In recent years, global requirements to transform production processes to make them environmentally friendly, guarantee sustainable development and promote the adequate use of natural resources have become increasingly demanding.
Although this trend is mainly driven by the most developed countries, it also impacts small and medium-sized economies for which the implementation of these policies and requirements represents a major challenge.
As a rule, legislation and regulation fail to keep pace with global objectives and priorities. Therefore, in recent years there has been debate regarding the relation between competition and sustainability, and as to whether or not countries should encourage companies and individuals to directly implement policies that benefit the development and sustainable production of goods and services, even if this means entering into agreements between competitors or sharing sensitive information between them.
The discussion has not gone unnoticed in Colombia, where it has been approached mainly from an academic, rather than a governmental or regulatory perspective.
This document focuses on the regime applicable to free competition in Colombia, the limits to the exercise of this constitutional right, and the establishment of priorities and policies on environmental and sustainability issues in our country.
With this context, this article seeks to determine if it would be admissible and convenient for the competition authority to take into consideration the environmental benefits of anticompetitive conduct as grounds for not investigating it or not imposing penalties on those who have incurred in it.
Firstly, it is worth mentioning that the Colombian competition regime is based on Article 333 of the Political Constitution, which states, among others, that: (i) "Economic activity and private initiative are free, within the limits of the common good"; (ii) “Free economic competition is a right for everyone that entails responsibilities”; (iii) "businesses, as the basis of development, has a social function that implies obligations"; and (iv) “The law will delimit the scope of economic freedom when required by social interest, the environment, and the cultural heritage of the Nation."
Article 79 of the Constitution also recognizes the right to enjoy a healthy environment as a collective right and stipulates that it is the duty of the state to protect its diversity and integrity. This highlights the importance that, since the 1991 Constitution, has been given to environmental protection. What must be analyzed is if the antitrust regime should be or could be instrumentalized to achieve environmental protection and sustainability.
Likewise, the relevant legal framework for the discussion of sustainability and antitrust is also comprised in Article 1 of Law 155 of 1959, Articles 47 and 49 of Decree 2153 of 1992, and Article 3 of Law 1340 of 2009.
Although the oldest provision dates to 1959, it is Article 3 of Law 1340 of 2009 that sets out the purposes of the current free competition regime in Colombia: free participation of companies in the market, consumer welfare, and economic efficiency. These purposes guide the activities of the Superintendence of Industry and Commerce—the Colombian competition authority—within its competencies, which include investigating and sanctioning restrictive behaviors and agreements
Nonetheless, Article 1 of Law 155 of 1959 prohibits all kinds of practices aimed at limiting free competition and maintaining or determining unfair prices, known in the Colombian competition regime as the general prohibition.
Accordingly, Article 47 of Decree 2153 of 1992 provides a non-exhaustive list of agreements considered contrary to the free competition, either by their object or their effects on the market (e.g., agreements to determine sales conditions and set prices, but also to limit sources of supply of productive inputs, to refrain from producing goods or services or to affect its production levels, to prevent third parties from accessing markets or commercialization channels, among others).
The Colombian competition regime also includes exceptions outlined in Law 155 of 1959 and Decree 2153 of 1992, which are relevant to the topics of sustainability and competition. Some concerns have been raised about whether, theoretically, these exceptions could allow competitor agreements aimed at achieving environmental benefits.
As set forth in Paragraph 1 of Article 1 of Law 155 of 1959, the Government can authorize agreements that seek to defend a “(…) basic sector for the production of goods and services that are of interest to the economy in general”, referred to as the block exemption.
Meanwhile, Article 49 of Decree 2153 of 1992, allows: (i) behaviors aimed at cooperation in research and development of new technology; (ii) agreements on compliance with standards, norms, and measures not adopted as mandatory by the competent authority when they do not limit the entry of competitors into the market; and (iii) agreements related to procedures, methods, systems, and ways of using common facilities.
That said, based on the objectives of competition law some have argued that sustainability and environmental goals align with the application of competition policy.
Specifically, they suggest that environmental benefits contribute to consumer welfare (OECD, 2020) and to economic efficiency, if sustainability is considered as a quality and innovation parameter and therefore contained within the objectives of competition law (Nowag, 2022). This would entail that when assessing whether an agreement or conduct is illegal, the competition authority could consider the potential environmental benefits.
As anticipated, proponents of this view also believe that, eventually, agreements between competitors aimed at environmental sustainability, which would prima facie be restrictive of competition by their object or effect, could fall within the exceptions of Article 49 of Decree 2153 of 1992 (Ortiz, Solano, 2016), or could be authorized through the block exemption of article 1 of Law 155 of 1959 (Gutierrez, Solarte, 2023).
The opposing theory, that this article supports, is that the objectives and purposes of competition law does not include sustainability, nor should they (Modrall, n.d.). Expanding the goals of competition law to encompass environmental issues could encourage greenwashing, disincentivize sustainable production, and overload competition authorities (Schinkel, Treuren, 2020).
Moreover, consumer welfare should be analyzed case by case, and it is difficult to understand how an agreement that, by example, results in higher prices for certain products or excludes others from the market, even if it has a positive environmental impact, directly benefits consumers in those markets.
This is not to deny that environmental sustainability is a matter of utmost importance, and the right to free competition cannot be a barrier to achieving higher principles, values and objectives. Therefore, the policy and regime of free competition must not be an obstacle to environmental sustainability. In fact, Article 333 of the Constitution recognizes that the law may establish limits on economic freedom, among other reasons, due to environmental requirements.
Even if Colombian free competition regime does not include sustainability and environmental considerations within its legal framework, that circumstance does not diminish the importance of environmental preservation nor the fact that constitutional rights of free competition and private initiative can be limited by reasons of common interest and general welfare.
Thus, the question to be asked is whether competition policy should be defined by firms or individuals, and if the state should encourage them to determine the limits of competition in the interest of sustainability and the environment. Alternatively, should only the state set such limits, ensuring that no agreement or act that restricts competition is exempt from law enforcement, even if it generates a positive impact on the environment?
In Colombia, according to the Constitution, only the state has the power to establish limits to the exercise of rights, especially if these are of constitutional rank, as is the case of free competition. This is expressly established in Article 333 of the Constitution: “Economic activity and private initiative are free, within the limits of the common good. For their exercise, no one may demand prior permits or requirements, without authorization by law (…) The law shall delimit the scope of economic freedom when so required by the social interest, the environment and the cultural heritage of the Nation.”
As anticipated in the previous section, including sustainability as a goal of competition policy is a topic that generates both support and opposition.
On the one hand, proponents, including the Organization for Economic Cooperation and Development (OCDE), argue that incorporating sustainability into competition policy could incentivize businesses to adopt sustainable practices.
Specifically, the OECD stated that "competition supports environmental protection goals where consumers preferences lean towards environmentally friendly products or services. This creates an incentive for companies to adjust their supply of sustainable products and align their investments to meet that demand."
Efforts by companies to comply with environmental standards can also help mitigate negative externalities caused by their production processes, such as air and water pollution, as well as the depletion of natural resources. These externalities suppose that the effect of production or consumption of goods and services imposes costs on others which are not reflected in the price charged for the goods and services provided.
Giorgio Monti, a law professor at Tilburg University, suggests in his “Handbook on Sustainability and Competition Law” that competition law can penalize behaviors detrimental to the environment, especially when such actions secure competitive advantages at the cost of environmental protection.
The European Commission has highlighted the role of competition law in achieving the Green Deal objectives. In its Competition Policy Brief, the Commission emphasized that competition policy can drive green innovation and facilitate the technological advancements necessary for sustainable growth.
On the other hand, the inclusion of this matter within the purposes of the competition law could generate significant uncertainty, as the parameters under which authorities would evaluate such objectives would lack clarity. As an example, the approval process for mergers and acquisitions might become uncertain, as it would no longer be strictly limited to competition policy concerns but extend into other areas.
On that line, Margrethe Vestager, the Executive Vice-President of the European Commission, in her speech at the conference on “Competition Policy Contributing to the European Green Deal” on February 4, 2021, stated that “competition policy is not the primary tool for achieving green goals”.
In Colombia, as previously stated, Law 1340 of 2009, in its Article 3, outlines the objectives of competition law, namely, the protection of economic freedom and enterprise, market efficiency, and consumer welfare. Environmental protection and sustainability are not among its stated purposes; therefore, it should not be made enforceable through competition law, at least not until the legal framework for its enforcement is determined.
So, it is clear that the objectives of competition law in Colombia do not explicitly address sustainability policies. Despite the increasing significance of these issues, there has been no substantial regulatory development in this area. Moreover, the Superintendency of Industry and Commerce, even in its guidelines on business collaboration agreements, does not reference any agreements aimed at achieving environmental objectives. This is partly due to the exceptions outlined in Article 49, which do not specifically cover agreements with sustainability goals. As a result, the current legislation does not directly incorporate environmental objectives into competition policies.
As suggested by the International Chamber of Commerce in their paper “Competition Policy and Environmental Sustainability” (2020), competition authorities should not be overburdened with roles beyond their expertise, they should focus on maintaining free and fair competition. Even though environmental sustainability is important, including it as an objective of competition law could dilute its effectiveness.
Competition authorities specialize in the economic and legal analysis of markets. Including objectives such as environmental sustainability would compel them to assume roles for which they are unprepared, undermining their core purpose. Thus, assigning functions outside the scope of the competition authority can dilute the extent of its responsibilities and ultimately deviate them from the goals of the free competition regime.
The International Chamber of Commerce also suggests that integrating external objectives, such as environmental ones, could lead competition policy to adapt to numerous exceptions linked to other public policies (e.g., health or human rights).
This dilution would not only reduce the focus and efficacy of competition policy but also distort its original purpose. Each specialist area should address its respective concerns—competition law must be coordinated with industrial and sustainability policies, not replaced by them.
Including sustainability as a goal of competition law could also create barriers for market players. Large corporations, with greater resources and adaptability, might disproportionately benefit from the incorporation of sustainability objectives. Meanwhile, smaller businesses could struggle to meet stricter standards, potentially being excluded from the market.
This may represent a major competition issue, particularly in developing countries such as Colombia, whose local industry (i) does not always have sufficient financial leverage to make the investments in the short term that other multinationals have made to implement international sustainability standards, and where (ii) investment priorities may be focused on other more pressing needs.
Moreover, the Organization for Economic Cooperation and Development (OCDE) in their paper on Sustainability and competition (2020) indicated that there is a risk that companies could use sustainability as a pretext to justify anticompetitive practices or enhance their public image artificially, without genuinely meeting environmental standards. This could lead to unfair practices, such as greenwashing.
In addition, it should not be overlooked that not all markets value sustainability in goods and services in the same way and, therefore, from the consumer's perspective, an offer that prioritizes these elements does not necessarily generate a benefit for the consumer, per se.
This, in turn, implies that priorities set from a global environmental perspective may not necessarily follow the same agenda in each country, as the consequences of their implementation will be different depending on the economy in question, its priorities and its environmental necessities.
Rather than incorporating environmental sustainability as a direct goal of competition analysis, it would be more convenient to establish institutional coordination mechanisms between competition authorities and environmental policy agencies. Sustainability should be addressed through public policies and specific regulatory frameworks that complement competition law, thereby avoiding a diversion from its core purpose.
Furthermore, public policies must determine the environmental and sustainability requirements according to each jurisdiction, and it should not be up to the competition authority and much less to particulars, to decide which environmental benefits could justify and legitimize potential restrictions on the market.
According to Principle 7 of the Rio Declaration on Environment and Development (1992): “In view of the different contributions to global environmental degradation, States have common but differentiated responsibilities.” This means that the environmental responsibilities and requirements that could be applicable, for example, in the United States or in the European Union, might not be the same in nature and extent, as those in Latin American countries. Therefore, sustainability priorities should be defined through environmental regulation and public policy.
For example, in Colombia, environmental requirements, rather than focusing on the reduction of greenhouse emissions, should aim at preventing deforestation and protecting biodiversity and ecosystems, that are the country's principle ecological challenges (EAN University, 2023).
Note that in 2023, China and the United States, jointly, generated 45% of the greenhouse gas emissions in the world (Statista, 2024), whereas Colombia´s greenhouse emissions are far from substantial. In contrast, in terms of deforestation and according to the World Resources Institute, between 2001 and 2023, Colombia ranked 7th in loss of hectares of primary tropical forest.
In our view, an agreement in Colombia between competitors that seeks to reduce the country's emissions -or any other sustainability goal that deviates from the specific environmental requirements of the country-, and as a result prices of a certain product increase, or a product or competitor is excluded from the market, will have little or no effect in what should be the country´s sustainability priorities and it may come at a great cost to consumers and to the economy.
As previously mentioned, since Colombia contributes only marginally to global CO2 emissions, allowing restrictive agreements in the country to combat or control these emissions would not have a significant positive effect on Colombian consumers or in sustainability purposes, especially while major polluting countries like the United States and China do not make significant efforts to achieve this goal.
Anyhow, if sustainability is left to the criteria of the competition authority, it would be responsible for establishing and measuring the environmental impact of agreements and conducts that allegedly seek sustainability, as well as the actual benefits in comparison with the harm to competition.
In doing so, the competition authority would have to issue a decision on a matter (environmental and sustainability) that is completely beyond its competence and expertise.
In other words, if environmental requirements are not clearly defined through public policy, and it is left to the competition authority to determine which sustainability goals to pursue, there is no guarantee that the relevant environmental concerns will be addressed.
In Colombia, according to Article 1 of Decree Law 3570 of 2011, the Ministry of Environment and Sustainable Development (MADS by its acronym in Spanish) is the authority in charge of “(...) defining the policies and regulations to which the recovery, conservation, protection, planning, management, use and sustainable exploitation of renewable natural resources and the environment of the Nation shall be subject, in order to ensure sustainable development, without prejudice to the functions assigned to other sectors”.
Thus, MADS has within its powers to (i) design and regulate public policies to, among others, prevent, repress, eliminate or mitigate the impact of polluting, deteriorating or destructive activities on the environment in all economic and productive sectors; and (ii) evaluate the scope and economic effects of environmental factors, their incorporation into the market value of goods and services and their impact on the development of the national economy and its external sector; their cost in medium and large infrastructure projects, as well as the economic cost of the deterioration and conservation of the environment and renewable natural resources.
Within this context, there is nothing to prevent lawmakers (in the first place) and MADS from setting parameters that private parties must abide when developing their activities in the market to reduce their environmental footprint and impact. As previously stated, free competition as a constitutional right can only be limited by law.
Therefore, if one of the State's priorities is to encourage agreements between private parties to promote the adoption of sustainable practices or procedures, MADS is the authority responsible for promoting them and establishing the guidelines under which they must be carried out, ensuring that they are transparent for all market agents and for consumers.
If necessary, MADS may even request the competition authority to give its opinion on the matter under the competition advocacy referred to in Article 7 of Law 1340 of 2009. This figure allows coordination between both authorities (MADS and SIC) and guarantees that public policies on competition, environment and sustainability are aligned.
Hence, the Colombian legal system has clearly defined the competencies of the different state entities. The regulation of matters related to sustainability and the environment is not the responsibility of the competition authority.
Environmental sustainability, although a legitimate and desirable objective in the global context, does not constitute an explicit or primary purpose of competition policy. As outlined by the principle of instrumentality within the competition regimen, competition policy serves as a tool to achieve objectives such as economic efficiency and consumer satisfaction, but it is neither designed nor intended to directly address environmental sustainability goals.
Although competition policy should not be seen as the solution to challenges that go beyond its objectives, such as environmental, labor or industrial policy issues, neither should it act as an invincible barrier or obstacle to state policies in these areas, mainly because there are cases in which competition law and instrumental policies must be balanced.
The OCDE in their paper “Environmental Considerations in Competition Enforcement” established that competition policies can contribute to sustainability objectives. As a matter of fact, “environmental regulation limits the space within which companies compete and even shape business models, yet competition may still occur within that space”.
In a similar line, in 2020 the Economic Commission for Latin America and the Caribbean (CEPAL for its acronym in Spanish) adopted the Andean Environmental Charter, wherein member countries expressed their commitment to enhancing environmental protection. Specifically, the Charter emphasized the intention to shift consumption patterns towards more sustainable practices and to pursue economic recovery in a sustainable manner. Principle 2 highlights the importance of promoting sustainable, inclusive and environmentally respectful development to preserve and contribute to the present and the future well-being of the citizens.
Nonetheless, the interplay between sustainability and competition requires appropriate regulations addressed to balance environmental protection and efficiency.
As it was said before, in Colombia certain agreements between competitors are permitted by competition law, precisely because they pursue desirable objectives for the economy, such as encouraging best practices in the market or innovation and technological development, but even in those cases they are limited.
In fact, given that the agreements established under the exceptions provided in Article 49 of Decree 2153 of 1992 do not require prior authorization, particular caution must be exercised to ensure that such agreements do not exceed what is permitted by law.
These agreements must not be more restrictive than necessary to achieve their goals, and they should be considered as a last resort, with less restrictive means prioritized first. Environmental agreements are still agreements between competitors; therefore, they carry the risk of affecting competition, which could potentially lead to the invalidation of the agreement. The legality of the agreement will depend on the parties, whether they justify that their accord is essential to achieve the goal and that it assures market efficiency and benefits the consumer.
It would be advisable to consider the criteria outlined by the European Union Competition Commission and the Autoridade da Concorrência in their Guide of Best Practice on Sustainability Agreements, to be specific:
Competition law cannot extend beyond the scope permitted by its primary purposes. This means that competition authorities do not have the mandate to prioritize environmental considerations over their core objectives. However, they may support sustainability goals as long as they operate within legal boundaries.
Any interpretation that allows for environmental objectives must be based on a clear legal framework and aligned with constitutional principles such as the social function of property (Article 333 of the Political Constitution).
In exceptional cases, it may be legitimate to limit free competition to protect fundamental social goods such as health or sustainable development. However, such limitations must be justified within the regulatory framework issued by the competent authority (MADS) and demonstrate that the social benefits outweigh the restrictions imposed on the market.
In other words, competition policy should serve as a tool to facilitate the achievement of objectives like environmental sustainability without undermining its primary purpose. It is not the responsibility of competition authorities to prioritize environmental sustainability over traditional goals. However, competition policy can support such goals complementarily, provided it does so within established legal limits and in harmony with public policies.
Ultimately, sustainability should primarily be addressed through specific and specialized public policies, while competition policy must ensure that these are implemented with minimal impact on competitive dynamics.
The absence of an environmental policy leads to the problem of the “first mover disadvantage”, where the first producer to switch to a sustainable production process will be affected if other competitors do not adopt the same model, as their costs will be higher. This first producer might eventually withdraw from the market if others do not adopt similar practices.
In this context, and to guarantee competitive neutrality of environmentally sustainable agents, what needs to happen is for the legislative and government to issue laws and regulations that encourage or discourage certain behaviors, according to a well-defined environmental policy, instead of allowing anticompetitive conducts.
Solutions through adequate regulation could:
Addressing the disadvantages created by business decisions belongs to the regulator, not to the competitors themselves.
As indicated by the OECD, environmental standardization can help overcome the first-mover disadvantage, as without it, competitors may not adjust their activities or production processes to higher environmental standards.
