Fresh in the wake of trailblazing new “green” guidance in a number of jurisdictions, and rising anti-ESG litigation in others, we were delighted to partner with the British Institute of International and Comparative Law (BIICL) and Frontier Economics on Thursday 25 January to discuss global sustainability and antitrust. There is no doubt that the green transition will be an expensive one, and the cost may be compounded for businesses acting alone due to a perceived “first mover” disadvantage. The levels of complexity required to effect industry-wide change require competitor collaboration, which in turn requires some degree of navigation to avoid falling foul of antitrust laws.
The debate – which was hosted under the Chatham House rule – featured representatives from some of the world’s leading antitrust agencies, economic consultancies, and businesses directly affected by developments in this space. We have summarised some of the key takeaways from the conference.
(1) New guidelines are the start of a journey – not the full stop.
Various new sets of sustainability guidelines published across the world over the last few years have been a very positive conversation starter, as well as a helpful confirmation that many competitor collaborations on sustainability are already taking place within appropriate guardrails.
Further iterations to the official position on sustainability agreements are expected as pressure on regulators and governments from business, consumers and shareholders grows, and the bank of practical experience expands. Revised guidelines are already in progress in Japan, for example, while the ongoing publication of CMA informal guidance in the UK will represent a valuable, practical resource for businesses.
The key challenge will be continued state-level hostility to such agreements in the US stemming from ideological differences in terms of how benefits to the consumer are perceived, which represent a clear bifurcation in approach. One of the best defences against the threat of litigation will likely be a more confident narrative around the extent of permitted collaboration – which new guidelines will support.
(2) It’s easier than it looks to act within existing rules…
Recent experience has made clear that regulators are taking a pragmatic approach towards sustainability agreements and, in some cases, are stretching traditional legal concepts. Most cases reviewed by regulators in this space so far have been found consistent with existing antitrust rules on competitor collaboration and have therefore not needed to demonstrate eligibility for any relevant exemptions.
(3) However, thorny questions remain around economic evidence and how to quantify sustainability benefits
The assessment is likely to get more difficult if and when regulators are called upon to assess whether a sustainability agreement should be exempted on the basis that it delivers benefits to consumers (e.g., under Article 101(3) TFEU). Benefits resulting from sustainability collaborations tend to be forward-looking, unpredictable and uncertain. Unlike other kinds of agreements between competitors, the benefits are for society as a whole rather than just the consumers directly impacted by the agreement in question: in the case of climate change, the impact of action in one jurisdiction may even be felt somewhere much further away. In this context it was recognised that there is scope for deviation from traditional economic assessment to consider benefits from beyond the affected market, and regulators have indicated a willingness to be flexible in considering different kinds of evidence. Nevertheless, some more difficult cases are required to allow the practical boundaries to be drawn.
(4) Antitrust developments are only one piece of the puzzle…
There is only so much that competition law can achieve in advancing sustainability goals: the sharpest tool in the regulatory toolkit continues to be statecraft and government action. Wide-ranging policy and regulation are required to effect the kind of deep, systems-level change across industries that is needed to tackle polycentric environmental issues, with private agreements seen as a complement to those efforts. Addressing climate change requires input from scientists, policymakers, financiers, economists, and civil society as well as competition lawyers.
(5) … but an important one to get right!
Antitrust may not be the environmental be-all-and-end-all, but it should absolutely be a priority to ensure that competition law is not a barrier to legitimate collaborative sustainability efforts. The shift to a more sustainable world will also lead to adjustments in many product areas and markets, producing winners and losers as a result. It is important that this transition develops in a way that preserves fair and efficient markets and protects consumers from opportunistic market abuses and “greenwashing”.
We discuss these developments in more detail in our recently published report - Global antitrust in 2024 - 10 key themes - antitrust and sustainability. Please get in touch with your usual contact if you would like to discuss this rapidly developing area and how current enforcement policies may impact your business initiatives.