Environmental concerns and sustainability have recently become the focus of antitrust enforcement in many jurisdictions. Argentina is certainly missing out in comparison to other countries when it comes to providing guidance on Sustainability Agreements. However, regardless of this legal uncertainty there are other regulations that complement the current antitrust landscape. This could be further encouraged and developed by the antitrust authorities in the country as a priority in their agendas.
As a member of the United Nations, Argentina has committed to the UN’s Agenda 2030 for Sustainable Development. There is a general consensus that a switch into “green” components or “clean” processes today is a must for businesses. But companies struggle when it comes to investment or innovation in these aspects, resulting in a general “first mover disadvantage”. This is why in Argentina competitors also may seek to counter these risks by agreeing to modify their inputs, products, or processes in a coordinated manner.
Pursuant to Argentina’s competition law No. 27,442 there is uncertainty as to how to tackle sustainability initiatives, but Section 2 of said law presumes that certain agreements between competitors are illegal under the “per se” rule, and the types of agreements enumerated are enunciative and not limited (e.g., price fixing). Even more, the fact that a sustainability agreement among competitors may result in “price fixing” or “establish obligations to (i) produce, process, distribute, purchase or market only a restricted or limited quantity of goods, and/or (ii) provide a restricted or limited number, volume or frequency of services” which are both foreseen in Argentina’s antitrust law.
In addition to this, Argentina’s antitrust law provides in Section 29 that the antitrust authority may issue “permits” for the execution of agreements involving practices in Section 2 (i.e., cartels). Also, Section 29 of Decree No. 480/2018 which regulates the law states four conditions that these agreements need to meet in order to be authorized, namely: (i) they must contribute to improving the production or distribution of goods or services, (ii) they must encourage technical or economic growth, (iii) they must be indispensable in order to achieve conditions (i) and (ii), and (iv) they must not eliminate competition from a “substantial part” of the relevant market.
Even though it seems that Argentina is lacking practical enforcement in this area, the good news is that the regulation in force provides the necessary tools to keep up with other jurisdictions that are already well upfront in sustainability and competition.
Environmental concerns and sustainability have recently become the focus of antitrust enforcement in many jurisdictions, creating a snowball effect. Still, there is skepticism, and that is understandable, because if antitrust is about maintaining competitive markets, why should we care? When discussing key antitrust considerations for companies implementing ESG, such as sustainability agreements, the answer to this question remains simple: sustainability agreements may restrict competition. There is a correlation between sustainability and antitrust, but there is a lack of a coordinated approach by agencies around the world to translate that correlation into a common understanding of antitrust policy.
The first country to step up its game was Austria, which introduced the “world’s first green exemption” in antitrust law. In September 2021, Austria amazed the local antitrust community with a green exemption provision in its antitrust amendment: “Consumers shall also be considered to be allowed a fair share of the resulting benefit if the improvement of the production or distribution of goods or the promotion of technical or economic progress substantially contributes to an ecologically sustainable or climate-neutral economy.” As a result, the Austrian sustainability exemption allows enforcers to consider granting an individual exemption to a sustainability cooperation between companies.
Previously, in 2007, China had enacted an Anti-monopoly Law that included a public interest exception for “serving public interests in energy conservation, environmental protection and disaster relief.”
After these first movers, last year could be defined as a “green antitrust year,” with sustainability related antitrust law developments in many jurisdictions to watch.
On June 1st, 2023, the EC published its revised Guidelines on Horizontal Cooperation (Guidelines), which include a chapter on sustainability agreements. The EC’s Guidelines include a broad definition of sustainability, which encompasses activities that support economic, environmental, and social development (including labor and human rights development). Sustainability agreements are defined in the Guidelines, as any type of horizontal agreement between companies that pursues a sustainability objective, regardless of the form of cooperation. On October 4th, 2023, the Authority for Consumers & Markets (ACM) published new rules on sustainability agreements between companies, fully aligned with the EC’s Guidelines, under which the ACM “does not want competition rules to stand in the way of agreements that contribute towards a more sustainable society.”
On October 12th, 2023, the UK Competition and Market Authority (CMA) issued Green Agreements Guidance, which explains how antitrust law applies specifically to environmental sustainability agreements that aim to prevent, reduce, or mitigate the adverse effects of economic activities on the environment or to support the transition to environmental sustainability. This approach is narrower than that of the EC, which includes social developments in the scope of its guidance on sustainability agreements. Other jurisdictions outside of Europe have also published their guidelines on sustainability.
On March 31st, 2023, the Japan Fair Trade Commission (JFTC) released its guidelines on how its Antimonopoly Act should be interpreted to achieve a green society. Compared to the EC Guidelines, the JFTC guidelines aim to address a comprehensive set of antitrust issues raised by sustainability, taking a more holistic approach. The JFTC Guidelines cover antitrust (both horizontal and vertical aspects), mergers and abuse of superior bargaining coverage of areas (no equivalent in EU law). This means that if an antitrust issue involves sustainability, private companies will be able to rely on a single document. This is different from all of the above guidelines, which seem to incorporate sustainability incrementally each time a guideline is revised.
Prior to these guidelines, authorities in different jurisdictions were already assessing cooperation agreements related to the green transition and sustainability. As a result, it is more practical for companies to evaluate the case law of the authorities as a source of trustworthy criteria, regardless of whether there are different guidelines, considering that the principles adopted in the case law will certainly be referenced in their soft law. The same approach can be applied in those jurisdictions where there are still no guidelines, or even case law yet, since it is already possible to anticipate which will come first.
The EC, for example, has yet to apply its guidelines, but it has already acknowledged the significance of sustainability advantages in influencing antitrust evaluations long before the existence of the Green Deal.
In the case of CECED (Washing Machine case of 1999), the EC approved an agreement among producers and importers of washing machines, collectively representing over 95% of sales within Europe. This agreement aimed, among other objectives, to cease the production and importation of the least energy-efficient washing machines constituting approximately 10-11% of sales in Europe.
The agreement eliminated one aspect of competition among sellers, negatively impacting competition and leading to price increases (typically, the most environmentally harmful machines tend to be the cheapest), thus prohibited under European antitrust rules. However, the EC contemplated that the agreement could receive individual exemption based on the energy savings realized in terms of individual economic advantages and the pollution reductions achieved in terms of collective environmental benefits. Consequently, the EC concluded that the agreement would advance environmental interests, facilitating a reduction in energy consumption, an objective unattainable without the agreement.
The most recent decision was in 2021: The car emissions cartel case. The EC considered that the five car manufacturers under investigation individually had the capacity and technology to reduce car emissions to an even greater extent than the current emission standards. The carmakers had agreed to a technological standard that would simply mirror the applicable standards, thereby limiting their ability to compete for even greener standards. This decision left as an indication that the EC will not tolerate that competitors who can achieve better or faster targets set a limit to compete for them in the area of sustainability. In other words, the five automakers had the technology to reduce harmful emissions beyond what was legally required by EU emissions standards.
As a result, the EC established a precedent where harsh cartel treatment was not necessarily for classic cartel behavior, such as price fixing, market sharing or customer allocation, but rather for “kindly intentioned, but not considerate” cooperation, since sustainability agreements must not only be well-intentioned; they must ultimately use the better technology that could achieve over-fulfillment of green goals. The importance of this case for companies looking for guidance on sustainability agreements lies in the fact that today’s EC guidelines state that one of the conditions for a sustainability agreement not to have a negative impact on competition is that the members of the agreement must be free to go further. Binding requirements can be imposed on participating companies to ensure compliance with the standard, but companies must remain free to apply higher sustainability standards.
In 2022, the ACM allowed Shell and TotalEnergies to collaborate on the storage of CO2 in empty North Sea gas fields. The decision, prior to the ACM’s guidelines, involved an informal request for guidance from the companies on whether their collaboration might reduce competition or, in short, whether the benefits outweighed the costs. The ACM considered that if the project contributed to achieving the goals of the Paris Climate Agreement, the benefits to society as a whole could be taken into account for an exemption from antitrust rules. In this respect, the ACM concluded that the benefits to customers and society as a whole outweighed the costs of restricting competition and, more importantly, that competition was not restricted for the remaining 80% of transport and storage capacity. In addition, the ACM analyzed whether the companies could actually achieve this goal on their own and found that cooperation was necessary for the project to succeed. The criterion extracted from this case and later reflected in the ACM guidelines was that sustainability agreements do not fall under the scope of the prohibition if users are allowed a fair share of the sustainability benefits, and the restriction of competition is necessary to obtain the benefits (in this case 20%) and does not go beyond what is necessary (in this case there is a remaining 80%).
But what about what is not allowed? On January 25th, 2022, the German Federal Cartel Office (FCO) concluded that a proposed agreement in the dairy sector to introduce a surcharge in favor of milk producers was anti-competitive. However, the FCO indicated that it would be open to considering a revised concept, including sustainability objectives, that was not based on a price agreement to the detriment of consumers. In this context, the FCO rejected the proposed agreement because it did not improve sustainability in the dairy sector, but the proposed system of surcharges would ultimately lead to price increases for consumers as they would not be able to switch to viable alternatives. The President of the FCO clarified that the economic interest in a higher level of income per se cannot justify the exemption of such an agreement from antitrust law. As a result, despite the fact that the FCO has not published any guidelines, the criterion applied to the case is also in line with those jurisdictions that have already published their soft law, i.e. a sustainability concept based on a price agreement to the detriment of consumers will not be subject to an exemption, whereas a sustainability concept with no negative impact on prices to the benefit of consumers will certainly serve as an initiative compatible with antitrust law, not only for the FCO but also for any other antitrust authority.
Other initiatives to promote sustainability have been evaluated by antitrust authorities in Germany, the Netherlands, the United Kingdom, and Belgium that were considered unlikely to harm competition, namely voluntary commitments, agreements to offer multiple services to new customers, long-term supply agreements, the exchange of non-commercially sensitive data, and the creation of platforms for sharing sustainability measurement data. While each case is unique, these assessments suggest that companies can effectively cooperate on sustainability goals with appropriate guidelines and safeguards, such as non-binding measures and limited scope of cooperation, where necessary.
How can we achieve proactive global consensus among antitrust agencies on what the approach of antitrust law should be to sustainability agreements?
While the initiatives of agencies around the world are positive, there is a lack of a coordinated approach to translate that into a common understanding of antitrust policy. Therefore, if companies are considering sustainable collaboration or joining forces to achieve sustainability goals, they should be very mindful of the geographical scope of that collaboration based on the current landscape. The existence of these guidelines implies different jurisdictions, different antitrust authorities, and therefore different approaches. Instead of simplifying and encouraging companies to be greener, they might as well stay as they are to avoid a thorough self-assessment of whether or not their cooperation can benefit from the legal exception rule, especially in cross-border cases. However, there is one thing that all antitrust authorities in all jurisdictions should be able to do: provide case law that serves as an example for all kinds of guidelines and soft law approaches.
Although the antitrust authorities have adopted different guidelines, the case law that has inspired their soft law is undeniably coherent and uniform in most jurisdictions, even in those that have not yet published guidelines. The following criteria can be extracted from the above-mentioned cases (i) sustainability agreements must pursue sustainability goals; if there is no evidence that the agreement pursues sustainability, then it falls within the scope of a regular agreement between competitors, which prima facie does not fall within the scope of pro-competitive practices, (ii) the agreement must not restrict the companies’ ultimate freedom to go beyond the proposed sustainability targets, i.e. if they want to be more environmentally friendly, they should not be constrained in their behavior, and (iii) the sustainability target pursued by the agreement must generate benefits for consumers, for society, that can proportionately and reasonably outweigh high costs or prices.
These are present in all the guidelines mentioned above and reflect the essence of the competition assessment that antitrust authorities might later make on a case-by-case basis. There are aggregations to this, but the overall picture remains the same.
Pursuant to the Argentina’s Antitrust Commission’s case law, when competitors exchange sensitive information, they may be facilitating collusion and harming competition to the detriment of the general economic interest. In this regard, competitively sensible information can be defined as information of a strategic nature which, if known by a competitor, may influence its decision in the market. Therefore, only information that is “reasonable” can be shared among competitors.
Following the Guidelines for associations, chambers and professional associations, which regulates the exchange of sensitive information, the following considerations should be taken into account when exchanging information between competitors: (i) the nature of the information, (ii) the timeliness of the information, (iii) the level of detail, (iv) the source of the information and (v) the territory in which the information is being exchanged.
Based on the above, in order to avoid any anticompetitive conduct under the exchange of commercially sensitive information, the information should be exchanged in a restricted manner without further details and references to production volumes, sales, prices, discounts, reductions, promotions, commercial strategies and future plans with respect to pricing, business plans, customer lists, etc.
So, if antitrust authorities are already applying uniform standards, what is left to achieve a proactive global consensus?
This will require multifaceted collaboration that includes communication, and a shared understanding of the issues at hand. To continue with the good work, the following initiatives could be pursued: (i) International forums and working groups, composed of representatives of antitrust agencies from around the world. These forums can serve as platforms for discussion, knowledge sharing, and cooperation on the intersection of antitrust law and sustainability agreements; (ii) Research and analysis, where antitrust agencies can discuss specific cases involving sustainability agreements. These discussions can help identify common challenges and potential solutions. For example, in 2020 the OECD published a Discussion Paper on Sustainability and Competition, where the main topics of discussion were: defining sustainability, determining whether antitrust law and policy should be affected by sustainability, and other related technical and procedural issues. Today, however, the landscape has evolved and a new and updated research by the OECD could be encouraged based on the various cases discussed above in relation to different jurisdictions and their guidelines; (iii) Case studies and workshops, where antitrust agencies can discuss specific cases involving sustainability agreements. These discussions can help identify common challenges and potential solutions. By pursuing these strategies, antitrust agencies can work towards a proactive global consensus on sustainability agreements, ultimately promoting a more harmonized and coordinated regulatory environment.
