Sustainability agreements and competition law: Recent EU and UK developments
Global | Video | April 2022 | 8:00
Video Details
| Mark Daniels | Richard, great to see you today. Today, we are discussing sustainability agreements and competition law, in particular how agreements between competitors that aim to achieve environmental or other sustainability goals should be assessed under the EU and UK competition law rules. Perhaps you could start by just outlining some of the key issues? |
| Richard Whish QC | Yes, certainly, it is a very interesting area, a very important area. Let’s remind ourselves that in 2000, the Commission published horizontal cooperation guidelines that included a chapter on environmental agreements, and then the 2010 iteration dropped that chapter. But today, Green Deal, net zero etc, clearly there is a renewed interest in this question. And, clearly, the Commission and lots of other authorities are looking seriously into the question of whether competition law acts as an impediment to desirable sustainability agreements, and if so what those impediments are, and how they can be addressed. Might be worthwhile just asking ourselves what we mean by sustainability. Is this purely about the environment or is it about other types of ethical, if you like, considerations as well? And just to say that in the draft guidelines that the Commission has now published, in paragraph 543, the Commission says the notion of sustainability objective “includes, but is not limited to, addressing climate change (for instance through the reduction of greenhouse gas emissions), eliminating pollution, limiting the use of natural resources, [but also] respecting human rights, fostering resilient infrastructure and innovation, reducing food waste, facilitating a shift to healthy and nutritious food, ensuring animal welfare, etc”. So we’ve got to take this as being a broad agenda, not just narrowly the environment. |
| Mark Daniels | Ok, and what would appear to be the Commission’s latest approach on these agreements? |
| Richard Whish QC | Well, there are some quite serious technical difficulties with all of this. Obviously, we have got to decide whether an agreement restricts competition in the first place for the purposes of Article 101(1), and also there’s the de minimis doctrine, of course, that certain agreements only harm competition in a non-appreciable manner. But I think at the heart of this is the question of Article 101(3), which does recognise that some agreements that restrict competition should be permitted where they lead to improvements in production or distribution, or where they lead to technical or economic progress. And there’s always been this rather interesting debate about, well, how narrow or how broad are those criteria? You could take them to mean purely enhancements of economic efficiency in a narrow sense. Well, I think some of those things I just described – human rights, animal welfare – do they really come within technical and economic progress? So there is an issue around the flexibility with which one interprets those expressions. Separately, which I think is more technically difficult, even if one does identify a benefit, however narrowly or broadly drawn, consumers have to get a fair share of that benefit. Well, which consumers? Does that simply mean consumers within the market affected or is there, as it were, the human race, the planet? How broad can we take this expression “consumers” to be? And a lot of thought has gone in to that. As I read this draft notice, I am still not exactly clear what the Commission’s final position will be. |
| Mark Daniels | And, I guess with that in mind, do you see room for much movement by the Commission or particular aspects of the guidance you think raise tensions or difficulties that could be helpfully refined in there? |
| Richard Whish QC | It does occur to me that a sustainability objective in one sector of the economy might be profoundly different from in another sector. So I think everyone, all stakeholders, ought to seriously contemplate whether they want to make representations, and I do think that more clear guidance can be given than what is to be found here. |
| Mark Daniels | Ok, so that’s the European Commission’s approach, but in a post-Brexit world, what’s the position of the CMA and the UK Government on all of this? |
| Richard Whish QC | Well, it’s very interesting because, as you say, in a post-Brexit world we do not have to go the same way as the European Commission. Having said that, I wouldn’t imagine that we would want to deviate significantly from whatever the Commission eventually comes up with. And I doubt whether your firm’s clients would particularly want to have a different code for EU and UK purposes, but we can develop our own thinking here. What we know is the CMA has given advice to BEIS, the relevant department, on all of this, but it does say that it will be publishing, the CMA will be publishing, its own draft guidelines in due course. So it’s a little bit too early, I think, to be quite clear where we’re headed in the United Kingdom. |
| Mark Daniels | Ok, and the CMA, they are also saying, I think, that they don’t see an immediate need to change the legal framework, but perhaps BEIS might think differently. What do you think of that suggestion in the advice? |
| Richard Whish QC | Well, yes, it’s interesting. I see that the CMA says that “at this stage we do not see sufficient evidence that competition law prevents firms from acting sustainably”. So presumably what they’re saying is, if you look at the competition law provisions there is no serious impediment. Now, obviously, BEIS might form a different view, but I suspect they will take very seriously the steer that they are given by the CMA. |
| Mark Daniels | OK, it will be interesting to see the CMA’s guidance, when we eventually see it… |
| Richard Whish QC | Indeed, indeed. One thing I would conclude by saying though is that, it’s one thing to have horizontal cooperation guidelines from the European Commission, or some analogue from the CMA, but what I would like to see going forward when the new regimes are in place… I would think it would be helpful if there could be individual examples of where undertakings take agreements to the European Commission or the CMA, and then perhaps those authorities, where appropriate, give guidance, whether it be formal or informal, on the position, because I think we all learn more from real-life examples. But, of course, the authorities can only respond if the firms take their agreements to them in the first place, so there’s an element of “chicken and egg” about guidance. |
| Mark Daniels | And the CMA, I think they are establishing a sustainability taskforce to engage more with stakeholders, so it sounds a good time to engage with them... |
| Richard Whish QC | That’s true, that’s interesting. So we have a Digital Markets Unit within the CMA and now we’re going to have a sustainability taskforce within the CMA. And that’s obviously sensible because there’s a lot to think about, there’s a lot of research is needed here, and one needs experience to be gathered and then located within one part of the organisation, so that’s something I welcome. |
| Mark Daniels | Great, thank you very much, Richard. |
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