Antitrust enforcers and policymakers globally are grappling with their approach to sustainability agreements – agreements between competitors that aim to achieve sustainability goals.
Is collaboration vital to overcome the “first mover disadvantage”, namely businesses unwilling to be first to pursue sustainability goals, for concerns that this may disadvantage them against their rivals?
Alternatively, are sustainability goals better met by businesses competing, not collaborating, on sustainability? Do sustainability agreements need rigorous scrutiny to ensure the benefits are not overstated or amount to “greenwashing” and to ensure the benefits outweigh any potential harm, such as higher prices or less choice?
The UK’s Competition and Markets Authority (CMA) recently released draft guidance proposing a new more permissive approach for “climate change agreements”, which contribute towards the UK’s binding climate change targets under domestic or international law. The CMA intends to allow the full benefits to all UK consumers, not only those in relevant or related markets, to be taken into account when assessing the fair share requirement under section 9 Competition Act 1998. Ultimately, this will make it easier for climate change agreements to qualify for exemption and not infringe UK competition law.
Several EU Member States (notably the Netherlands, Austria and Greece) also favour a more permissive approach, but their efforts in this regard are shadowed by the European Commission’s position as Member State authorities must usually apply the EU competition law rules when assessing such agreements, rather than their national rules which may be more relaxed. The European Commission’s position will be confirmed in new guidance expected to apply from 1 July. The published draft of this guidance provides greater clarity on the application of EU rules on sustainability initiatives with a dedicated “soft” safe harbour, but does not go as far as the CMA’s guidance in certain aspects or the approach some EU Member States would like.
Across the Atlantic, sustainability initiatives have become a politicised topic with “net zero” initiatives attracting scrutiny, albeit at state and not federal level. Opinions vary with some states’ environmental regulatory agencies actively pushing for greater sustainability efforts, while other states’ enforcers are sceptical and are voicing concerns.
While an interesting debate, these different and evolving approaches between jurisdictions create a challenging environment for international and global companies wanting to collaborate on sustainability initiatives but needing to tailor what they do where.
I recently discussed the key issues with Richard Whish KC, getting his viewpoints on the differing approaches and possible future developments.
For more information about sustainability agreements and other key antitrust and competition law developments, see our Global antitrust and competition trends for 2023.