A fine balance – regulators weigh up the extent of permissible collaborations between competitors to achieve sustainability objectives

A fine balance – regulators weigh up the extent of permissible collaborations between competitors to achieve sustainability objectives

We are pleased to share with you our briefing on how, and to what extent, competitors may be able to collaborate on sustainability objectives within the existing framework of EU and UK competition laws.

Regulators have acknowledged the fact that private sector investment will be important in realising ambitious environmental targets. Equally, there is also acknowledgement that collaborations between competitors will be necessary to enable this private sector activity given the costs and difficulties involved in shifting to "greener" industry standards and operating models. However, despite this general acknowledgement, the scope of permissible collaborations in this area has hitherto been both unclear and somewhat limited. Indeed, a decision by the European Commission to fine three car manufacturers for sharing information related to meeting emissions standards has made this issue a pressing one to address.

Key points to take away:

  • Information exchanges and other forms of collaboration intended to meet sustainability initiatives must not be used as a front to disguise attempts to pursue so-called "hard core" anti-competitive activities (such as price fixing, market sharing or customer allocation).
  • The European Commission's revised Horizontal Guidelines include a bespoke chapter on so-called sustainability agreements (i.e., agreements which genuinely pursue one or more sustainability objectives). Provided that sustainability agreements meet certain prescribed criteria, they can benefit from a new safe harbour or an individual exemption.
  • For a sustainability agreement to qualify for an individual exemption, the criteria to be met includes new elements that apply specifically to these types of agreements. For instance, a wider array of consumer benefits may be taken into account, reflecting the fact that pursuing sustainability goals will often involve higher costs which will inevitably be passed on (something which would otherwise rule out eligibility for an individual exemption for other types of competitor agreements). These wider consumer benefits include elements such as a general appreciation for "greener" products and/or services as well as so-called collective benefits (where benefits to consumers outside those directly affected by any sustainability agreement may also be taken into account, provided that directly affected consumers still benefit too).
  • Notwithstanding that the Horizontal Guidelines do provide more clarity in this area, the extent of meaningful collaborations that are currently permitted are likely to remain limited in reality. The European Commission will likely need to go further in order to afford businesses with the necessary certainty and flexibility to collaborate more widely (and thus with greater success) vis-à-vis environmental initiatives. Further, some national competition authorities ("NCAs") are diverging from the European Commission by taking a more lenient approach. 

It is hoped that regulators will continue to implement changes to competition law policy in order to allow greater collaborations on sustainability between competitors.

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