2023 saw a number of developments concerning the interplay between sustainability considerations and competition policy. This blog post highlights the five key developments that businesses need to know when collaborating to achieve sustainable aims.

Key takeaways

1. Authorities in the EU and UK resisted calls for introducing a sustainability safe harbour and adopted guidelines based on a case-by-case examination of sustainability agreements.
2. However, sustainability agreements concerning agri-food and environmental damage may benefit from “soft(er)” safe harbours in certain jurisdictions.
3. A combination of formal and informal guidance and case law provides increasing clarity over lower risk forms of collaboration.
4. It further provides clarity over the circumstances in which sustainability agreements will be considered indispensable and benefit consumers.
5. Finally, in merger control, sustainability-related issues have not yet led to novel theories of harm in the EU – but outside the EU, sustainability benefits have helped parties to get their deals cleared.

Guidance but no safe harbours

The European Commission (“Commission”), the UK’s Competition and Market Authority (“CMA”) and the Netherlands’ Authority for Consumers and Markets (“ACM”) each issued guidelines on the assessment of horizontal sustainability agreements during the course of 2023.

• The Commission’s Horizontal Guidelines dedicate a chapter to sustainability agreements. The Commission defines “sustainability agreement” as any type of horizontal cooperation agreement that pursues a sustainability objective (including activities that support economic, environmental and social development).
• The ACM’s oversight of sustainability agreements is fully aligned with the Horizontal Guidelines.
• The CMA’s Green Agreements Guidance explains how competition law applies specifically to environmental sustainability agreements, which aim at preventing, reducing or mitigating the adverse impact that economic activities have on the environment or assist with the transition towards environmental sustainability. This approach is narrower than the Commission’s. As noted above, the Commission includes agreements which pursue social development aims in the scope of its guidance on sustainability agreements, the CMA’s guidance however specifically focuses on the environment and excludes agreements with broader societal objectives. 

None of the three authorities felt it necessary to introduce a horizontal block exemption regulation to provide a safe harbour for sustainability agreements. Rather, each piece of guidance aims to help parties assess whether the agreement is likely to comply with the prohibition on anticompetitive agreements under Article 101(1) TFEU (or national equivalent) and, if not, whether the agreement might qualify for individual exemption under Article 101(3) TFEU (or national equivalent).

Soft(er) safe harbours introduced for specific sustainability agreements

The Commission and the ACM each identified that separate types of sustainability agreements may benefit from more relaxed approach, akin to a “soft” safe harbour:

• Agri-food sector agreements: The Commission has released guidelines setting out six cumulative conditions under which agri-food sustainability agreements fall outside scope of Article 101 TFEU. These require that: (i) at least one of the participating undertakings to the agreement should be a producer; (ii) the agreement should relate to production of, or trade in, specific agricultural products; (iii) the agreement should have one or more specific sustainability objectives; (iv) the agreement should set a sustainability standard in line with the objective mentioned above, which is higher than the standard under EU and/or national law; (v) the agreement restricts competition; but (vi), the restriction of competition should be indispensable to the attainment of the agreement’s standard. The Commission considers that agreements meeting all six criteria will strengthen the position of producers in the supply chain and support the transition to a sustainable food system in the EU.
• Environmental damage agreements: In the Netherlands, the ACM has taken a more permissive approach to environmental damage agreements. It stated in its overview that agreements that “contribute efficiently to compliance either with a national or an international standard or to the achievement of a specific policy objective directed to prevent environmental damage” will not be further examined, if the relevant provisions are necessary for achieving the environmental benefits and these benefits sufficiently outweigh potential competitive harm. This is effectively a soft version of the exemption set out in Article 101(3) TFEU and national equivalents and stems from a recognition of the immediate need to promote collaboration to prevent environmental damage. However, as this is a statement of national policy, parties seeking to rely on this statement should first ensure their agreement is in scope of only national, and not EU, competition law.

Lower risk forms of collaborations

The Commission’s Horizontal Guidelines and the CMA’s Green Agreements Guidelines are broadly aligned on the types of sustainability agreements that are unlikely to raise competition concerns. These include among others: agreements on the internal corporate conduct of businesses; the organisation of joint campaigns for raising awareness of environmental sustainability; the pooling of funds for engaging in activities to adapt to the effects of greenhouse gas emissions generated in production; and agreements that set up databases about sustainable supply chains.

Furthermore, the following initiatives have been assessed by global competition authorities and were found unlikely to have the object or effect of restricting competition:

• Voluntary commitments: The Bundeskartellamt in Germany assessed a proposal by members of the German Initiative on Sustainable Cocoa (comprising public bodies, companies active in the cocoa sector, German retailers and NGOs) to voluntarily adopt individualised minimum prices, quotas or premium systems. Such agreements need careful consideration since they can present significant risk under EU and national competition laws. However, in this case, the Bundeskartellamt found that the aim of the commitments is to create better prices for farmers, the commitments are non-binding and there are no sanctions for deviation. Further, information published about the commitments is in aggregated and anonymised form. Therefore, the Bundeskartellamt did not consider a detailed examination of the proposal necessary, although it would keep a “steady eye” on further development.
• Agreements to offer more than one service to new clients: The ACM assessed a sustainability initiative where competing collectors of commercial waste would agree to offer new corporate clients a contract for at least two sorted waste streams. The ACM considered that the initiative aligns with the Dutch statutory waste-separation obligation and provides an additional incentive for waste separation, promoting awareness of sustainable waste management. It found the potential impact on competition for the small group of disposers not subject to statutory waste-separation obligations to be negligible and did not investigate the initiative further.
• Long term supply arrangements: The CMA reviewed the Fairtrade Shared Impact Initiative scheme by grocery retailers to enter into three to five year agreements to purchase fixed volumes of bananas, coffee, and/or cocoa from a selected group of Fairtrade producers, confirming it was unlikely to raise competition concerns. The proposed scheme aimed to offer extended contractual stability to Fairtrade producers so that they can invest in environmentally sustainable farming practices, while also resulting in a bigger variety of products available to UK consumers.
• Exchange of non-commercially sensitive data and information:The Belgian Competition Authority (“BCA”) reviewed a sustainability related collaboration scheme aimed at closing the gap between actual and living wages in the banana industry. The participants committed not to set mandatory or recommended minimum prices and not to communicate any changes in costs relating to their supply chains. Further, the BCA found that there were sufficient safeguards that commercially sensitive information would not be exchanged.
• Creation of a platform for sharing sustainability measurement data: Under its merger control powers, the Brazilian competition authority (“CADE”), reviewed the creation of a joint venture between SustainIt, Cargill, Louis Dreyfus, and ADM to create sustainability measurement software for the food and agricultural supply chain. The joint venture aims to establish a platform to share sustainability measurement data. CADE found that the establishment of the platform would not lead to the creation of any standards, therefore did not create any competition concerns.

While each individual case will fall on its specific facts, the above shows that there is considerable scope for undertakings to use formal and informal guidance and case law to clarify what constitutes a low risk collaboration. This enables businesses collaborate to achieve sustainable objectives, but should note that safeguards (such as the use of non-binding measures and limiting the scope of the collaboration) may be appropriate in some situations.

Collaborations examined under the exemption provision of Article 101(3) TFEU or national equivalents

Where an agreement has an anticompetitive object or effect, it may still benefit from individual exemption from competition law under Article 101(3) TFEU and national equivalents if any restrictions are indispensable to the agreement’s benefits and consumers will get a fair share of the resulting benefits.

• Indispensability: In March 2022, the Bundeskartellamt approved an agreement under the “Initiative Tierwohl”, pursuant to which German farmers implementing certain animal welfare criteria received a payment for pork or poultry meat sold, to subsidise the higher costs of achieving animal welfare standards. However, the Bundeskartellamt made it clear that the subsidy would not be a long-term solution for the industry and the initiative duly switched from a subsidy model to a system of non-binding recommendations aimed at covering the higher costs. The Bundeskartellamt considered that the initiative was established in the market, and as of 2024 a subsidy was no longer indispensable. This serves as a good reminder that parties whose agreement is exempt from competition law under Article 101(3) TFEU (or national equivalent) when it is formed should regularly review the position through the life of the agreement to ensure that the Article 101(3) criteria continue to be met.
• Consumer benefit: As a general rule, the sustainability benefits to consumers should outweigh the harm suffered as a result of the agreement. However, the guidance issued by the Commission, ACM and CMA foreshadows tensions in how consumer benefit may be assessed. The Commission and the ACM consider that consumer benefits should be realised in the markets in which competition concerns arise. However, the CMA takes a bifurcated approach. For most sustainability agreements, it requires parties to show that UK consumers in the market affected by the agreement realise the benefit. But if the agreement is a climate change agreement – meaning an agreement that contributes exclusively to combating climate change – the CMA only requires that benefits accrue to UK consumers as a whole. The indispensability criterion has long been a high threshold to meet when applying Article 101(3) TFEU. But if the agreement has cross-border effects, diverging approaches to the analysis of consumer benefits may add another hurdle to an undertaking’s ability to rely on an individual exemption.

Sustainability parameters assessed under EU and ex-EU merger control

In September 2023 the Commission published its Merger Brief, explaining how sustainability relates to merger control and describing how sustainability parameters have been integrated into the market definition and competitive assessment of merger cases in industries strongly related to sustainability goals.

However, there is no indication that sustainability-related issues have so far led to novel theories of harm in the EU:

• Transactions are not assessed on their environmental benefits alone. Transactions will be cleared if a sufficient competitive constraint remains post-merger, while transactions reducing innovation will be blocked. However, the Commission’s Revised Market Definition Notice reflects the importance of sustainability considerations as non-price parameters when assessing substitutability in product markets. This reflects the Commission’s existing practice. In Marine Harvest / Morpol (2013) the Commission found evidence that UK retailers favored Scottish salmon over Norwegian salmon, due to Scotland’s more sustainable and environmentally friendly production standards, and concluded that Scottish and Norwegian salmon were not substitutable. In Novelis / Aleris (2021) the Commission assessed that the market for car body parts could be segmented into separate markets for aluminum and steel car body parts based on weight, which impacts fuel consumption and ultimately CO₂ emissions.

Outside the EU, the Australian Competition and Consumer Commission (“ACCC”) found in a recent case that competition concerns raised by a transaction in the energy sector were overridden by the transaction’s ability to accelerate the generation of renewable energy. This indicates there is likely value in bringing evidence of sustainable benefits to competition authorities in merger control reviews, with authorities increasingly likely to scrutinise this. 

Concluding remarks

We expect the interplay between sustainability and antitrust to continue to come to the fore. Increasing numbers of jurisdictions have published guidelines on sustainability (with guidelines recently published in Japan, New Zealand and Singapore), and authorities including the CMA and the ACM have introduced open door policies, where parties can request informal guidance on proposed sustainability initiatives. As more informal guidance is published, this should provide increasing certainty on the dos and don’ts of sustainability collaboration.

There are, however, still gaps. For instance, where competition authorities diverge (for example, with regard to the treatment of consumer benefits), and an agreement is cross-border, parties will have to ensure compliance with diverging regimes. Going forward, it will be important for companies to monitor the approaches of the different competition authorities in order to better understand how these will apply in practice.