Tackling the sustainability challenge through industry initiatives: Adjusting competition law to create a risk-free environment for environmental collaborations
Sustainability is the main societal and business challenge of the 21st Century. Tackling it solely through individual action is unlikely to drive change at the speed and scale necessary to make a real difference. Collective action undertaken at industry level is thus often necessary to bring about changes in production processes and product design in a faster and more impactful way.
Competition law can inhibit ambitious environmental collaborations
General counsel increasingly realise that focusing on sustainability can be good for business, and ignoring it can harm their firm’s reputation and bottom line. Improving sustainability can help cut costs, attract investors, and lead to better firm management and governance, while neglecting it can lead to shareholder and regulatory pressures, and reputational and financial damage. Consequently, general counsel now regularly push sustainability concerns at board level and in the work of their legal departments.
But when it comes to industry collaborations on sustainability, this can often lead to problems: Good for the environment does not always mean good for competition and like any other collaboration between competitors, environmental collaborations are subject to competition law rules that must be safeguarded.
The message that we hear from stakeholders in various industries is that they perceive competition law as a hurdle to their projects. Self-assessing the competition law compliance of a project can be a daunting experience and can slow down and even inhibit these collaborations. Businesses need a safe and stable environment to operate and have been increasingly vocal on the fact that the current EU competition instruments and tools fail to provide this.
The Dutch competition authority’s vision of a risk-free environment for sustainability collaborations
Above all, these unprecedented sustainability challenges require an upfront positive message from antitrust regulators on industry-wide initiatives that seek to meet those environmental goals. European antitrust enforcers need to embrace sustainability and appropriately integrate the environmental benefits generated by industry-wide cooperation when vetting such agreements.
The Netherlands Authority for Consumers and Markets (ACM) has risen to the challenge and positioned itself as a thought leader in Europe on the topic. With its July 2020 draft Guidelines on Sustainability Agreements, the ACM wishes to create a risk-free environment for environmental collaborations and sends a very positive message to the industry. It signals that the enforcer opens the door for dialogue with the industry and will not impose fines or sanctions when an initiative seeks to achieve sustainable goals but, for some unforeseen reason, does not get it perfectly right. The ACM also appears to be ready to take account of societal benefits in its assessment of collaborations and thus to go beyond the narrower traditional consumer benefits approach.
All eyes are now on the European Commission
But the ACM may be somewhat constrained in its ambitions by the European Commission’s approach. The safety of your joint environmental efforts will require the European Commission to follow suit and all eyes are now on Brussels.
It is clear from the Sustainability and Competition series of roundtables that we organized in the last few months with European Commission officials that the Commission is embracing the debate and keeps an open mind. Prompted by stakeholders, in November it launched a public consultation on the topic and is actively exploring the adoption of sustainability guidelines of its own.
In terms of reforms to the antitrust framework for assessing industry collaborations, we can see that the current rules on information exchange, standards and joint R&D should be updated and tailored to better fit the EU’s climate and biodiversity goals.
However, the current exercise should not be mistaken for a pure technical review and adjustment of existing rules. This is a necessary component, but the market expects more from the European Commission in terms of positive messaging and creation of ambitious safe harbours and a risk-free environment to operate. The European Commission must go all in and truly lead the way.
What you should watch for in 2021
The debate will be raging in 2021 and all stakeholders will have further opportunities to weigh in.
Pending the European Commission producing further guidance on the topic in 2022, all your joint collaborations should continue to be vetted under existing competition law rules. The Dutch draft guidelines can guide your national projects for now since they reflect current conditions of enforcement in the Netherlands. EU or worldwide collaborations may not benefit from an equally favourable framework, but effective collaborations should not be prevented where the rationale for the collaboration is sound and the collaboration process carefully managed.