Under the 2030 Agenda for Sustainable Development1, seventeen sustainable development goals were officially announced by all United Nations member states in 2015, providing a common blueprint for peace and prosperity for all people around the globe. The sustainable development goals, which cover a wide range of issues such as water, energy, climate, oceans, urbanization, transportation, science, and technology, are a strong commitment to the implementation of global goals by all stakeholders. The 2030 goals call for action for change and development in the face of adversities and challenges in the world.

In its targets, the European Commission has committed to net zero greenhouse gas emissions by 2050, a more sustainable economy and no communities or areas discriminated against in the implementation of the targets.2 The European Commission has also adopted a series of proposals to align the EU's climate, energy, transport, and taxation policies to reduce net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels.3 It is aimed to implement environmentally friendly systems in transportation with regulations such as the production and distribution of alternative transportation fuels that are less polluting and sustainable in terms of carbon emissions, the establishment of charging stations for low-emission vehicles, the creation of smart traffic management systems, and the obligation to use electricity from the land for ships docked at ports. Thus, it is planned to eliminate congestion in cities, shorten travel times and reduce environmental damage by developing more cost-effective, automated, environmentally friendly and connected multimodal transportation routes.4

Horizontal collaborations are essential projects for sharing risk, saving costs, increasing investment, pooling know-how to improve product quality and diversity, and accelerating innovation. According to the OECD, given the fundamental role of individual and collective undertakings, competition policy has a key role to play in ensuring the efficient allocation of capital, which will also contribute to the realization of technological breakthroughs needed to achieve environmental objectives.5 The OECD emphasizes that competition authorities may face several challenges in incorporating environmental impacts/efficiencies into competition analysis when using their traditional instruments and lists these challenges as follows:

  • Which environmental impacts to consider and how,
  • How to analyse individual and collective impacts or benefits for or against individuals and/or consumers,
  • How to balance environmental benefits with other benefits,
  • How to analyse the time dimension of environmental impacts.

The most comprehensive revisions of the European Commission's revisions to the Horizontal Group Exemption Regulation and Directive, which are expected to enter into force on 01.01.2023, are the revisions under the heading of sustainability. In these revisions, the Commission particularly aims to shed light on what kind of cooperation undertakings can realize in their sustainability6 initiatives and what kind of self-assessment they can make within the framework of the exemption. Accordingly, the revised regulations outline the following set of rules:7

  • Collaborations aimed at sustainability should not result in a "significant" increase in prices and a "significant" decrease in consumer preferences and should be implemented in accordance with the principles of transparency, openness, non-discrimination, voluntariness, freedom to adopt higher standards and not lead to the exchange of sensitive commercial information. This will create a safe harbour for such cooperation.
  • A broader benefit analysis should be conducted. Accordingly, the benefit analysis can be based on the following elements:
    • The value associated with individual use (such as increased product quality, increased variety, ease of access, etc.)
    • The value that is not tied to individual use (where an individual attributes value to the benefit that increased sustainability generates for other individuals, even if they do not derive a direct use value)
    • Collective benefit (the value attributed to the benefit created for a wider social group rather than the benefit to the individual)

In early 2022, the UK Competition Authority ("CMA") also published its recommendations to the government on how competition and consumer laws can help the UK achieve its environmental and sustainability policy objectives.8 It highlighted that it is already possible for companies to work together to reduce the negative environmental impacts of their activities by pooling resources or expertise without breaching competition rules. According to the UK Competition Act, for an exemption to be granted to sustainability agreements, an agreement must (i) not completely eliminate competition, (ii) benefit must arise, and (iii) consumers must be able to receive a 'fair share' of that benefit. According to the CMA, the restriction of competition in a sustainability agreement should be considered a 'fair share' if it brings environmental benefits to more consumers than those harmed. According to the CMA, the relevant provision of the law is susceptible to a broad interpretation when assessing environmental benefits.

The Dutch Competition Authority ("ACM") announced the "Draft Guidelines on Sustainability Agreements" on January 28, 2021.9 According to the Guidelines, the following conditions must be met when making sustainability arguments:

  • The sustainability advantage offered by the product must be clear,
  • Sustainability arguments are supported by facts and kept up to date,
  • Fair comparisons with other products, services, or companies,
  • Be honest and specific in articulating sustainability efforts,
  • Visual promotions and labels are useful for consumers.

Underlining that sustainability is one of its main priorities in 2021, ACM signalled that it would continue its activity in this area.10

As a final example, a special provision on sustainability exemption was introduced in the Austrian competition law on 09.09.2021, which is the first binding sustainability-themed exemption provision to be included in competition law.11 Under the current Austrian law, horizontal cooperation is exempted from the prohibition of agreements if it "contributes to improving the production or distribution of goods or to promoting technical or economic progress, while providing consumers with a fair share of the resulting benefit". The amendment adds the provision that "Consumers are given a fair share of the benefit resulting from the improved production or distribution of goods or the promotion of technical or economic progress if the agreement contributes significantly to an ecologically sustainable and climate-neutral economy". This approach in Austria is in line with the UK Competition Authority's policy recommendations to the government that "if the restriction of competition in a sustainability agreement provides environmental benefits to more consumers than those harmed, these benefits should be treated as a 'fair share'". The practical effects of these amendments to the Austrian Cartel Act in 2021 can be evaluated as follows:

  • "Environmental benefits" do not need to be directed to consumers in the relevant market where a particular product/service is offered or leads to better, more innovative, cheaper, or more sustainable products, and it is recognized that such benefits may be completely irrelevant to the market to which they apply. Instead, environmental benefits generated for the wider society may be sufficient for exemption.
  • Environmental benefits do not have to be immediate or short-term, it is sufficient that "future generations" benefit from the advantages created by the cooperation. The legislature has cited climate protection measures (such as renewable energies and emission reductions, sustainable use of natural resources, measures contributing to the transition to a circular economy or measures to save or restore ecosystems and biodiversity) as benefits that contribute to an "ecologically sustainable and climate-neutral economy".
  • The severe restrictions imposed by the cartel ban, such as price-fixing agreements or customer/territory sharing, will not be exempted on sustainability grounds.12

The Dutch Competition Authority ACM has assessed and authorized two collaborations in the energy sector under the above-mentioned 'Draft Guidelines on Sustainability Agreements'.13 The first initiative concerns the joint purchase of electricity from a wind farm by businesses and organizations. The other initiative concerns distribution system operators agreeing to use a uniform price for carbon dioxide in their calculation models for network investments. In its assessment, ACM noted that the cooperation allows VEMW members (mainly small enterprises rather than the big players in the market) to procure green energy directly from the producer. This is expected to increase the realization of previously agreed climate targets and stimulate the creation of new wind farms. In addition, undertakings and wind farm developers will continue to have the option to buy and sell energy outside the cooperation. For these reasons, the Authority has concluded that the cooperation does not contravene competition rules.

Consequently, with the steps taken by the United Nations and the European Commission in the framework of the Paris Climate Agreement and the European Green Deal, a sustainability approach towards environmental sensitivities is developing. The adaptation of competition law regulations and practices to the process is of immense importance for initiatives to be undertaken by the private sector in line with this understanding. In the exemption approaches developed for sustainability-themed horizontal cooperation agreements, it can be said that, unlike the benefit analysis in traditional exemption evaluations, an analysis that measures the impact on a wider time period and on different segments of society/consumers has started to develop and is reflected in the regulations, especially with the OECD recommendations. For example, in EU competition law, horizontal cooperation may be exempted subject to a broader consumer benefit analysis in cases where there is no significant increase in prices, it is not discriminatory, it is voluntary, and competition is not eliminated. In the UK, if the restriction of competition in a sustainability agreement provides environmental benefits to more consumers than those harmed, these benefits will be considered a 'fair share'. In Austria, it is stated that environmental benefits are not expected to be realized in the short term but may arise not only in the relevant market but also in other markets, considering the benefits for future generations. In addition, common to all countries is that severe restrictions such as price fixing and customer/territory allocation are not included in the scope of the exemption.

Footnotes

1. United Nations, Transforming our world: the 2030 Agenda for Sustainable Development, Date of access: 21.10.2022 https://sdgs.un.org/2030agenda

2. European Commission, A European Green Deal: Striving to be the first climate-neutral continent, Date of Access: 21.10.2022 https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en

3. European Commission, Delivering the European Green Deal, Date of Access: 21.10.2022 https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en

4. Nazali Gündem, Environmental Law Bulletin, European Green Deal and Turkey's Harmonization Process

5. OECD (2021), Environmental considerations in competition enforcement, OECD Competition Committee Discussion Paper, https://www.oecd.org/daf/competition/environmental-considerations-in-competition-enforcement.htm

6. In the revision, the concept of "sustainability" is used to encompass environmental initiatives as well as labour and human rights initiatives. However, this study focuses only on environmental sustainability.

7. European Commission, Revision of The Horizontal Block Exemption Regulations and Horizontal Guidelines – Overview of Main Proposed Changes, 01.03.2022

8. Competition&Markets Authority, 14.03.2022

9. ACM, Guidelines On Sustainability Claims, Erisim Tarihi: 14.06.2022 https://www.acm.nl/sites/default/files/documents/guidelines-suistainability-claims.pdf ACM, Rules of thumb for sustainability claims have been finalized, serving as basis for ACM's enforcement, Date of Access: 21.10.2022 https://www.acm.nl/en/publications/rules-thumb-sustainability-claims-have-been-finalized-serving-basis-acms-enforcement

10. ACM, Rules of thumb for sustainability claims have been finalized, serving as basis for ACM's enforcement, Erisim Tarihi: 14.06.2022 https://www.acm.nl/en/publications/rules-thumb-sustainability-claims-have-been-finalized-serving-basis-acms-enforcement

11. Viktoria H.S.E. Robertson, The New Sustainability Exemption in Austrian Competition Law, Journal of European Competition Law & Practice, Date of Access: 21.10.2022 http://dx.doi.org/10.2139/ssrn.3957551

12. Florian Reiter-Werzin, Maria Dreher, Amendment of Austrian Competition Law Strengthens Role of Sustainability, Date of Access: 22.10.2022 , https://sustainability.freshfields.com/post/102h6wl/amendment-of-austrian-competition-law-strengthens-role-of-sustainability

13. ACM – 28.02.2022

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