The European Commission has published a Policy Brief setting out its preliminary views on how to fit the European Green Deal’s sustainability goals into the EU competition rules. Companies keen to be green may be left in limbo by a looming clash with more far-reaching proposals from national competition authorities.
More pieces of the antitrust sustainability puzzle will fall into place as soon as the ongoing review of the guidelines on horizontal cooperation is finalised.
Never fear – more clarity is (almost) here?
The Policy Brief acknowledges the call for more clarity, particularly for companies currently reluctant to invest in sustainable products or processes for fear of breaching the competition rules. To help companies to overcome this fear, more examples of various types of ‘antitrust proof’ cooperation agreements with sustainability objectives will be included in the guidelines on horizontal cooperation agreements (currently under review). The guidelines will also provide more guidance on how to ‘save’ anti-competitive sustainability collaborations from the application of the EU competition rules under the exemption of Article 101(3) TFEU. With this insight, companies should be able to self-assess when and how sustainability benefits emanating from a restrictive sustainability collaboration can generate sufficient efficiencies to outweigh negative effects on consumers.
The Policy Brief includes the following indicators for this self-assessment:
- Quality matters: sustainability benefits, such as those improving the quality or durability of a product (thereby increasing the product’s value for consumers), count as qualitative efficiencies.
- No direct or immediately noticeable effect required: the product users’ level of appreciation for the sustainability benefits (and the associated willingness to pay for these) is a factor to consider in the antitrust assessment, even if the benefits do not generate any direct or immediately noticeable effects in terms of the product’s costs or quality.
- Out of market is not out of mind: sustainability benefits arising on separate markets can play a role in the antitrust assessment if there is a substantial similarity between the groups of harmed and benefitting consumers. Similarly, associated benefits for society as a whole (for instance, through collaborations to cut pollution) can be incorporated in the antitrust assessment, but only in so far as a fair share of these (out-of-market) ‘societal’ benefits can be allocated to the harmed (in-market) consumers so as to fully compensate them for the harm suffered.
- Indispensability is still key: the need to override first mover disadvantages (for instance, in collaborations to persuade consumers to use more expensive but less polluting products) is a relevant aspect when determining whether the sustainability cooperation is indispensable for the claimed benefit. However, if consumers value the sustainable products, companies are expected to offer these products independently rather than by cooperating.
In regard of merger control, the Policy Brief states that the Commission has no mandate to intervene in mergers for environmental harm reasons only, but can take account of sustainability considerations in its merger assessments; for instance, when defining markets, identifying competitive constraints or protecting green innovation efforts. In addition, the new upward referral policy should prevent green killer acquisitions from flying under the merger review radar (see our October 2020 and May 2021 newsletters).
What is fair?
The Policy Brief hints at more room for manoeuvre for companies entering into anti-competitive sustainability agreements. It acknowledges that out-of-market benefits are relevant to determine whether a restrictive agreement’s positive effects outweigh its negative effects on (in-market) consumers. Nevertheless, this can hardly be considered a “green revolution”, particularly when looking at the green initiatives in Greece or the Dutch Competition Authority’s draft sustainability guidelines (see our September 2020 newsletter and the ACM’s legal memo on fair share for consumers in a sustainability context).
Where the Dutch Competition Authority (ACM) proposes to promote sustainability agreements whose anti-competitive effects are outweighed by their environmental benefits to society as a whole (rather than to in-market consumers only), the Commission intends to only give the go-ahead if in-market consumers are fully compensated for the negative effects. To help the Commission reflect further on the need to change its mind on this, companies should take up the invitation to provide more real-life examples of how EU competition rules scare them away from joint sustainability projects.
Companies may see their sustainability agreements treated differently across the EU if the Commission sticks to its ‘fair share means full compensation’ guns in the revised horizontal cooperation guidelines (planned for fourth quarter 2022). Before embarking on green initiatives, it may therefore be worthwhile to keep track of the Commission’s ongoing enforcement actions (see our August 2021 newsletter) and to contact the Commission and national competition authorities for antitrust comfort or individual guidance letters if getting cold feet.
This article was published in the Competition Newsletter of October 2021. Other articles in this newsletter:
• Commission's record fine for gun jumping upheld
• ACM walks the walk: first-ever vertical price coordination fine
• Court of Appeal provides guidance for further course of proceedings in pre-stressing steel litigation