CN03 - Sustainability agreements and competition rules - will EU and national guidance converge
13 October 2021
13 October 2021
On 10 September 2021, the European Commission published a Competition Policy Brief ("Policy Brief") on how EU competition rules can complement environmental and climate policies more effectively. The Policy Brief recognises that further guidance is needed on the application of competition law to sustainability initiatives. Similarly, national competition authorities (most notably in the Netherlands, Greece and Austria) have taken steps to clarify the application of competition rules to sustainability agreements.
Key takeaways
- The European Commission is expected to provide further guidance on the application of Article 101 TFEU to sustainability agreements in the future - both in the revised guidelines and on individual cases.
- National initiatives in Austria, the Netherlands and Greece have paved the way for more flexibility in the assessment of sustainability initiatives and, in particular, for the consideration of environmental benefits for the society as a whole. The European Commission does not appear to be ready to go as far in its assessment of efficiencies under Article 101(3) TFEU.
- Both the European Commission and national authorities have made clear that sustainability agreements must not be a cover for a cartel.
In December 2019, the European Commission presented the European Green Deal which commits to climate neutrality by 2050.
Acknowledging the need for a "green" competition policy, the European Commission published a call for contributions in October 2020 and held a conference in February 2021 which focused on how EU competition rules can support environmental and climate policies.
In September 2021, the European Commission published a Policy Brief which provides examples of policy reform across State aid, antitrust and merger control. One theme which emerged from the responses to the call for contributions is a need for greater clarity on how the pursuit of sustainability objectives affects antitrust assessment. The European Commission has confirmed that it will provide this guidance in its updated guidelines on horizontal cooperation and vertical agreements. In particular, it has identified a number of areas for clarification with respect to assessments under Articles 101(1) and 101(3) TFEU.
In providing this guidance, the European Commission is likely to consider national initiatives designed to offer more flexibility in relation to sustainability agreements. Most notably:
In its Policy Brief, the European Commission acknowledges that it is important to provide concrete examples of how companies can engage in sustainability initiatives without restricting competition.
When revising its guidelines, the European Commission may draw inspiration from the ACM draft guidelines in particular, which propose creating a safe harbour for the following categories of agreements:
The Policy Brief acknowledges that it will be useful to clarify how sustainability benefits can be taken into account in the assessment of Article 101(3) TFEU and in particular:
As regards "out-of-market" efficiencies, the Policy Brief states that the assessment of the anti-competitive effects and benefits of a practice should, in principle, be made within the confines of the same relevant market. This reflects the anchored "consumer welfare standard" according to which restricting competition for a product can only be justified if the users of that product are not, on balance, worse off. However, the Policy Brief acknowledges that "benefits achieved on separate markets can possibly be taken into account" provided that:
The approach taken by the European Commission to "out of market" efficiencies noticeably diverges from positions taken at national level.
Most notably, the Austrian legislator recently amended Austrian competition rules to explicitly provide that the harm to consumers will be considered as offset where the benefit "contributes significantly to an environmentally sustainable or climate-neutral economy". This includes climate protection measures, the sustainable use of natural resources or measures directed at saving or restoring ecosystems and biodiversity. Although the Austrian Competition Authority has not yet issued its guidelines, the preparatory works for the legislative amendment interestingly provide that:
In its draft guidelines, the ACM adopts a similar position with respect to environmental-damage agreements (i.e. agreements which aim to improve production processes that cause harm to humans, the environment and nature). It provides that these agreements should be allowed where (i) the benefits to society as a whole are equal to or greater than the disadvantages to users and (ii) these benefits support an international or national standard binding upon the government (e.g. the Paris climate agreement).
The ACM and HCC also jointly commissioned a Technical Report on Sustainability and Competition on the quantification of sustainability benefits. The Technical Report "spotlights the forms of quantitative analysis that can be used in competition assessments to account for broader social benefits, including benefits for future generations". This leading expert report is likely to be taken into account by both the European Commission and other national competition authorities.
In addition to the new guidelines on horizontal cooperation and vertical restraints (due to be published by the end of 2022), the Policy Brief states that the European Commission will consider:
The HCC has also proposed the creation of a "sandbox" for sustainability and competition in the Greek market. The "sandbox" would take the form of a digital platform and provide a supervised environment for businesses active in certain sectors to liaise with the authority about proposed sustainability initiatives.
The draft revised guidelines on horizontal cooperation are expected to provide more concrete guidance on how companies can cooperate to achieve environmental goals without breaching EU competition rules. While the European Commission may draw inspiration from national initiatives, the Policy Brief suggests that the institution may take a different approach to some national authorities in relation to key aspects of the antitrust assessment (in particular, the concept of "green" efficiencies).
Both the European Commission and national competition authorities have made clear that sustainability initiatives cannot be used as a cover for cartels. This was very recently stated by the Commission when issuing its decision fining car manufacturers for agreeing to limit the development of the full potential of clean emission technology (see our September 2021 newsletter).
With thanks to Jessica Bracker and Uliana Kovaleva of Ashurst for their contribution.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.