidance highlights that well intentioned sustainability collaborations may still raise competition risks, particularly where the collaboration involves competitors, but there are ways to mitigate those risks, including by ACCC authorisation on public benefit grounds.
• The ACCC is currently seeking feedback on the draft guidelines. The consultation period ends 26 July 2024. 

What you need to do

• Useful guideline: The guide shows the ACCC recognises the importance of sustainability collaborations and the public benefits they can deliver, but cautions businesses to carefully consider, and address, competition law concerns, especially where collaborations involve competitors or the exchange of competitively sensitive information.
• Understand the competition law risk: Businesses can explore potential sustainability collaborations, but should make sure they understand the competition risks that may arise from any proposed collaboration—especially whether it raises a risk of cartel conduct or other anti-competitive practices.
• Take caution in preliminary discussions: When exploring whether to pursue potential sustainability objectives, businesses should ensure those discussions do not lead to cartel conduct or other anti-competitive practices. In particular, the guide recommends:
  • Any agreement must be clearly conditional on it being authorised by the ACCC before coming into force. 
  • Businesses should not share commercially sensitive information with each other unless the ACCC has authorised the proposed collaboration.
• Consider authorisation where there is a competition law risk: The guide encourages businesses to discuss proposals for sustainability collaborations with the ACCC before lodging an application requesting authorisation for the collaboration. 

Background

The ACCC has published long-awaited draft guidance for businesses proposing to collaborate on sustainability initiatives. It is seeking feedback from stakeholders on the draft guide by 26 July 2024. The ACCC expects to publish the guide towards the end of this year.

In the draft guide, the ACCC recognises “the clear need for urgent action on environmental sustainability” and that “environmental harm, including climate change and biodiversity loss, represents a special category of threat to the environment and economy which requires action by all stakeholders, including the business community.”

The ACCC is the latest in a number of competition regulators (including in the United Kingdom, the European Union, New Zealand, Japan, the Netherlands and Singapore) to publish guidance for businesses collaborating to achieve sustainability goals. 

The guide highlights that in Australia, unlike some other jurisdictions, the ACCC is able to give businesses certainty about their exposure to the risk of legal action through the authorisation process. If businesses obtain authorisation before engaging in a sustainability collaboration, they can engage in the authorised conduct without risk of the ACCC, or third parties, taking legal action against them for a breach of competition law.

The Chair of the ACCC, Gina Cass-Gottlieb, observed earlier this year that one in four conduct authorisations considered by the ACCC in recent years have involved assessing environmental sustainability claims.  In October 2023, for instance, the ACCC approved the proposed takeover of Origin Energy by Brookfield and EIG, despite not being satisfied that the takeover would not substantially lessen competition. 

Draft guide 

The ACCC’s draft guide seeks to assist businesses in understanding the competition law risks of entering into sustainability collaboration initiatives, while identifying a potential path for mitigating those risks.  The guide is intended to complement existing ACCC guidance and businesses should also have regard to the ACCC's recently published 'Making environmental claims' guide in structuring their sustainability collaborations to ensure compliance with competition law.

Low risk collaborations

Similar to other jurisdictions (notably, New Zealand), the draft guide provides specific examples of sustainability collaborations that are unlikely to raise competition concerns:

• Jointly-funded research into reducing environmental impact: Competitors agreeing to jointly fund and promote research into reducing the environmental impact of their industry.
• Pooling information about suppliers: Competitors agreeing to pool evidence-based information about the environmental sustainability credentials of suppliers.
• Industry-wide emissions reduction target: Industry participants pledging, voluntarily, to work towards a target to reduce their greenhouse gas emissions.
• Independent decisions about using a sustainable input: Competitors discussing a recent public announcement of one of the competitors to transition to a more environmentally sustainable input for its products.

The guide notes that the examples are for illustrative purposes only.  However, the examples share common principles that provide guidance more generally on what other types of sustainability collaborations are unlikely to adversely impact competition—namely, they are collaborations in which the businesses:

• will make all strategic decisions independently;
• are free to innovate, or buy from or sell to whom they choose; and
• will not share commercially sensitive information.

Collaborations that raise competition concerns may be authorised by the ACCC

The ACCC has not, at this stage, proposed to issue a class exemption for sustainability collaborations.  Instead, if a proposed collaboration raises competition concerns, the guide explains that it may be appropriate for businesses to seek a formal authorisation exemption for the collaboration from the ACCC.

The draft guide acknowledges that an exemption can be sought via a notification, which enables eligible businesses to seek an exemption for specific types of conduct (such as small business collective bargaining, collective boycotts, resale price maintenance and exclusive dealing). Where groups of small businesses seek to collectively bargain, the collective bargaining class exemption may be available. 

However, the ACCC primarily encourages businesses to seek exemptions through authorisation applications to the ACCC. 

The ACCC may grant authorisation if it is satisfied that the likely public benefit resulting from the proposed collaboration outweighs the likely public detriment. The ACCC can take sustainability benefits into account coming from the conduct sought to be authorised. In particular, the ACCC has accepted that a reduction in greenhouse gas emissions is a public benefit of considerable weight, because it assists in global efforts to avoid the most severe effects of climate change. The ACCC can take into  account sustainability benefits that flow to society generally, with a particular focus on public benefits to Australians. 

The guide provides some practical guidance for how businesses considering to collaborate should frame their application for authorisation. An application for authorisation should, among other requirements: 

• identify the link between the proposed collaboration and the claimed sustainability benefits;
• explain why the sustainability benefits are likely, rather than a mere possibility;
• where feasible, quantify the size of the benefits (and detriments); and
• explain why the benefits cannot be achieved through less restrictive measures.

The ACCC has previously granted authorisation for sustainability collaborations, specifically:

• Industry stewardship arrangements, which imposed a levy on the sale of products to increase recycling or their safe disposal.
• Joint tendering by local councils that supported investment in a new waste recycling processing facility.
• Joint renewable energy buying groups, which  enabled members to lower the costs and share the risks of transitioning to renewables.
• Major supermarkets collaborating to address disruptions to a soft plastics recycling program.

Beyond authorisations, the guide provides limited discussion of the exceptions to the cartel and other anti-competitive prohibitions against which businesses considering to engage in sustainability collaborations can self-assess their conduct, rather than seeking an authorisation which can be time consuming, uncertain and costly—most notably the joint venture exception. Further guidance on these exceptions would be a welcome addition in encouraging sustainability collaborations.

Expedited authorisation process and interim authorisations may be available

The ACCC must make a determination in relation to an application for authorisation within 6 months of the application being validly lodged. Ordinarily, the authorisation process involves the following phases: targeted consultation with interested parties, publication of a draft determination, a period for written submissions to be made on the draft determination, and the issuing of a final determination.

However, in some cases the timeframe for granting an authorisation application can be expedited. Where a proposed sustainability collaboration does not appear to have any significant detriments associated with the conduct, or the application deals with a subject matter or industry that the ACCC has previous experience with and has concluded there was a clear net public benefit, the ACCC may skip the initial consultation phase and proceed to directly issue a draft determination. The ACCC will still consult publicly after issuing the draft determination.

Businesses can seek interim authorisation from the ACCC to enable them to engage in the proposed conduct while the ACCC considers the substantive application. The ACCC may grant interim authorisation where it considers it appropriate to do so. 

ACCC encourages businesses to discuss proposals for collaboration

The guide encourages businesses to discuss proposals for sustainability collaborations with the ACCC before lodging an application requesting authorisation for the collaboration. The ACCC cannot however provide legal advice.

The ACCC has not extended its encouragement to discuss proposals to businesses seeking guidance as to whether another type of exemption might be appropriate.   

Next steps for businesses 

Where businesses are looking to collaborate in respect of sustainability initiatives, they should seek legal advice as to whether a proposed collaboration raises competition concerns and whether it would be appropriate to rely on an exception to the cartel and other anti-competitive prohibitions, or to seek a formal exemption (eg an authorisation) for the collaboration from the ACCC.

Businesses are encouraged to comment on the draft guide.  We are able to assist businesses wishing to comment on the guide and to advise on proposed sustainability collaborations.

Authors: Justin Jones, Partner; Alain van der Westhuizen, Senior Associate; Victoria Beswick, Senior Associate; Oscar Han, Lawyer; and Pippi Mitchell, Graduate.