Short Reads

The ACM’s Green Deal: achieving sustainability via competition law?

The ACM’s Green Deal: achieving sustainability via competition law?

The ACM’s Green Deal: achieving sustainability via competition law?

03.09.2020 NL law

The ACM has issued draft guidelines on the application of competition law to sustainability agreements. Companies entering into agreements that restrict competition but contribute to governmental sustainability objectives – i.e. lower CO2 emissions – may expect more room for collaboration. The proposed framework would allow these types of agreements if their anti-competitive effects are outweighed by their environmental benefits to society as a whole (rather than to in-market consumers only, as under the existing framework).

The ACM also indicates it will not impose fines if the guidelines were followed in good faith. Although this sounds like an open invitation for more cooperative sustainable action, companies should beware. The guidelines may be of limited value if the Commission and other competition authorities do not follow the ACM’s approach, with companies still facing a patchwork enforcement pattern for their green initiatives across the EU. Reactions may be submitted until September 30.

What’s old?

The ACM reminds companies that sustainability agreements are often not caught by the cartel prohibition – and were thus already allowed under the existing rules. An extensive list of practical examples of permitted sustainability agreements is provided in the draft guidelines, such as the use of certification labels promoting environmentally-conscious practices.

Moreover, anti-competitive agreements are currently allowed under competition law if they fulfil the criteria for the statutory exemption laid down in Article 6(3) of the Dutch Competition Act and Article 101(3) of the Treaty on the Functioning of the European Union. One of these criteria requires that consumers receive a fair share of the benefits of the anti-competitive agreement.

What’s new?

Under the proposed framework, the ACM intends to widen the scope of the fair share criterion for certain types of sustainability agreements.

The draft guidelines distinguish between environmental damage agreements and other sustainability agreements. Environmental damage agreements aim to improve production processes which cause harm to humans, the environment and the nature; for example, agreements aimed at reducing CO2 emissions. Agreements that do not qualify as environmental damage agreements, such as those concerning animal welfare, fall under the other sustainability agreements.

The scope of the fair share criterion will be widened for anti-competitive environmental damage agreements if they efficiently contribute to a policy objective to which the Dutch government is bound – such as the climate goals under the Paris Agreement. With regard to these types of environmental damage agreements, the ACM will consider the fair share criterion to be met if their benefits to society as a whole – rather than to in-market consumers only – outweigh their harm to competition (e.g. higher prices). Instead of quantitative determination of the fair share (based on environmental prices for environmental damage agreements), qualitative determination will suffice for agreements between undertakings with a combined market share of under 30%.

And now?

The ACM will not impose any fines on companies for publicly announced sustainability collaborations that ultimately turn out not to meet all the criteria, if the companies have followed the guidelines in good faith. Companies will merely have to amend their agreements to comply with the rules. To prevent such ex post situations from happening at all, companies are actively invited to discuss their sustainability initiatives with the ACM when in doubt.   

Apart from the fact that the draft guidelines are still in the consultation phase (due to close on October 1), companies should carefully consider how to set up their green initiatives. The Commission acknowledges the need for clear guidance on agreements on sustainability issues. It is currently reviewing its own Horizontal Regulations and Guidelines and intends to include further guidance on green initiatives. The UK and French competition authorities have designated sustainability as a priority; whereas the German competition authority has monitored various sustainability initiatives set up by companies.

The ACM is the first national competition authority in the EU to take a progressive, and formal, stance. If the Commission and other national competition authorities do not follow the ACM’s approach, companies may yet be confronted with differential treatment of their sustainability agreements across the EU.

 

This article was published in the Competition Newsletter of September 2020. Other articles in this newsletter:

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