Working together to achieve sustainability goals and antitrust risk management in all regions

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With COP27 in Egypt taking place now, we are focusing on one of the four key themes of the Egyptian Presidency, ‘Cooperation’, and in particular where we should be in the global debate on the role of antitrust law in policing and enabling cooperation with Competitors have sustainability goals. An international consensus on these issues is long overdue. While collaboration between nations has long been recognized as one of the crucial elements in achieving sustainability goals, it is only in recent years that the importance of collaboration between companies has really come to the attention of politicians, businesses and society.

Of course, as with any competitor looking to work together, it’s important not to violate antitrust rules. As 2021 car emissions Infringement decisions have shown that the line between permissible interactions and anti-competitive interactions will not always be clear-cut, and enforcement authorities are increasingly focused on protecting perceived innovation competition (although this trend affects not only horizontal cooperation but also regulatory reviews, for example in mergers). and acquisitions context).

Against this broader backdrop, a number of regulators and policymakers around the world are evaluating whether rule changes are needed to facilitate legitimate collaborations with competitors pursuing sustainability goals. Below we have outlined the key developments in Europe, Asia and the US, as well as the regulatory risks for companies looking to collaborate to advance sustainability goals. For a more in-depth look at these developments, please read our accompanying briefing here.

The latest in Europe

So far, most authorities believe that no real antitrust changes are needed. Rather, a combination of: (i) published guidance to help companies assess for themselves whether or not an agreement raises competition concerns and, if so, to make a trade-off between sustainability benefits and negative impacts; and (ii) case-by-case guidance should be sufficient to give undertakings the necessary reassurance. The notable exceptions are Austria, where antitrust laws were amended to provide the basis for the power to include sustainability-related considerations in the assessment of cooperation agreements between companies (see our blog post); and the Netherlands, where the agency has committed itself to softening existing antitrust laws for sustainability-related collaborative agreements (see here).

Businesses have generally welcomed the guidance issued by European antitrust authorities, including the European Commission and the Dutch, German, Greek and UK authorities (see our previous blogs – here, here and here), but there is still some ambiguity on some key issues .

Some authorities are also releasing details of cases to provide more transparency on how they approach the assessment – some of which revolve around supply chain initiatives. Examples of collaborations that were found not to violate applicable antitrust rules are an agreement reviewed by the German competition authority where the parties collaborated on minimum wages in the Ecuadorian banana sector and an agreement reviewed by the Dutch competition authority, to which Shell and TotalEnergies have jointly agreed to set prices for the first 20% of the capacity of their jointly built carbon storage facilities. However, the few cases that authorities have cleared to date have tended to involve agreements that sought sustainable results but did not have significant anti-competitive effects (or even affected competitive parameters). Official authorities have usually only tolerated projects within the scope of their discretionary powers and have not made any formal (exceptional) decisions.

More clarity is expected as authorities publish more (or definitive) guidance, as well as more cases that could involve tighter restrictions and the application of the exemption criteria, for example with regard to companies that meet stricter supply chain due diligence requirements want.

Raise the agenda in APAC

Competition laws in some APAC jurisdictions already allow the antitrust authority to authorize otherwise problematic collaborative efforts to pursue sustainability goals when they are in the public interest (e.g., Australia and New Zealand), or to exempt such efforts when they do not have a significant impact on have competition and bring benefits to consumers (e.g. China). Other jurisdictions are actively working to introduce guidelines.

In Japan, for example, the Japan Fair Trade Commission (the JFTC) recently announced plans for guidelines to help assess antitrust risk for companies seeking to pursue sustainability goals through collaborations, such as collective boycotts of unsustainable suppliers and joint development agreements. With groups of companies setting up joint ventures in areas such as clean technology, recycling and bio-products, the Ministry of Economy is deliberating on clearer rules for how competitors can work together to activate more joint projects in the sustainability industry. It is also worth noting that the JFTC identified instances of “greenwashing” in its announcement, demonstrating its intention to also address such behavior as an enforcement target.

Authorities in the Asia-Pacific region are clearly closely monitoring developments in Europe, but given different legal systems and political priorities, it should not be assumed that they will follow the same approach.

A different risk landscape in the US

While companies in the US have similarly shown interest in collaborating on sustainability, the regulatory climate on the antitrust front is quite different. While federal antitrust authorities — under the Biden administration — have not publicly targeted sustainability-related collaborations, they have indicated that these types of collaborations will not receive exemptions or carve-outs from antitrust rules.

Additionally, many attorneys general have announced antitrust investigations targeting ESG-related efforts, and recently launched an investigation into six major banks over these initiatives. For example, in March 2022, Arizona Attorney General Mark Brnovich announced an investigation into whether concerted efforts by financial institutions to reduce greenhouse gas emissions from investments in coal and natural gas constituted unlawful market sharing, calling such initiatives the “largest antitrust violation in history.” . .”

The central theses

In the absence of clear guidance and possibly differing regulatory approaches around the world, companies need to find tailored solutions to cope with the somewhat unclear regulatory developments and potentially different enforcement frameworks. In any case, a careful assessment is required:

  • any anti-competitive effects of an agreement, such as B. less choice and/or higher prices for consumers;
  • whether restrictive elements of the collaboration (including information sharing and agreements on prices or individual purchasing or supply decisions) represent the minimum necessary to achieve the sustainability goals and are carried out within the necessary safeguards; and
  • how the sustainability benefits resulting from the scheme can be demonstrated, particularly considering the authorities’ focus on consumer behavior and willingness to pay.

As discussions during and in the run-up to COP27 have made clear, the transition to net-zero will require cross-border collaboration at government and corporate levels – including frameworks for effective collaboration, but also, for example, sufficient public funding. Clear and, if possible, harmonized competition rules will facilitate cooperation at company level by giving companies the necessary legal certainty when deciding whether and how to cooperate with competitors.

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