Sense and sensibility in sustainability collaborations

Background

Originally published in 2020, and amended in 2021, the Sustainability Guidelines of the Dutch Consumer and Markets Authority (the ACM) aim to explain in greater detail how competition law is applied to sustainability arrangements between companies. On top of the sustainability guidelines, in September 2022 the ACM published Guidelines regarding collaborations between farmers (the Farmers Guidelines). These touch upon sustainability too.

Sensible sustainability initiatives

The ACM has applied its Sustainability Guidelines to various sustainability arrangements between companies. In many of these cases, the ACM found the arrangements to fall under one (or more) of the five categories of agreements listed in the Sustainability Guidelines, which are generally considered not to prevent, distort or restrict competition:

1. Agreements that incentivise undertakings to make a positive contribution to a sustainability objective without being binding on the individual undertakings;
2. Codes of conduct promoting environmentally-conscious, climate-conscious or socially-responsible practices;
3. Agreements that are aimed at improving product quality, while at the same time certain products or products that are produced in a less sustainable manner are no longer sold;
4. Initiatives where new products or markets are created through innovation, and where a joint initiative is needed for acquiring sufficient production resources, including know-how, or for achieving sufficient scale; and
5. Agreements whose sole purpose is to make the undertakings involved, their suppliers and/or their distributors respect the national or international standards that apply to doing business in countries outside Europe, particularly in developing countries. 

The ACM recently examined three more sustainability arrangements and found two of them to fall under the above-mentioned categories, with the third one ‘saved’ by (sustainability) efficiencies (see our March 2022 newsletter for earlier reviewed initiatives).

• In July 2022, the ACM endorsed the agreements between soft-drink suppliers to discontinue plastic handles on their packaging. Coca-Cola approached the ACM for an opinion on whether the arrangements negatively affect competition and harm consumers. Relevant aspects in the ACM’s assessment were that the handles play no role in the competitive process and that each participant remains free to decide for itself when and how to discontinue the plastic handles of the multipacks. As a result, the agreement was deemed to fall into categories 1 and 3 referred to above and was informally cleared.
• In early September 2022, the ACM provided an informal opinion on sustainability agreements between garden centres to exclude suppliers that use illegal pesticides. Growers who are currently using illegal pesticides have an advantage because their means of production are cheaper and the growing requires less effort. This constitutes illicit competition since the advantage is brought about through illegal means. The ACM concluded that the agreements provided a necessary and proportional elimination of illicit competition and fell under the fifth category of sustainability agreement referred to above, namely the combating of below-legal-standard competition. It did require that the arrangements excluding these suppliers, are to be open and transparent and due process is in place and followed before such exclusions are applied.
• The collaboration between Shell and Total in the field of CO2 storage did not fit under one of the five categories of the Sustainability Guidelines. In its June 2022 informal opinion, the ACM considered this collaboration to potentially fall under the competition rules due to the joint setting of prices, capacity and quality. However, this potential restriction of competition was presumed to be justifiable and therefore allowed as a result of the (sustainability) efficiencies, generated for customers of both companies and for society as a whole, for instance through reduced CO2 emissions.

Agriculture: more latitude for sustainability initiatives

The ACM’s Farmers Guidelines provide the ACM’s views on the different cooperation possibilities available to farmers under (i) the specific EU agricultural sustainability exemption; (ii) the EU’s general agricultural policy (without sustainability objectives); and (iii) ‘regular’ competition rules.

The specific sustainability exemption from competition law for the agri-food supply chain was introduced at EU level in December 2021. The arrangements covered will also be exempted from the Dutch competition rules as of 1 January 2023. Pursuant to this, vertical and horizontal sustainability arrangements in the agri-food supply chain fall outside the scope of the competition rules if they have a positive effect on the EU’s sustainability goals, even if they harm competition. The Commission is expected to publish guidelines to provide more clarity on the application of this exemption by the end of 2023.

In the meantime, farmers can turn to the Farmers Guidelines for guidance and practical examples to gain more clarity on the permissibility of sustainability initiatives and more general on collaborations to create a stronger bargaining position towards their suppliers or buyers. Informal contact with the ACM or the Commission is also still possible in certain situations to gain more antitrust clarity.

Conclusion

Until the European Commission finalises its position on competition and sustainability, companies may rely on ACM’s draft guidelines and precedents for guidance. They may also still turn to ACM for a blessing of their sustainability solutions.

Recent precedents demonstrate that the ACM is more than willing to provide comfort to companies contemplating green initiatives in the agricultural sector and beyond. In fact, most of the green initiatives that the ACM assessed do not fall under the competition rules.