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Dutch Ministry issues Guidelines on Corporate Sustainability Initiatives and Competition Law

Dutch Ministry issues Guidelines on Corporate Sustainability Initiatives and Competition Law

Dutch Ministry issues Guidelines on Corporate Sustainability Initiatives and Competition Law

02.11.2016 EU law

On 5 October 2016, the Dutch Ministry of Economic Affairs published revised policy guidelines and an explanatory note ("Guidelines") applicable to the Netherlands Authority for Consumers and Markets' ("ACM")  assessment of sustainability initiatives between competitors. Examples include initiatives relating to ecological or environmental welfare, and agreements that may benefit public health, animal welfare, and/or fair trade.

The Guidelines introduce specific factors which the ACM must take into account when applying the national equivalent of article 101 (3) TFEU (the exemption provision) to agreements on sustainability, including:

  • Long-term benefits – for society as a whole – that may result from the agreement,
  • Long-term quantitative and qualitative benefits for consumers directly affected by the agreement,
  • First-mover disadvantages that would arise if the initiative was taken by a single firm, and
  • Whether parties to the agreement are able to compete effectively on parameters that remain unaffected by the agreement.

The new Guidelines were adopted to address (perceived) tension between the competition rules and sustainability initiatives. Businesses considered that the ACM's practical application of the competition rules would continue to hamper legitimate cooperation on sustainability. In 2015, for example, the ACM did not approve of a set of agreements aimed at enhancing the animal welfare conditions of chickens sold in Dutch supermarkets [see our February 2015 newsletter article].

Although the Guidelines do not alter the legal criteria enshrined in the exemption provision, guidance is provided on the types of objective benefits and supporting evidence the ACM must consider in its assessment if brought forward by businesses in support of the initiative. For example, when assessing whether objective efficiency gains offset initial consumer harm (e.g. in the form of higher prices or reduced choice) the ACM will have to assess the positive effects that are likely materialize in the long term, including the effects on future generations of consumers. In addition, the ACM will have to consider the effects of the agreement as a whole, as opposed to limiting its assessment to the part of the agreement that may result in negative effects on competition.

In practical terms, the Guidelines offer a number of methodologies than can be used by businesses to support the positive effects of sustainability initiatives. These include using so-called "shadow pricing" to determine the future costs for society that could be avoided by the sustainability initiative. Another suggested method includes quantifying the costs relating to damage sustained by failing to undertake the initiative.

Despite the additional assessment criteria imposed on the ACM by the Guidelines, businesses seeking to cooperate on sustainability will continue to bear the burden of proving that the envisaged agreement meets the exemption criteria. Overall the Guidelines provide useful information that can be used for this purpose, but the exercise will continue to depend of the facts of the case and the scope of the agreement. It remains to be seen whether the Guidelines will materially alter the ACM's critical track record or succeed in cutting red tape for businesses seeking to cooperate on sustainability.

This article was published in the Competition Law Newsletter of November 2016. Other articles in this newsletter:

  1. District Court of Rotterdam annuls 6 fines in the Rotterdam taxi operators cartel case
  2. District Court of The Hague deals with claim reduction by claimant and rules that claimant is responsible for preserving documents

Team

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