ACCC provides clarity in draft sustainability collaboration guidance

This article was co-authored with Susan Graham.

As businesses weigh up the wide range of options available to help them achieve their sustainability goals, the ACCC has published draft guidance that clarifies how they may be able to work with competitors to make better, faster progress in that space. Competition law experts Claire Forster, Charlotte van Beek and Zoe Lonard discuss the key risks and what the ACCC’s publication adds to the regulatory picture in Australia.

The Australian Competition and Consumer Committee (ACCC) has recently published draft guidance on ‘Sustainability collaborations and Australian competition law’ and is seeking industry comment. The guidance formalises the ACCC’s recognition of “the clear need for urgent action on environmental sustainability” and that “competition law should not be seen as an immovable obstacle for collaboration on sustainability that can have a public benefit”.

Well intentioned collaborations amongst competitors to further environmental and sustainability goals can fall foul of prohibitions against cartel conduct and other anti-competitive arrangements. Both in Australia and around the world, collaborations often involve some harmonisation or coordination of activity thereby softening competition. For example, the application of criteria for supply chain to meet sustainability targets, establishing buying groups or imposition of industry recycling levies.

Some competition law obstacles to sustainability collaborations are identified in our previous article. However, we also noted that where there is a genuine rationale to collaborate, it can either be managed in a way that does not raise competition law risks and, if not, that the ACCC is very willing to engage to assess if it can be approved through its authorisation process.

Consistent with our previous observations, the ACCC’s guidance aims to clarify this area – identifying ‘low-risk’ collaborations where participants can proceed without regulator engagement, as well as those that are higher risk and require engagement with the ACCC through its authorisation or similar processes. The draft guidance also contains information to assist businesses more strongly advocate for authorisation of ‘high risk’ collaborations.

Low-risk collaborations

Where sustainability collaborations have the following characteristics, they are unlikely to raise competition law risks:    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 market in a meaningful way. If any collaborations were to go beyond these type of matters, ACCC authorisation may be required.  We often work with participants to set appropriate ‘guardrails’ from the outset to ensure that a collaboration stays within the permissible areas of activity and does not unintentionally digress into higher risk areas.

Higher-risk collaborations

Consistent with the orthodox approach in competition law circles, the ACCC’s guidance also 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 indicates that the following examples are likely to raise cartel conduct risks:   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 require ACCC authorisation.

Draft guidance provides information and comfort to boost likelihood of success of authorisation

One of the issues facing would-be collaborators seeking authorisation for high-risk collaborations to date has been uncertainty around the weight the ACCC will give to sustainability goals in assessing whether to grant an authorisation, and how long the process will take. In making an authorisation decision, the ACCC must weigh the public benefits of the proposed conduct against the likely public detriments, which include anti-competitive detriments. Generally, authorisation processes can take over 6 months.

The draft guidance makes clear that the ACCC “[accepts] that a reduction in greenhouse gas emissions is a public benefit of considerable weight.” This will provide considerable comfort to businesses who are seeking a way to legitimately work together to help Australia reach its emissions reduction targets.

The guidance also indicates that the ACCC will streamline the authorisation process where there do not appear to be any significant detriments associated with the conduct and/or the application deals with subject matter or an industry that the ACCC has previous experience with. In such cases, the ACCC will look to skip the first stage of public consultation, and move straight to a draft determination.

The ACCC also offers guidance around the ways proponents can articulate public benefits arguments in a compelling way, which could reduce clearing time by some weeks or months:

• adequate supporting evidence is (of course) key;
• the ACCC will give more weight to benefits which flow to the broader community and are sustained over time;
• evidence demonstrating why collaboration is necessary will be helpful (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 should be emphasised.

A recent example of authorisation for sustainability purposes is the ACCC’s interim authorisation 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”.

Applicants should seek expert competition law advice early in their consideration of a potential “high risk” collaboration to advance their authorisation application in a way that is most likely to be successful.

Observations

It is pleasing to see the ACCC seek to confirm its practice (and our recent experience) in approaching sustainability initiatives and other enterprises that further the public good.

The ACCC’s guidance confirms that it sees these initiatives in a similar way to regulators in other countries,¹ 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.”² The approaches to this issue across the United States, United Kingdom and European Union (as at January 2023) were discussed in this article. More recently, the European Commission introduced specific guidelines on the application of an European Union antitrust law exemption for sustainability agreements involving producers of agricultural products; these are discussed in this article.

Public consultation on the ACCC draft guidance is open until 26 July 2024. After considering submissions, the ACCC expects to publish final guidance on its website in late 2024.

We regularly work with individual businesses and industry groups to help them plan and manage sustainability collaborations on an Australian and global basis. Please get in touch if you need assistance.