Sustainability collaborations under Australian Competition Law

Low-risk collaborations

Where sustainability collaborations have the following characteristics, they are unlikely to raise competition law risks:

	There is no restriction on the customers or suppliers that participants may deal with.
	Participants can pool and share information and evidence about suppliers’ sustainability credentials, so long as there is no restriction on how each participant deals with suppliers that fall short.
	Non-binding industry targets are set and it is up to each participant to independently decide how they will meet those targets.
	The collaboration does not involve the sharing of confidential and commercially sensitive information between participants.

Sustainability collaborations which take the form of any of these practices are unlikely to have the effect of interfering with or damaging the competitive process in a meaningful way. If any collaborations were to go beyond these types of matters then ACCC authorisation may be required. It is advisable to set appropriate ‘guardrails’ from the outset, to ensure that a collaboration stays within the permissible areas of activity and does not unintentionally stray into higher risk areas.

Higher-risk collaborations

The ACCC’s guidance outlines certain ‘high risk’ areas of potential collaboration. These include where the collaboration involves agreeing on the prices that will be charged or paid by participants, the markets participants will operate in, the customers or suppliers participants will deal with, participants’ supply of an output or purchase of an input, or the way in which participants will respond to a tender. If any of these areas are affected by a collaboration, there is a high risk of cartel conduct. Cartel conduct is prohibited outright, irrespective of its effect on competition. Such collaboration generally cannot occur without authorisation and so advice should be sought before any coordination or sharing of sensitive information begins.

The ACCC guidance provides the following examples of collaborations that are likely to raise cartel conduct risks:

	Businesses that ordinarily compete to acquire a certain input, agreeing to only buy the input from suppliers that meet particular sustainability criteria.
	Suppliers agreeing to charge a levy on the sale of their products to customers, in order to fund an industry recycling scheme for their products at the end of life.
	Rival manufacturers agreeing to use a new technology in their production process and to stop using older technology that emits more pollution.

With that said, these types of collaborations may well be permissible if they are likely to result in meaningful public benefits that outweigh anti-competitive downsides, but will need to rely on other exemption pathways.

Pathways to permissibility

For collaborations likely to raise cartel risks, key regulatory pathways available include:

• Reliance on the ‘joint venture’ exception, which exempts a cartel provision where it is ‘reasonably necessary’ for a genuine joint venture, and the joint venture is not intended to ‘substantially lessen competition’. However, this exception is untested and businesses (and their backers) are often wary of relying on it for this reason.
• Reliance on the ‘small business collective bargaining’ class exemption, by submitting a short form to the ACCC and affected businesses. This allows small businesses to engage in certain collective bargaining behaviour such as jointly negotiating price and terms. However, only businesses with a turnover below a certain threshold are eligible, and it does not allow bargaining groups to refuse to deal with particular counterparties. Trade unions are not eligible for this exemption.
• Reliance on the notification process for other small-scale collective bargaining and collective boycotts. For small businesses that are not eligible for the class exemption, or those seeking to agree to refuse to deal with a supplier unless it accepts certain terms (e.g. regarding sustainability requirements), the notification process may be available. This involves lodging a notification with the ACCC that sets out the likely public benefits and detriments from the arrangement. Once notification is in effect, it provides legal protection for the arrangement unless the ACCC revokes it.
• Reliance on the ‘collective acquisition’ exemption, which permits agreement between competitors on the price of goods or services to be collectively acquired, and the joint advertising of re-supply prices for goods or services collectively acquired. However, reliance on this exemption is often impractical due its narrow scope.
• Obtaining authorisation from the ACCC for the collaboration. This is a formal, process under which the ACCC assesses the public benefits and detriments of the activity, and its competitive impact. The process can be lengthy and involves public consultation. These factors mean it is often not seen as an attractive compliance option for businesses. However, the ACCC’s guidance indicates the ACCC will streamline this process for certain sustainability-related collaborations.

The guidance also notes that the ACCC is open to creating new class exemptions in this area, where there is a compelling case for a new category of collaboration to which a class exemption could be applied. However, this process would take considerable time and would be subject to approval by parliament.

Authorisation remains a genuine pathway, made clearer by an increased ACCC commitment to facilitating and streamlining the process

A business planning to engage in conduct that may be considered a high-risk collaboration may apply to the ACCC to authorise the conduct. Authorisation is a public process involving stakeholder consultation, although businesses can request to keep some information confidential. In making its determination, the ACCC must weigh the public benefits of the proposed conduct against the likely public detriments, which include anti-competitive detriments. Any interested party may make a submission for consideration by the ACCC.

The guidance provides these key ‘tips’ for businesses seeking authorisation:

• Be adequately prepared, having identified the objectives and public benefits they seek to achieve with the collaboration, any features that might limit the impacts on competition, and the businesses who will be part of the collaboration.
• Engage in informal discussions with the ACCC before lodging an authorisation application – this will allow the ACCC to explain what areas will need to be addressed and what information it will require.

The guidance even commits the ACCC to providing a level of input that has not historically been available as part of this process – the ACCC is prepared to review a draft authorisation application and provide feedback on potential areas of concern and indicate where more information or justification may be needed. This option is likely to be of significant utility, although it may impact timelines.

One of the issues facing proponents seeking authorisation for high-risk collaborations to date has been uncertainty about the weight the ACCC will give to sustainability goals in assessing whether or not to grant an authorisation. Nonetheless, the ACCC has previously granted authorisation for arrangements that involve sustainability-related public benefits including industry or product stewardship, recycling initiatives, reductions in plastic, reductions in greenhouse gas emissions or supporting the transition to renewable energy. Further, the guidance makes clear that the ACCC “[accepts] that a reduction in greenhouse gas emissions is a public benefit of considerable weight.” This should provide confidence to businesses seeking a way to legitimately work together to help Australia reach its emissions reduction targets or other environmental goals.

The guidance acknowledges the lengthy authorisation process can take up to six months. This has historically made it a relatively unattractive option for businesses seeking to act quickly. The guidance confirms what has been happening in practice for some time; the ACCC will streamline the process where there do not appear to be significant detriments associated with the conduct, and/or the application deals with subject matter or an industry with which the ACCC has previous experience. In this situation, the ACCC will consult publicly after its draft determination, but not before. Where applicable, this approach will trim months from the usual authorisation timeline. For example, a recent authorisation granted to the Business Renewables Buying Group to pool their electricity demand and conduct a joint procurement process for renewable energy was obtained in only two months.

Interim authorisation is also an option where applicants wish to move more quickly. This allows parties to engage in the proposed conduct while the ACCC considers the substantive application for authorisation. Decisions about interim authorisations are generally made within just 28 days of request (and sometimes, within an even shorter period).

Proponents will also be assisted by articulating public benefits arguments in a compelling way, which could reduce clearing time by some weeks or months. The ACCC’s guidance indicates this can be done by:

• Providing adequate supporting evidence
• Identifying benefits which flow to the broader community and are sustained over time, as these will be given greater weight
• Providing evidence demonstrating why collaboration is necessary (for example, why businesses lack the ability to address the environmental or sustainability issue individually)
• If the collaboration is seeking to mitigate a market failure, (for example, where providing a good or service has a cost to society greater than the cost to the purchaser, or in order to overcome ‘first mover disadvantage’) this aspect should be emphasised

Another example of authorisation for sustainability purposes is the ACCC’s interim authorisation² on 18 July 2024 for the major supermarkets to continue their collaboration to recycle stockpiled soft plastics and continue with the in-store collection program. While the substantive authorisation process is still underway, the ACCC noted the importance of the interim authorisation to “keep the stockpiles out of landfills and… enable the supermarkets to process the stockpiles with the requisite sense of urgency, without any disruption.”

Alignment with other jurisdictions

It is pleasing to see the ACCC is seeking to confirm its practice in approaching sustainability initiatives and other enterprises that further Australia’s achievement of its sustainability goals.

The ACCC’s guidance confirms that it sees these initiatives in a similar way to regulators in other countries,³ many of whom have analogous guidance intended to “ensure that competition law does not impede legitimate collaboration between businesses that is necessary for the promotion or protection of environmental sustainability”.⁴ For example:

• The European Commission recently introduced specific guidelines on the application of a European Union competition law exemption for sustainability agreements involving producers of agricultural products. Notably, this guidance recognises broad public benefits, diverging from the Commission’s usual approach of requiring that competitive harm to consumers must be offset by equivalent benefits for those same consumers, which had previously been a hurdle to sustainability collaborations in Europe.
• At the end of 2023, the UK Competition and Markets Authority (CMA) published ‘Guidance on the application of the Chapter I prohibition in the Competition Act 1998 to environmental sustainability agreements’.

This Guidance follows a similar format to the ACCC’s guidance, setting out examples of non-problematic cases, and providing guidance on borderline cases. Unlike the ACCC guidance, however, the CMA Guidance expressly notes that agreements to “do something jointly which none of the parties could do individually” are unlikely to create restrictive effects in breach of competition law. Since this is generally the aim of sustainability collaborations, this statement could have broad implications in the UK.

Likely Australian implications

The final guidance liberates businesses working together on low-risk collaborations, particularly in the small to medium business sector. For larger businesses seeking to implement innovative, complex collaborations and joint schemes, perhaps with multiple investors, obtaining expert competition law advice early in the process, on a case-by-case basis, and early ACCC engagement where appropriate, will remain vital.