Becoming more sustainable is an epic task. Not only for governments, but for society as a whole. Companies notice this as customers are increasingly demanding sustainable products. To remain competitive, it is important for companies to take an active role in fostering sustainability initiatives. Such initiatives often require joining forces and include an alignment on certain competitive parameters, like on the use of certain sustainable production standards to reduce environmental pollution. But alignment on competitive parameters brings EU antitrust laws to the table. This client alert describes what all companies need to know to avoid a breach of EU antitrust laws when entering into sustainability collaborations.
Sustainability – The need for private collaborations
Sustainability is one of the key policy priorities for the next few decades. In Europe, the EU Commission ("EC") announced the "Green Deal" in order to become climate neutral by 2050.1 But sustainability is more than climate neutrality or environmental protection in general; it also encompasses environmental, social and governance aims, inter alia, public health, animal welfare, biodiversity, fair trade, fair working conditions, and human rights.2 While companies could independently promote ambitious sustainability initiatives going beyond what is legally required, they often fear competitive disadvantages. Such competitive disadvantages particularly arise due to high costs associated with such initiatives and the related price increases for customers ("first-mover disadvantage"). Sustainability initiatives thus often require joining forces and collaborating to achieve a critical participating mass. Collaborations aiming to achieve sustainability benefits typically include an alignment between companies on certain competitive parameters, such as the use of certain sustainable products or production standards to reduce environmental pollution. Due to such alignments on competitive parameters, collaborations promoting sustainability are subject to the EU's prohibition on anticompetitive agreements (Art. 101 TFEU), which needs to be considered carefully due to the associated risks (such as fines, or follow-up damage claims).
No clear guidance at EU level – Mixed signals from the EC
Companies generally need to conduct a "self-assessment" with respect to antitrust compliance of their respective collaborations. To support companies in this assessment, the EC provided guidance on several collaboration types (such as joint marketing or joint purchasing agreements) in its Horizontal Guidelines.3 While there are certain statements in these Horizontal Guidelines concerning aspects of environmental standardization, clear guidance on sustainability collaborations is missing. The EC recognized this deficit and is currently working on updating its Horizontal Guidelines to include guidance on sustainability initiatives. When the EC started the discussion, companies hoped for more relaxed rules, particularly after a statement by Competition Commissioner Vestager in 2020, according to which the aim is "to apply our [antitrust] rules in ways that better support the Green Deal." But such hopes received a setback. In February 2022, Vestager indicated that it is for the elected politicians to set the rules around sustainability aspects (like animal welfare and emissions standards), and that competitions agencies should only be "subcontractors" in that regard.4
While it is not entirely clear what this exactly means in practice, we expect that the EC may not be willing to widely accept sustainability benefits to justify identified restrictions of competition in a collaboration. Vestager said, in that context, that she is "not ready" to accept that wider sustainability achievements for society can outweigh the specific anticompetitive effects to a group of customers directly affected by a certain restrictive agreement.5 But Vestager also emphasized that the EC is willing to listen and to provide individual guidance to companies' suggestions for sustainability initiatives. Thus, there is still hope that the EU's top enforcer will move (and will eventually not miss this important topic, including the expected contribution of antitrust policy to this topic). If the EC were not to move, it may be a call to legislators to introduce rules for this century task. In the agricultural sector, the EU legislator already introduced a provision exempting sustainability agreements from the EU's prohibition on anticompetitive agreements (Art. 101 TFEU). This applies if the agreements are aimed at achieving higher standards than required by law regarding certain types of sustainability goals, such as environmental protection, animal health, and animal welfare, provided such agreements are indispensable for the achievement of these standards.6
EU Member States level
Sustainability is also on the agenda of individual EU Member States and their competition authorities, which have launched consultations on this topic. Some of them, like the German authority, generally support Vestager's current view and fear a politicization of antitrust law if sustainability benefits are – absent specific legislative rules – widely accepted. Specifically the German authority very recently provided pragmatic guidance on certain sustainability initiatives, and the German Ministry for Economic Affairs and Climate Action announced an assessment of the adoption of a legal framework to provide legal certainty for sustainability initiatives.7 Other agencies have taken a very active role to facilitate the transformation to a green economy with the help of antitrust law. This particularly applies to the Dutch authority that published draft guidelines on sustainability agreements.8 These draft guidelines contain very concrete proposals, such as what sustainability benefits can be considered, or when and how sustainability benefits should be measured in order to determine whether anticompetitive effects are outweighed by these benefits. Finally, in Austria, the legislator recently introduced an amendment to its exemption from the Austrian prohibition on anticompetitive agreements stipulating that anticompetitive effects shall be outweighed "if the agreement significantly contributes to an ecologically sustainable and climate neutral economy".9 This Austrian exemption – like all other exemptions at EU Member State level – does, however, only apply to cases relating to the territory of Austria. If trade between EU Member States were affected by a sustainability initiative, EU antitrust law would apply and the Austrian exemption would be irrelevant in that respect.
The European Court of Justice has the last word
Competition authorities including the EC may issue guidelines, but the ultimate decision power lies in the hands of the courts, specifically the European Court of Justice ("ECJ") when it comes to the interpretation of EU (antitrust) law. European courts showed flexibility in the past in various situations when European policy goals were at stake. It is particularly noteworthy that the ECJ highlighted in several decisions that restrictive agreements fall outside the scope of the EU's prohibition on anticompetitive agreements (Art. 101 TFEU) if they are "necessary to ensure the implementation of legitimate objectives,"10 such as to ensure specific standards/quality of services in certain areas (such as legal services). Whether or not this doctrine applies to sustainability collaborations, is an open question. Only the ECJ can provide ultimate legal certainty in that respect. We consider this doctrine to be a viable option, particularly in light of the cross-sectional clauses in the Treaty on the Functioning of the EU (TFEU). These clauses provide that certain sustainability goals, such as the protection of environment,11 must be considered when executing or implementing other EU policies, such as EU antitrust rules. What is more, the exemption for sustainability collaborations from the EU's prohibition on anticompetitive agreements (Art. 101 TFEU) in the agricultural sector is ultimately a reproduction of this ECJ doctrine. This demonstrates that this doctrine can be applied to sustainability collaborations.
So what should companies do?
Companies face legal uncertainty when it comes to sustainability collaborations and the related compliance with EU antitrust laws. Until specific guidance or case law is available, the following principles should be observed:
- Sustainability initiatives should follow the current applicable framework, particularly the Horizontal Guidelines on standardization, which – inter alia – provide a safe harbor in case of (sustainable) standards if "participation in the actual establishment of standard terms is unrestricted for the competitors in the relevant market, and the established standard terms are non-binding and effectively accessible for anyone";12
- Sustainability initiatives between competing companies going beyond the safe harbor criteria for standardization, particularly by making certain sustainability standards mandatory (e.g., production standards), and not containing other hard-core restrictions (such as price fixing, customer sharing, or market allocation) should be admissible if the combined market share of participating companies is below 10%;
- Companies should check whether their sustainability initiatives qualify for certain specific rules or exemptions in EU Member States and should make use of that; and
- Companies should take up offer by competition authorities, such as the EC, to seek guidance on any sustainability initiatives that go beyond the safe harbor criteria described above.
2. Cf. ACM, Draft Guidelines on Sustainability Agreements, para. 7.
3. Available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52011XC0114(04)&from=EN.
4. Cf. recording of the conference at https://ec.europa.eu/competition-policy/policy/green-gazette/yex22_en.
5. Cf. recording of the conference at https://ec.europa.eu/competition-policy/policy/green-gazette/yex22_en.
6. Cf. Art. 210a Regulation (EU) 2021/2117.
7. Cf. Action item 5of the Competition Policy Agenda, available at (in German) https://www.bmwi.de/Redaktion/DE/Downloads/0-9/10-punkte-papier-wettbewerbsrecht.pdf?__blob=publicationFile&v=6.
9. Cf. Sec. 2(1) Austrian Cartel Act.
10. ECJ, Case C-136/12 (CNG), para. 54; case C-309/99 (Wouters), para. 97.
11. Cf. Art. 11 TFEU.
12. Horizontal Guidelines, para. 301.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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