The approach of European Competition Authorities (both at EU and National level) to sustainability agreements has been keenly debated in recent years, including in light of updates made by the European Commission to its Guidance on Horizontal Co-operation Agreements. On 4 October 2023, the Dutch Authority (the ACM) published a Policy Rule on its approach to sustainability agreements to replace its draft guidance in this area.
As previously discussed, we have seen several differing approaches to the treatment of sustainability agreements by European competition authorities. Perhaps the most contentious issue is the extent to which benefits to the general public (as opposed to users of a given product) can be taken into account when balancing the restrictions of an agreement against its benefits.
In its previously-issued draft guidance the ACM adopted the position that all benefits, both “in market” benefits (i.e., those that accrue to customers that are affected by the restrictions of an agreement) and “out of market” benefits (i.e., those that accrue in markets that are not affected by the agreement), should be considered. This was the most flexible and permissive approach, allowing parties to rely on a broad set of (potentially global) environmental benefits to justify important sustainability agreements.
In contrast, the European Commission adopted the more conservative requirement that benefits must accrue to the consumers/users affected by any restriction of competition. In initial drafts this was somewhat absolute, though the final guidance does provide some flexibility, albeit relevant consumers must nevertheless make up a substantial part of the group receiving the benefits. Whilst this was welcome, in a world of global environmental challenges and cross-border supply chains, it may prove difficult to rely on this guidance in all but the most clear cut of cases.
Meanwhile, the UK CMA has adopted a half-way house approach. In general, its approach aligns with that of the European Commission (for example, agreements with an ecological benefit would need to show specific benefits to the consumers of the products in question). However, the CMA departs from the European Commission’s approach as it concerns so-called climate change agreements, where the CMA is broadly aligned with the ACM’s approach.
The Policy Rule seeks to formalise the ACM’s approach to sustainability agreements in light of the Commission’s Horizontal Guidelines. In doing so, the ACM accepts that the majority of agreements will fall within both Dutch competition laws and Article 101 of the TFEU. As such, it recognises the need to respect the primacy of EU law and notes that the ACM will apply the Commission’s Horizontal Guidelines where it chooses to investigate sustainability agreements (whether under Dutch or EU law).
However, as a practical matter, the ACM’s Policy Rule sets out two important principles of prioritisation that suggest it is unlikely to pursue agreements where two criteria are met.
- Like the European Commission, the ACM recognises that agreements entered into between undertakings “solely to ensure compliance with sufficient precise requirements or prohibitions in legally binding international treaties, agreements or conventions […] and which are not fully implemented or enforced by a signatory EU Member State, will nevertheless fall outside the scope of Article 101”. The ACM goes further to recognise that, as a matter or priority, it will not pursue agreements entered into to ensure “compliance with rule following from national or European sources of law”.
- The ACM further adopts the position that where agreements have the aim of achieving specific international or national policy objectives to prevent environmental damage (e.g. to reduce greenhouse gas emissions in the supply chain), their benefits extend to a wider group than simply the consumers of the products. Where this is the case, the ACM will not pursue any investigation and/or fines provided that “it is plausible that the agreement is necessary for achieving the environmental benefits and that such benefits sufficiently outweigh the potential competitive disadvantages”. When considering this question, the ACM makes clear that it will take account of whether “the consumers [of the products] should belong to a group that benefits from the agreement”. In adopting this approach to case prioritisation, the ACM makes clear that it is seeking to balance the “polluter pays” principle alongside the need to align with the European Commission’s interpretation of Article 101.
Given the need to ensure uniform compliance of EU competition law, it was clear that the ACM’s draft guidance would run into challenges following the issuance of the Commission’s Horizontal Guidelines when applied in practice. However, the ACM has sought to navigate this by recognising the Commission’s interpretation of Article 101, whilst using its discretion on enforcement prioritisation in relation to sustainability agreements. Companies entering into sustainability agreements in the Netherlands can therefore obtain some comfort that the ACM is unlikely to intervene, though this comfort is limited in two important ways:
- Whilst the ACM’s approach is not to prosecute such agreements as a matter of policy, this does not prevent parties from bringing private actions in the Netherlands (or elsewhere) under competition law against parties entering into such agreements.
- Where an agreement has the potential to restrict trade between EU Member States (which the ACM recognises is the case for many agreements), it remains open to the European Commission to conduct its own investigation and potentially issue fines. This risk is likely to depend on the size of the undertakings in question, but is potentially more likely in circumstances where the ACM’s policy is not to investigate certain cases which the European Commission considers might fall foul of Article 101.