CCCS seeks public feedback on Guidance Note for Environmental Sustainability Collaborations

Introduction

On 20 July 2023, the Competition and Consumer Commission of Singapore (CCCS) announced a public consultation to seek feedback on its proposed Guidance Note on Business Collaborations Pursuing Environmental Sustainability Objectives (Environmental Sustainability Collaboration GN). The consultation will run until 17 August 2023.

The release of the proposed Environmental Sustainability Collaboration GN reflects the CCCS’s growing focus on the interaction between competition law and environmental sustainability and is in line with the initiatives taken by many other competition regulators around the world. Consistent with the approach in other jurisdictions, the CCCS’s guidance focuses on cooperation between competitors and industry-wide initiatives, and does not address at this stage how environmental sustainability objectives may affect the authority’s assessments of mergers or of single-firm conduct under the abuse of dominance regime under the Competition Act 2004 (Competition Act).

Scope of the Environmental Sustainability Collaboration GN

Section 34 of the Competition Act prohibits agreements between businesses that prevent, restrict or distort competition within Singapore (Section 34 Prohibition). 

The Environmental Sustainability Collaboration GN provides guidance on how the Section 34 Prohibition applies to business collaborations pursuing environmental sustainability objectives. It should be read together with: 

• The CCCS’s Business Collaboration Guidance Note, which provides general guidance on seven common types of business collaborations; and 
• The CCCS Guidelines on the Section 34 Prohibition. 

The guidance in the Environmental Sustainability Collaboration GN relates to the following broad areas: 

1. clarification on what are considered environmental sustainability objectives;
2. examples of collaborations pursuing environmental sustainability objectives that would typically not be harmful to competition;
3. conditions under which competition concerns are less likely to arise from such collaborations;
4. how CCCS would assess the economic benefits of collaborations and whether such collaborations may qualify for the Net Economic Benefit exclusion if they raise competition concerns; and
5. a proposed streamlined notification process for businesses which wish to seek guidance from the CCCS regarding such collaborations.

Assessing what constitutes legitimate environmental sustainability objectives

In determining whether a collaboration falls within the scope of the Environmental Sustainability Collaboration GN, the CCCS will consider whether the crux or main activity of the collaboration is carried out in pursuit of environmental sustainability objectives. In doing so, it will consider factors such as: 

• the starting point and main focus of the collaboration; and
• the degree of integration of the different functions required to pursue the environmental sustainability objective(s).

Collaborations unlikely to raise competition concerns

The draft Environmental Sustainability Collaboration GN indicates that the following collaborations will not, or are unlikely to, raise competition concerns: 

1. Agreements that do not affect factors of competition such as price, quantity, quality, choice or innovation of goods or services supplied. 
2. Agreements which none of the parties could do independently (for example, due to lack of the necessary technical capabilities or the necessary scale).
3. Agreements to comply with written law, or in acting on behalf of the Singapore government.
4. Collaborations to develop industry-wide environmental standards or codes of practice and associated “green” quality marks.
5. Joint productions, commercialisation or R&D where the collaboration (i) does not facilitate price-fixing, bid-rigging, output limitation and market sharing and (ii) the collaborating businesses do not have market power. 

However, the CCCS has also warned businesses that environmental sustainability goals should not be used as a guise for anti-competitive conduct. Any collaborations which are anti-competitive by their very nature, or which have effects that are anti-competitive to an appreciable extent, will raise competition concerns and may infringe the Competition Act.

Qualifying for the Net Economic Benefit Exclusion

The Environmental Sustainability Collaboration GN also provides guidance on when collaborations pursuing environmental sustainability objectives may generate a net economic benefit. Such collaborations would be excluded from the scope of the Section 34 Prohibition. 

Examples of collaborations which could generate net economic benefits include: 

• collaborations that adopt cleaner but more costly technologies which reduce greenhouse gas emissions or otherwise improve the efficiency of production 
• collaborations to share delivery capacities to maximise utilisation of delivery vehicles 
• joint creation of new or improved products which phase out or replace the use of non-sustainable material, thereby improving the quality or variety of products
• collaborating to contribute different technical and commercial expertise to develop large-scale solutions to reduce carbon emissions. 

As with other types of collaborations, any economic benefits must be objective in nature and there must be a direct causal link between the agreement and the claimed benefit. Any claimed economic benefits must be substantiated, and these benefits must be sufficient to outweigh any harm to competition arising from the collaboration.

Notably, while the traditional approach in assessing economic benefits is to consider how they may accrue in the markets that are directly or closely related to the agreement in question, the CCCS has indicated that it will take into account economic benefits accruing to Singapore as a whole, where appropriate. This recognises that pursuing environmental sustainability objectives may benefit society at large, and this could potentially outweigh the harm to a particular affected market. In another welcome development, the draft Environmental Sustainability Collaboration GN suggests that the CCCS would be open to considering various methods in estimating the value of economic benefits, particularly in respect of projects involving nascent products, services or technologies whose benefits may be challenging to quantify.

Streamlined notification process

Under the present competition law regime in Singapore, if a business is unsure whether its agreement infringes the Section 34 Prohibition, they may voluntarily notify the CCCS and seek guidance or a decision as to whether there is a risk of infringement. There is no indicative timeline as to when the CCCS will furish the guidance or decision – this depends on the nature and complexity of the application, as well as the volume of applications that have been filed at that point in time.

The Environmental Sustainability Collaboration GN proposes to establish a streamlined notification process for collaborations pursuing environmental sustainability objectives. This aims to support Singapore’s nation-wide effort to realise its climate change goals. 

Under the streamlined notification process, the CCCS will adopt a two-phase approach. A Phase 1 review of a simple case is expected to be completed within 30 working days, while an additional Phase 2 review of 120 working days is expected for complicated cases. This is similar to the administrative timelines provided under the merger notification regime. Businesses are expected to fully cooperate with the CCCS and to provide all relevant information in a timely manner, in order to achieve a streamlined process.

Concluding thoughts

Singapore has answered the global imperative to combat the rising threat of climate change, by significantly stepping up its environmental sustainability efforts and commitments in recent years. This is aptly demonstrated by the implementation of the Singapore Green Plan 2030 which charts concrete sectoral plans and seeks to position Singapore to achieve the long-term aspiration of net-zero emissions by 2050.

Businesses are the key driving forces for change and collaborations between businesses unquestionably play a vital role in contributing to this effort. That said, safeguards must be put in place to ensure that businesses are not allowed to pursue anti-competitive conduct which is detrimental to the economy under the pretext of environmental sustainability. In this regard, the Environmental Sustainability Collaboration GN provides welcome clarity for businesses who wish to combat climate change together, while ensuring that their collaborations do not inadvertently harm competition. 

If you have any questions on the proposed Environmental Sustainability Collaboration GN or on competition law, please feel free to contact us.