Netherlands Authority for Consumers and Markets publishes policy rule on sustainability agreements. What should businesses pursuing sustainabiliy goals know?

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On 4 October 2023, the Netherlands Authority for Consumers and Markets (also ACM) published its policy rule towards oversight of sustainability agreements. This policy rule followed shortly after the European Commission’s adoption of the amended Horizontal Block Exception Regulations (‘HBER’) accompanied by the EC horizontal guidelines, providing much-needed clarity on how sustainability agreements between competitors must be assessed under navigate competition law.

Below we will delve into these new rules and guidelines and explain how businesses can cooperate to pursue sustainability goals without violating competition law principles.

What are sustainability agreements?

Sustainability agreements are cooperation agreements that pursue genuine sustainability objectives, such as the reduction of carbon emission, the conservation of natural resources or the promotion of animal welfare or labour rights. An agreement to jointly develop a manufacturing technology that reduces energy consumption or an agreement to share infrastructure with a view to scale down production waste are just some of the many examples of sustainability agreements.

While such agreements hold great promise for addressing critical global challenges like climate change, they may also raise antitrust concerns. Hence, companies cannot ignore the prohibition on anti-competitive agreements; careful and comprehensive antitrust analysis of sustainability agreements remains fundamental.

In its newest guidelines, the European Commission provides a framework for the assessment of sustainability cooperation between competitors. The ACM follows this framework and states that it will not enforce in two additional situations, thereby providing companies with more possibilities and certainty for their cooperation in the field of sustainability. We will set out the assessment framework and the specifics of ACM’s policy rule below.

Sustainability agreements that do not fall within the scope of the cartel prohibition

First and foremost, not all sustainability agreements between competitors fall within the scope of the cartel prohibition. This concerns agreements that do not negatively affect competitively sensitive parameters such as price, quantity, quality, choice or innovation. This is mostly the case when those agreements, alternatively:

  1. aim solely to ensure compliance with specific rules outlined in international treaties or conventions, whether or not they have been incorporated into national laws. Examples include preventing child labour or the logging of tropical wood types;
  2. solely concern internal corporate conduct. For instance, competitors may cooperate to boost their industry’s eco-friendly image by implementing measures such as phasing out single-use plastics or controlling indoor temperatures;
  3. establish a database with general supplier information related to (non-)sustainable value chains, production processes or components. However, these groups of agreements cannot mandate or prohibit parties from buying from such suppliers; or
  4. relate to the organization of industry-wide awareness campaigns, or campaigns raising customers’ awareness of the environmental impact or other negative externalities of their consumption.

Sustainability agreements that do fall under the cartel prohibition can still be allowed if certain criteria are met

Where sustainability agreements negatively affect one or more parameters of competition, they must be assessed under the cartel prohibition. In other words, it should be determined whether a particular agreement aims at and/or results in competition being restricted. For that purpose, several factors must be considered such as the market influence of participating parties, the agreement’s reach in the market and whether prices will be raised, or other competitive parameters such as output, variety or innovation will be negatively affected.

Ultimately, sustainability agreements that restrict competition can still qualify for an exemption if they, cumulatively:

  1. contribute to efficiency gains. Examples include the use of cleaner production technologies or a more resilient infrastructure. Sustainability agreements can also accelerate the commercialization of sustainable products and aid consumers in informed decision-making;
  2. do not impose restrictions of competition that are not indispensable to the attainment of these benefits;
  3. result in consumers receiving a fair share of the benefits, i.e. the benefits deriving from the agreement, either individual or collective, outweigh the harm caused by the agreement, so that the overall effect on consumers in the relevant market is at least neutral; and
  4. do not allow the parties the possibility to eliminate competition in respect of a substantial part of the products covered by the agreement. This last condition may be satisfied even if the agreement restricting competition covers the entire industry, if the parties to the agreement continue to compete vigorously on at least one important parameter of competition.

ACM takes a less strict line than the European Commission

The ACM follows a three-stage test to assess situations:

  1. does the sustainability agreement negatively affect competitively sensitive parameters?
  2. if yes, does the sustainability agreement restrict competition by object or by effect?
  3. if yes, can the sustainability agreement be exempted on the grounds mentioned above?

An important difference between the ACM policy rule and European Commission’s horizontal guidelines is that the ACM applies its policy rule also to sustainability agreements between companies that are not competitors (such as companies operating at a different level of the production chain, vertical agreements). Moreover, the ACM takes a less strict stance in its policy by recognising two additional situations that are immune from enforcement action.

  1. Compliance with binding sustainability rules

Firstly, the ACM claims that companies may enter into sustainability agreements to comply with rules stemming from national or European sources of law (in addition to international treaties or conventions legitimising sustainability agreements as with the European Commission). In one of its informal guidances, the ACM elaborates that ‘below legal standard competition’ would not have existed if binding sustainability rules had been complied with, so such activities do not deserve protection irrespective of where the sustainability rule has been laid down.

  1. Environmental damage-agreements

Secondly, when companies reduce or prevent environmental damage by cooperating, ACM does not consider it expedient to continue investigating their agreement if the initial investigation shows that it is plausible that the agreement is necessary for achieving these environmental benefits and that such benefits sufficiently outweigh the potential competitive disadvantages. It is also important that consumers in the relevant market receive an appreciable and objective part of the advantages. This means in any case that the consumers should belong to the group that benefits from the agreement. Furthermore, there should remain a degree of residual competition to legitimize the environmental damage-agreement.

Making these choices is in line with the line ACM has been taking for some time, as also referred to by Martijn Snoep (ACM chairman) in his speech at the GCR Connect conference in April 2021.

Remarks from the latest practice of the ACM

The ACM has so far commented eight times on specific cases of sustainability agreements in various industries. Most of those views were made based on draft guidelines that preceded the current policy rule. Each time, the ACM has taken an environmentally favourable perspective. It has refused to support a sustainability agreement in only one case, which concerned an industry-wide price-fixing of single-use packaging among supermarket chains. Nonetheless, the ACM decided to adopt a wait-and-see approach rather than impose an outright ban.

In other cases, the ACM ruled in favour of sustainability agreements concerning:

  1. mutual arrangements of dairy companies to use a system with which dairy farmers can demonstrate that they meet legal requirements regarding animal welfare and food safety;
  2. joint purchase of wind energy from one producer by the members of a business energy users association;
  3. a uniform price of CO2 used by distribution system operators in calculation models for grid investments;
  4. output restrictions and price-fixing by Shell and Total Energies collaborating on a newly established market for CO2 storage in empty gas fields;
  5. joint arrangements of beverage suppliers regarding the discontinuation of plastic handles on their packaging;
  6. detailed arrangements made between garden centres aimed at curtailing the use of illegal pesticides; and most recently
  7. collectors of commercial waste to stipulate among themselves to always offer new corporate clients a contract for at least two sorted waste streams

Request to the ACM for informal guidance

All the above-mentioned positive views were issued as an outcome of the informal guidance procedure, in which procedure companies can ask the ACM for an initial assessment of their sustainability agreements. ACM does stress though that it expects companies to initially conduct their own assessment, together with their competition counsels, to determine whether their sustainability agreements potentially restrict competition and may qualify for the statutory exemption. In case of any left uncertainty, they can contact the ACM, preferably at an early stage and provided the initiative is sufficiently concrete. Further procedural details are available in Chapter 4 of the ACM policy rule.

Due to its simplicity and minimum formalities, this procedure is expected to encourage businesses to co-operate in their pro-environmental efforts. It also proves again the ACM’s forefront engagement in the sustainability discussion. By way of comparison, the European Commission also offers the possibility to consult in its informal guidance procedure, however, at the same time accepts only novel and so far unresolved questions. As a result, the accessibility of the European Commission for stakeholders will generally be more limited.

No fines commitment

Having regard to the ACM policy rule, its accessible and business-friendly informal guidance procedure and the example-cases mentioned above, one might conclude that the ACM follows the European Commission’s approach regarding sustainability agreements though in a slightly more lenient manner. Finally, the ACM clarifies in its policy rule that it will not impose fines on companies that (i) have submitted their sustainability initiative to the ACM in good faith and (ii) with regard to which the ACM has indicated that it does not appear to be in breach of the competition rules, even if it later turns out that the agreement is not compliant. With this in mind, more companies may be attracted to the route of seeking informal guidance with the ACM when they are dealing with sustainability agreements.

Should you require assistance with the assessment of a sustainability initiative, we would be happy to help. Do not hesitate to contact us either by e-mail or phone.