Achieving greater sustainability is the central driver behind the European Green Deal, a set of policy initiatives launched by the European Commission with the overarching, ambitious aim of making Europe climate neutral by 2050.
Competition policy is expected to play its part in the achievement of this sustainability goal. The Directorate General for Competition recently published a call for contributions on a set of questions designed to explore how the EU’s competition rules can be applied in support of sustainability policies. This call followed a speech delivered by Executive Vice-President Margrethe Vestager on how EU competition policy can contribute towards the achievement and success of the Green Deal. While EVP Vestager stressed that regulation remains the main instrument at the European Union’s disposal to achieve its sustainability goals, she outlined a number of ways in which competition law can contribute to realisation of these objectives.
The European Union’s sustainability goals will increasingly affect the Commission’s enforcement policy in all areas of competition law. State aid will be used to finance green initiatives. The Commission’s approval last year of a plan for seven EU countries jointly to invest more than €3 billion in a common scheme to develop innovative, greener batteries provides a good example of such support. The state aid rules are also expected to play a vital part in ensuring that the green transition is affordable. In the field of mergers, the Commission may be more willing to take environmental considerations into account when assessing the efficiencies to which proposed transactions may give rise. Finally, cooperation between industry players may be an efficient way to achieve certain sustainability objectives. There is a perception in some quarters that competition law as currently enforced is a hindrance preventing such cooperation. However, competition law can be an enabling, rather than obstructive, force. In the remainder of this article, we will consider under what conditions that may be the case.
1. Are (restrictive) agreements appropriate to achieve sustainability goals?
Article 101(1) TFEU prohibits agreements and arrangements that are restrictive of competition, unless they can be shown to meet the four cumulative conditions of Article 101(3) TFEU (see below, section 2(b)). Competitors seeking to cooperate in order to achieve certain sustainability goals will therefore need to assess the compatibility of their proposed cooperation with Article 101 TFEU.
It is worth noting upfront that plenty of sustainability initiatives are possible without requiring a detailed competition law assessment. For example, the incorporation of an ‘environmental quality label’ that is (a) based on objective criteria, (b) transparent, and (c) open to all who meet the objective criteria and wish to subscribe, is highly unlikely to raise any competition concerns. The same applies to agreements on non-binding standards, where individual companies voluntarily opting to adhere to a standard can freely devise their own strategies to meet the standard.
It is also important to acknowledge that sustainability may well be an important factor of competition. Before contemplating entering into an agreement to realise certain sustainability goals, market players should therefore ask themselves whether competition rather than cooperation would be the most efficient way to achieve these goals. The ‘Chicken of Tomorrow’ case illustrates this point. In January 2015, the Dutch Authority for Consumers and Markets (ACM) rejected a request for exemption of an agreement between chicken meat producers and supermarkets that aimed to ensure that chicken meat sold in supermarkets came from chickens that were reared using farming methods providing higher animal-welfare standards than was the case at the time. The ACM refused to grant an exemption because it was not convinced that the envisaged welfare improvements were sufficient to offset the expected price increase. An ex-post analysis earlier this year vindicated the ACM’s position at the time. It showed that chicken welfare had increased during the period under review and the improvements more than exceeded the planned arrangements of the ‘Chicken of Tomorrow’ initiative. These results also proved that it was not necessary for the sector to conclude an agreement to realise better animal-welfare conditions for chickens whose meat was being sold in Dutch supermarkets.
However, there will be circumstances where cooperation (rather than competition) between competitors is the most efficient way to achieve certain sustainability goals. For example, collaboration may be the best way to deal with free-riding issues where, but for the agreement in question, competitors are able to benefit at no cost from the sustainability investment made by a given market player. Similarly, cooperation may be the most efficient way to overcome a first mover disadvantage where, absent an agreement, the first company replacing a less sustainable product with a greener, more expensive alternative risks losing out to competitors that continue to sell the less sustainable but cheaper version (for a more detailed discussion, see the Hellenic Competition Commission’s Draft Staff Discussion Paper on Sustainability Issues and Competition law). The question therefore arises as to how to assess the compatibility of such agreements with competition law.