This post is also available in: Español
Europe has set itself the goal of becoming the first climate-neutral continent by 2050. The Green Deal is the EU’s road map to achieve this.
The Green Deal aims to make the European Union a fair and prosperous society with a modern, efficient and competitive economy, in which economic growth is uncoupled from resource use.
Regulation is one of the essential mechanisms in the institutions’ fight against climate change. However, increasingly there are those who advocate for including sustainable objectives in competition policy.
As it has been already discussed in this blog, some Member States have taken advantage of the launching of financial support packages for the sectors worst hit by the current pandemic crisis to impose “green” conditions on beneficiary companies. For example, in return for the aid granted to Air France, the French government has required the company to halve its carbon dioxide emissions for domestic flights by 2024, renew its fleet with cleaner aircraft and minimize domestic flights with a duration of less than two and a half hours when there is a rail alternative.
On October 13, the European Commission launched a public consultation inviting competition experts, academics and stakeholders to present their views on how competition policy can contribute to the achievement of the Green Deal targets.
Competition authorities, including those in the Netherlands and Greece, have launched initiatives to include new points, such as sustainability, when analyzing agreements between companies or mergers and acquisitions control.
The European Commission consultation
The European Commission believes that, by helping to achieve efficient and competitive results in the market, competition policy contributes to the effectiveness of sustainable policies. This is because competitive pressures in a market are great incentives to use the planet’s scarce resources efficiently.
From this perspective, the Commission has launched a call to stakeholders to contribute ideas and proposals on how competition policy can effectively complement regulation to fight against climate change and protect the environment, especially through state aid, unfair competition regulations and merger control rules.
The Commission plans to analyze the current state aid regulations to check whether they sufficiently support the transformation of the economy or whether they allow economic aid that runs contrary to environmental objectives. Moreover, among other issues, the consultation considers whether the amount of aid for activities negatively impacting the environment should be restricted or whether more state aid should be allowed to support environmental objectives.
The consultation also requests opinions on situations in which cooperation between companies may be preferable to competition in terms of achieving sustainable objectives. The Commission also asks how achieving the Green Deal targets can be distinguished from other important political objectives, such as job creation or other social aims, to justify the special treatment of restrictive agreements based on sustainable motives.
Third, the Commission questions whether there could be situations in which a merger could harm consumers by reducing their choice of environmentally friendly products or technologies and, lastly, it asks for input on how merger control could contribute to the Green Deal targets.
The consultation closes on November 20 and contributions will be presented at a conference due to take place in early 2021, which is sure to be interesting. As the Executive Vice President of the European Commission Margrethe Vestager stated, in order to achieve a sustainable economy “everyone in Europe will have to play their part – every individual, every public authority. And that includes competition enforcers.”
The Dutch Authority’s draft guidelines on sustainability agreements
In July, the Dutch Competition Authority published provisional guidelines on sustainability agreements, becoming the first EU authority to publish guidelines of this type.
The draft guidelines identify three categories of sustainability agreements: (i) permitted agreements; (ii) agreements requiring simplified assessment; and (iii) agreements requiring a detailed quantitative assessment. Under the guidelines, the first category falls outside the scope of Article 101.1 of the TFEU (collusive agreements), while the others could benefit from the exemption set out in section 3 of that Article if they generate significant efficiencies and meet the other exemption conditions.
Permitted agreements include non-mandatory agreements encouraging the participants to make a positive contribution to a sustainability objective (for example, reducing CO2 emissions) or agreements under which companies agree to respect sustainable development rules, including agreements in relation to labor (for example, on child labor) or environmental (for example, on illegal logging) matters.
In relation to the other two types of agreements, the Dutch Authority distinguishes between those that require a simplified assessment, which only require an explanation of the benefits and disadvantages, without quantifying the positive effects, and those subject to a quantitative assessment, which require a detailed analysis of the effects and efficiencies generated. The big development is that the Authority will take into account the benefits for society as a whole and not just for consumers (as competition law requires). This is sure to generate debate over the coming months in view of the significant implications for competition.
Furthermore, companies with doubts regarding their self-assessments may informally consult the Authority to identify possible solutions to the concerns generated by the agreements. Likewise, the Authority agrees not to impose sanctions if companies have followed in good faith the guidelines in their analyses, although it may order that the agreements be amended.
The Greek Competition Authority’s working document and the public consultation
The Greek Competition Authority has also initiated a dialog to develop methods and instruments for assessing commercial practices related to sustainability. It has published a working document before launching a public consultation to gather the opinions of authorities, academics, legal operators and companies in the field.
The working document presents possible approaches to sustainability concerns in the framework of agreements between competitors, abuse of a dominant position and merger control. The Authority appears to take as its premise that competition law should break down its silo by including a series of broader constitutional values and programmatic objectives, such as sustainability and the ambition of an environmentally friendly economy.
The Authority states the need for a set of clear rules giving companies the legal certainty needed to implement initiatives and agreements with sustainability objectives. Among other aspects, it recognizes the value of general guidelines, such as those published by the Dutch Authority, in clarifying the proper conditions for collaboration. With regard to merger control, the Greek Authority appears to be in favor of promoting the use of commitments and conditions to respond to possible negative environmental externalities identified during the material assessment of a transaction.
The Greek Authority’s main proposals include creating a common “Advice Unit” comprising experts from various regulatory authorities to resolve informal queries from operators. It also suggests creating a regulatory “sandbox” in which industry can experiment and ease cooperation to create sustainable commercial formats without submitting to the normal regulatory consequences of market regulation.
The Greek Authority’s press release summarizing the main milestones of the process to date can be consulted here.
Sustainability and competition policy are increasingly closely tied. EU competition authorities appear to be becoming more aware of this and, in the framework of the current transformation of the European economy, they have decided to take the initiative and emerge as a key player in this change and modernization process. Further evidence of this is that the French and British authorities have made sustainability a priority in their action plans. The European Commission may also include greater guidelines for sustainability agreements as part of its review of the horizontal cooperation guidelines.
In 1992, the European Commission stated that competition policy “does not constitute an objective in itself and cannot be applied without reference to this legal, economic, political and social context,” suggesting that it should be given “the greatest possible flexibility to adapt to changes and not lose sight of the great objectives the Community has established, particularly on economic and social cohesion, industrial competitiveness, technological research and development, and environmental protection.” It remains to be seen whether these initiatives will provide a flexible and definitive boost and facilitate the necessary economic transformation of the Union. For the moment, it looks like we are on the right path.
Authors: Marta Simón and Alexandre Picón
This post is also available in: Español