The European Commission publishes draft guidance on sustainability agreements has been saved
The European Commission publishes draft guidance on sustainability agreements
A step towards collaboration between competitors
The Growth Strategy in the European Green Deal demonstrates that sustainable development is a high priority for the European Member States. The European Commission (EC) has recognised that collaboration in the field of sustainability, within the boundaries of competition law, can contribute more to environmental and climate goals. Therefore, the EC has added a new chapter on sustainability agreements to its draft revised Horizontal Guidelines of the European Commission (”draft Guidelines”), which were published on 1 March 2022 . This blog briefly discusses the content of the draft Guidelines and the particular topics where local Competition Authorities take a more liberal approach.
When collaborating with competitors, businesses need to make sure that they are compliant with the Guidelines in order to avoid breaching the antitrust rules. The draft Guidelines recognise that the current Horizontal Guidelines do not reflect any recent economic and societal changes. Against this background, the EC aims to take into account these developments by adding a new chapter for assessing sustainability agreements under competition law. In comparison to the current Guidelines, the most notable difference is the wider scope of “sustainability”. The draft Guidelines’ focus stretches beyond sole environmental objectives, as it guides varying sustainability objectives, such as human rights, healthy food and animal welfare.
Proposed Guidelines for sustainability collaborations
According to the draft Guidelines, the definition of a sustainability agreement is “any type of horizontal collaboration agreement that genuinely pursues one or more sustainability objectives, irrespective of the form of cooperation”. Examples are Research & Development agreements or purchasing collaboration with the intention to contribute to the environment. The EC has emphasised that competition law remains applicable, even though sustainability objectives are pursued.
A few key points must therefore be taken into account, which are explained below:
- Sustainability initiatives can come in many forms. However, the draft Guidelines focus primarily on sustainability standardisation agreements, which are unlikely to raise appreciable negative effects on competition. This is because of a so-called “soft” safe harbour, provided the following cumulative criteria are met:
- the procedure for setting the sustainability standard is transparent and open for participation;
- the participation is voluntary;
- the participants are free to adopt a higher standard;
- the parties do not exchange commercially sensitive information that is not necessary for the development/adoption/modification of the standard;
- the outcome of the standard does not lead to a significant increase in price or reduction in choice of products;
- there is a mechanism/monitoring system in place to verify compliance with the standard by companies that adopt it.
- The draft Guidelines particularly provide extensive guidance on whether sustainability benefits resulting from the agreement can be considered as efficiency gains for consumers. The EC requires full compensation for the consumer for any price increase or loss of choice, quality or innovation in the relevant markets. This stresses the need for clear evidence that the resulting benefits from the sustainability agreement are passed on to consumers. These benefits should outweigh the (possible) harm caused by the agreement.
Response of the ACM to the draft Guidelines
Until 26 April 2022 market parties had the opportunity to comment on the draft Guidelines. The ACM was one of the parties that provided input. In general, the ACM is highly supportive, as it has also given several suggestions, which are discussed below:
- The ACM is pleased to see that the EC recognises the existence of out-of-market benefits in the form of collective benefits. However, the ACM advocates, amongst other things, for a broader application of the fair share condition, taking into account the benefits to society as a whole and not just to the individual user. The ACM states that an appreciable objective advantage must be enjoyed by consumers, which can only be assessed on a case-by-case basis, taking into account the relevant context. This fully reflects the consistent case law of the CJEU. The approach of the EC is narrower since it requires full compensation for consumers. Therefore the ACM is concerned that businesses will remain reluctant to invest resources in new sustainability initiatives. This will take away the sustainability benefit in the timely manner that is required, e.g., decreasing the economic dependence on fossil fuels, which will prevent climate change and will foster energy independence.
- However, the ACM welcomes the “soft” safe harbour, which is in line with its own view that competition law basically does not stand in the way of sustainability agreements. According to the ACM, the current wording implies that the soft safe harbour is only applicable to the creation of new sustainability standards, whilst businesses may also conclude agreements to apply an existing standard. The ACM believes that the soft safe harbour should apply to both existing and new sustainability standards. It seems to be equally (or even more) acceptable from a competition law perspective to jointly apply an existing standard as compared to new standards.
National Competition Authorities
National Competition Authorities, including those from Greece, Austria, the UK and the Netherlands, are also very active in developing competition law guidance for sustainability agreements. The EC has subsequently provided its own guidance on sustainability initiatives. Nonetheless, it does not endorse the more liberal approach that several National Competition Authorities have taken.
In particular, the ACM takes a more liberal approach to the assessment of efficiency defences in sustainability initiatives. Also, it is convinced that out -of -market efficiencies benefiting other consumers must also be taken into account. Full compensation for negatively affected consumers is therefore not required.
The ACM takes a proactive role in the European debate on sustainability initiatives under competition law. It is leading the way towards a greener application of competition law and aims to provide more legal clarity when assessing sustainability agreements. The ACM has already recognised that more room is needed for businesses that want to invest in green and meaningful initiatives. The ACM has mentioned that once the Commission’s draft Guidelines have been adopted it will re-evaluate its own draft Guidance on sustainability agreements.
It is good to see that, after the National Competition Authorities have acted as frontrunners in providing guidance on the assessment of sustainability collaboration, the necessary steps have also been taken at a European level. We will inform you as soon as there is clarity on the final -draft- Guidelines. For practical guidance on the interplay between collaboration on sustainability initiatives and the significant consequences of breaching the competition law rules, check the draft revised Horizontal Guidelines of the European Commission and the draft Leidraad Duurzaamheidsafspraken ACM. If you need any further advice, please get in touch with one of our lawyers.