The initiative includes a competition law sustainability “sandbox” in which market participants could team up to work on sustainable business projects.
By David Little and Pierre Bichet
The Greek Competition Authority (HCC) has announced a public consultation on how competition law rules might be adapted to promote more sustainable business practices. The HCC published a Staff Discussion Paper and held a digital conference to launch the consultation.
The HCC’s exploratory proposals outline a number of novel concepts, including: (1) the creation of a competition law sustainability “sandbox” in which market participants could team up to work on sustainable business projects with some measure of protection from competition rules; and (2) the establishment of an “Advice Unit” comprising experts from different regulatory authorities who could provide informal advice on sustainability-related initiatives. The proposals also envisage the publication of general guidelines defining the contours of legitimate cooperation between rivals on sustainability projects.
Background: The HCC’s Creative Thought Leadership
The HCC’s consultation is one of several recent initiatives by the authority that examines the application of competition law to new market segments and technologies. In April 2020, the HCC launched a sector inquiry into emerging financial technology services. The authority has also chaired conferences on the use of data science in competition enforcement and the application of competition law to cryptocurrency and blockchain markets.
To date, the authority’s activities have focused largely on analysis and consultation rather than enforcement activity. However, the HCC’s latest initiative provides further evidence of the authority’s creativity and interest in exploring novel applications of competition laws.
Business Cooperation on Sustainability Initiatives in Europe
The HCC is one of several authorities examining how competition law could be used to promote more sustainable business practices.
Historically, the European Commission and Member States have tended to promote environmental, social, and governance (ESG) goals — including measures to transition to a green economy — through sector-specific regulation (e.g., the European Green Deal, the European Fund for Strategic Investments, and the Action Plan on Sustainable Finance) and discretionary enforcement of State aid rules (e.g., to promote renewable energy projects). With isolated exceptions, the authorities have not used competition rules to further these aims.
However, there is an emerging academic and policy debate about whether competition law should play a more prominent role in promoting sustainable business practices. The HCC’s announcement is the latest in a series of recent initiatives at the European and Member State level. For example:
- During a conference at the end of 2019, Margrethe Vestager, EU Commissioner in charge of the competition portfolio, argued that “businesses have a vital role, in helping to create markets that are sustainable in many different ways. And competition policy should support them in doing that”. In the same spirit, Olivier Guersent, the top EU competition official, stated that “we will probably need […] to move toward more guidance in antitrust”. This need had already been highlighted by businesses in response to the ongoing EU revision of the horizontal rules and accompanying guidelines. In its factual summary of the responses received in the framework of the revision, DG COMP noted that “the most important development according to respondents […] is climate change and the corresponding challenging environmental and sustainability goals. Respondents believe that this results in increased demand from consumers and businesses for sustainable, ethical and environmentally friendly business practices”.
- The Dutch Competition Authority (ACM) adopted draft guidelines targeting sustainability agreements. According to the ACM’s new guidelines, sustainability agreements will not be anticompetitive if they “do not or not appreciably affect competition on the basis of key competition parameters”, including, for example, price, quality, diversity, service, and the distribution method. Final guidelines are expected before the end of 2020.
- Other national authorities are engaged in research in this area. For example, the UK Competition and Markets Authority has indicated that it will draw inspiration from the ACM guidelines and is “keen to support businesses in adapting to climate change, while ensuring that markets remain open to the kind of disruptive innovation that can also assist in climate change and sustainability goals”. In France, eight French regulators — including the French Competition Authority — have published a working paper on their role and tools in the face of climate change.
Sustainability, Single-Firm Conduct, and Merger Control
To date, competition authorities exploring possible tensions between competition laws and sustainability initiatives have focused on agreements between actual/potential competitors. Respondents to the European Commission’s horizontal guidelines consultation identified this area as requiring most urgent reform.
However, the HCC’s Staff Discussion Paper looks beyond inter-company cooperation to other forms of commercial activity that might influence the development of green technologies and more sustainable business practices. Specifically, the Staff Discussion Paper flags for consideration whether abuse of dominance infringements “may also include anti-competitive practices which also constitute breaches of environmental law or which restrict sustainable development” and “the extent to which sustainability issues could be taken into account when assessing mergers and acquisitions”.
Compared with the emerging body of work on cooperative agreements, little attention has been given to whether merger control or abuse of dominance (monopolisation) rules might be reformed in the name of sustainability. This is largely new ground for competition authorities. There are, of course, numerous examples of merger reviews and unilateral conduct relating to companies active in green sectors such as renewable energy or the circular economy. However, up until now, the cases have applied well-established legal rules and traditional antitrust economics without adjustment for specific market failures and frictions that might arise in the environmental sphere. While competition authorities have signalled a willingness to investigate claims of “greenwashing” (i.e., conveying a false impression of how environmentally friendly a product is) by individual firms, they appear to envisage relying on consumer protection laws for this purpose, rather than antitrust.
Latham & Watkins will continue to monitor developments in this area.
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