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Freshfields Sustainability

| 5 minutes read

Collaborating towards sustainability goals and navigating antitrust risk across regions

With COP27 in Egypt now taking place, we’re focusing on one of the four key themes of the Egyptian presidency, “collaboration”, and specifically where we stand on the global debate about the role of antitrust in policing and enabling competitor collaborations that pursue sustainability objectives. Arguably, an international consensus on these issues is long overdue. While collaboration between nations has been understood to be one of the crucial elements to reach sustainability goals for a long time, the importance of collaboration between businesses has only really come to the attention of policymakers, businesses and societies in the last few years.

Of course, as is always the case for rivals seeking to collaborate with one another, it is important to avoid falling foul of antitrust rules. As the European Commission’s 2021 Car Emissions infringement decision showed, the line between permissible interactions and anticompetitive interactions will not always be clear cut, and enforcers are increasingly focused on protecting assumed competition in innovation (with this trend affecting not only horizontal collaboration but also regulatory reviews, for example, in the M&A context).

Against this broader backdrop, a number of authorities and policy makers around the world are looking at whether any rule changes are needed to help facilitate legitimate competitor collaborations that pursue sustainability objectives. We’ve outlined below the most significant developments in Europe, Asia and the US and the regulatory risks for businesses seeking to collaborate to promote sustainability goals. For a more in-depth review of these developments, please see our accompanying briefing here.

The latest in Europe

So far, most authorities have taken the view that no real changes to antitrust laws are needed. Rather, a combination of: (i) published guidance to help businesses self-assess whether or not an arrangement gives rise to competition concerns and, if so, carry out the balancing of sustainability benefits against any negative effects; and (ii) guidance for individual cases should be sufficient to give businesses the certainty they need. The notable exceptions are Austria, where the antitrust laws have been amended to provide the basis for the authority to include sustainability-related considerations in the assessment of cooperation agreements between companies (see our blog post); and the Netherlands, where the authority itself has committed to re-interpreting the existing antitrust laws more leniently for sustainability-related cooperation agreements (see here).

Businesses have broadly welcomed the guidance published by European antitrust authorities, including the European Commission and the Dutch, German, Greek and UK authorities (see our earlier blogs – here, here and here), but there remains a lack of clarity on some important questions.

Some authorities are also publishing details of cases to provide more transparency over how they approach the assessment – a number of which revolve around supply chain initiatives. Examples of collaborations which have been found to not infringe applicable antitrust rules include an agreement considered by the German competition authority where the parties cooperated on minimum wages in the Ecuadorian banana sector and an agreement considered by the Dutch competition authority where Shell and TotalEnergies agreed to jointly set prices for the first 20% of capacity in their jointly constructed CO2 storage facilities. However, the handful of cases that authorities have given their blessings to so far have tended to involve agreements which pursued sustainable outcomes but which did not give rise to significant anticompetitive effects (or even touch upon competition parameters). Also, authorities mostly merely tolerated projects within the scope of their powers of discretion, rather than taking a formal (exemption) decision.

More clarity should be expected as authorities publish more (or final) guidance, as well as more cases which could involve harder edged restrictions and application of the exemption criteria, for instance with a view to companies seeking to fulfil increasing supply chain diligence requirements.

Rising up the agenda in APAC

Competition law regimes in some APAC jurisdictions already allow the antitrust authority to authorise otherwise problematic collaborative efforts pursuing sustainability aims if they are in the public interest (e.g. Australia and New Zealand) or to exempt such efforts absent a significant impact on competition and provided consumers benefit (e.g. China). Other jurisdictions are actively working towards introducing guidelines.

In Japan, for example, the Japan Fair Trade Commission (the JFTC) has recently announced plans for guidelines to assist companies wishing to pursue sustainability goals through collaborations, such as collective boycotts of unsustainable suppliers and joint development agreements, to assess antitrust risk. Against the background of groups of companies creating JVs in areas such as clean technology, recycling and bio products, the Economic Ministry has been consulting on clearer rules for competitor collaboration to activate more joint projects in the sustainability industry. It’s also worth noting that the JFTC called out instances of ‘greenwashing’ in its announcement, demonstrating its intention to treat such behaviour as an enforcement target as well.

Authorities in Asia Pacific are clearly watching developments in Europe closely, but with different legal regimes and policy 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 an appetite to engage in sustainability related collaboration, the regulatory climate on the antitrust front is quite different. While the federal antitrust authorities have not – under the Biden administration – publicly targeted sustainability-related collaborations, they have indicated that these kinds of collaborations will not receive exemptions or carve-outs from the antitrust rules.

Further, many Attorneys General have announced antitrust inquiries targeted at ESG-related efforts and have 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 financial institutions’ collaborative efforts to reduce greenhouse gas emissions from investments in coal and natural gas constitute unlawful market allocation, labelling such initiatives as the “biggest antitrust violation in history.”

Key takeaways

In the absence of clear guidance and potentially globally diverging regulatory approaches, businesses will have to find customised solutions to navigate the somewhat unclear regulatory developments and potentially diverging enforcement climates. A careful assessment in each case is needed of:

  • any anticompetitive effects of an arrangement, such as reduced choice and/or higher prices for consumers;
  • whether any restrictive elements of the collaboration (including information exchange and any agreements on price or individual purchasing or supply decisions) are the minimum necessary to achieve the sustainability objectives and are conducted within the necessary safeguards; and
  • how the sustainability benefits flowing from the arrangement can be demonstrated, especially considering the authorities’ focus on consumer patterns and their willingness to pay.

As discussions during and in the build-up to COP27 highlighted, the transition to net zero will require cross-border collaboration at the state and enterprise level – including frameworks for effective collaboration but also, for example, sufficient public funding. Clear and, where possible, harmonised competition rules will facilitate collaboration at the enterprise level by giving companies the legal certainty required when deciding whether and how to collaborate with rivals. 

For more details on any of these developments and how they might apply to your sustainability initiatives, please get in touch.


antitrust and competition, cop27, climate change