At a time when COVID-19 is having direct and indirect effects on the reduction of greenhouse gas (“GHG”) emissions and ensuing global warming, eight French regulators, including the French Competition Authority, issued on 5 May 2020 a joint working paper in which they highlight the need to take into account the “climate emergency” in defining and carrying out their missions, and describe their levers for action.
This working paper is the result of meetings between the presidents of the eight regulators in an informal group, which was set up in 2017 to discuss cross-practice issues and jointly develop their position on global warming.
Their position takes into account key advances in the fight against global warming, in particular the landmark Paris Agreement of December 2015, aimed at limiting global warming to well below 2°C compared to pre-industrial levels, and the European Green Deal of December 2019, which aims at a carbon neutrality by 2050.
In meeting these challenges, the working paper sets out in which sectors and activities climate change brings about particular economic challenges. First, it provides key numbers about the climate impact of certain business sectors, identifying the energy sector as the main source of GHG emissions, followed by the transportation sector. Second, the working paper highlights increasing interest in the digital sector, despite its low GHG emissions (approx. 3%). Consequently, both regulated and non-regulated companies, particularly in the energy, transportation, digital and audio-visual sectors, and related to all the financial sector, face significant transformation of their business models. In France, demand for increased transparency towards stakeholders and society overall in the way in which companies aim to address climate change is already profoundly changing companies and their economic models.
Whereas some regulators, e.g. the Energy Regulatory Commission or the Transport Regulatory Authority, have an explicit mandate to take into account environmental challenges in formulating their policies and activities, others lack such explicit mandates, including the French Competition Authority (“ADLC”).
This does not prevent the ADLC from acting against conduct that contravenes (or in favour of conduct that supports) the objectives of the Paris Agreement, where such conduct has competition implications falling within its jurisdiction. The working paper gives as example practices aimed at ensuring greater environmental protection with a potential spill- over into cartelistic practices. It acknowledges that companies may resort to concerted behaviour aimed at improving their environmental efficiency to meet environmental protection objectives. In some circumstances, such practices might be seen as anticompetitive, particularly if they lead to the creation of cartels.
Conversely, the ADLC may support environmental protection, e.g., by sanctioning anticompetitive agreements aimed at stifling innovation towards more sustainable products, which may increasingly become a source of differentiation for competitors. In addition to monitoring for such anticompetitive practices, the ADLC also envisages increased focus on environmental factors in merger review.
Regulators stress the possibility of tension between the implementation of their mission to protect consumer interests within the framework of economic regulation, on the one hand, and climate objectives, on the other hand. For instance, horizontal cooperation agreements aimed at reinforcing environmental protection might conflict with competition law. In the meantime, it is considered that regulation, by encouraging innovation and dynamic competition, can lead companies to differentiate themselves by turning environmental objectives into a competitive advantage.
The working paper identifies levers for action that can be used to support the desired transformation of the economy, including:
- the definition of incentive rules, recommendations or good practices;
- monitoring and control, g. by the Financial Markets Authority, to information provided by listed companies and asset managers with respect to climate risk management;
- decisions or opinions, such as those issued by the Energy Regulatory Commission or the ADLC, which may contribute to the fight against global warming or encourage corporate behaviour that responds to climate change issues;
- the provision of data on climate risk and the impact of certain activities on the climate within the framework of “regulation by data” to encourage companies and assist in their decision-making; and
- the proper information of citizens.
What’s next? The ADLC continues to put sustainability at the heart of its priorities, for the year 2020 and – most likely – for the foreseeable future. It continues to develop its position concerning the interplay between competition law and environmental protection, and intends to bring this discussion into the reviews of the block exemption regulations for vertical restraints, R&D agreements, and specialisation agreements.