Late last year, Austria became the first country to enact a green antitrust provision—an exemption shielding corporate agreements related to environmental sustainability initiatives from antitrust laws, further intensifying a debate among policymakers and enforcers in the European Union regarding the goals of competition law.
Can sustainability play a role in antitrust enforcement? And should it? Can competition policy be a viable tool to fight climate change, and should antitrust enforcers take climate change into consideration? In the past few years, these questions have been the subject of a growing debate among policymakers and scholars, particularly in Europe. In an attempt to answer these questions and more, we have decided to launch a series of articles on the relationship between antitrust and sustainability.
How Green Antitrust Started in Europe…
In late 2019, the European Commission announced its European Green Deal, an ambitious initiative that aims at establishing the European Union as a resource-efficient yet competitive economy that is both carbon-neutral and does not rely on the use of natural resources for economic growth, while at the same time leaving no one behind.
Ever since the Green Deal, the European antitrust community has been debating whether green antitrust is a viable way to fight climate change, with voices weighing the arguments pro and con green antitrust. As I discuss in a recent podcast, the Green Deal drove an important realization home: In order to fight climate change and save planet Earth, it is not enough that governments commit to those goals—businesses must play their part, too. And in order to do so, businesses must inevitably come together, start sustainability initiatives, and cooperate to that end.
Businesses, however, are often reluctant to engage in conduct that could be interpreted as an anticompetitive agreement or cartel, as hefty fines loom. This has only recently been discussed in the framework of the Net Zero Insurance Alliance, a joint pledge by some of the world’s largest insurance companies to reach net-zero emissions by 2050. Green antitrust faces the task of carving out the ways in which businesses can cooperate in order to create a more environmentally sustainable economy. While green antitrust can have a bearing on all aspects of competition law, including anti-competitive agreements, unilateral conduct and mergers, the debate is most advanced in relation to anti-competitive agreements. Here, the question arises whether there should be an exemption for corporate collaborative sustainability initiatives from the antitrust laws.
In the past, there have been individual cases where the European Commission accepted sustainability benefits to weigh in on the antitrust assessment. In the much-famed Washing Machine case of 1999, the Commission analyzed an agreement amongst producers of domestic appliances to phase out washing machines that were not energy efficient to a certain standard. It found that this agreement restricted competition, would lead to higher prices for consumers and was thus prohibited under the European competition rules. However, this agreement could be individually exempted based on the energy savings—termed individual economic benefits—and the reductions in pollution—termed collective environmental benefits—it would generate. This type of analysis could now see a revival, as indicated by the European Commission’s latest policy brief where it explains how sustainability benefits could be incorporated into an antitrust analysis.
… and How It’s Going
Austria may be a (very) small country, but it’s also a green one. You may think that this is thanks to its lush forests, or perhaps sitting President Alexander Van der Bellen’s membership in the Green Party, itself a prominent member of the governing coalition. But there’s more: Since September 2021, Austria has the first green antitrust provision—a world-first, it would seem.* While things are still moving more slowly at the European Union level, Austria surprised the local antitrust community with a green exemption provision in its latest antitrust amendment. The provision reads as follows (in this writer’s own lay translation; find the German original here):
“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.”
The new Austrian sustainability exemption refers to two important aspects: First of all, it clarifies that sustainability benefits can be part of an improvement of production or distribution, or of technical and economic progress. This means that sustainability benefits could be considered when enforcers think about granting an individual exemption to a sustainability cooperation between businesses. The types of benefits that Austrian legislators had in mind here, as can be gathered from the legislative proceedings, include
- climate protection (e.g., through the use of renewable energy or the reduction of greenhouse gas emissions);
- the sustainable use and protection of water resources (e.g., by protecting the environment from the adverse effects of waste water disposal);
- the transition to a circular economy that focuses on the reusability of products and the recycling of materials, thereby essentially eliminating waste (e.g., by promoting the reparability and recyclability of products, or increasing the use of secondary raw materials); and
- the protection and restoration of biodiversity and ecological ecosystems (e.g., through sustainable forest management).
At the European level, the Taxonomy Regulation of 2020—which establishes the criteria that an economic activity has to meet in order to qualify as environmentally sustainable —can provide a blueprint for how to decide on a common framework for understanding sustainability benefits. While it primarily applies to financial products, the taxonomy included therein could also be made fruitful for the purposes of competition law as it constitutes a valuable resource for identifying both what type of improvements should be considered under a sustainability exemption, and when such improvements can be considered to be substantial.
In this respect, the EU will also have to find a broader consensus on what constitutes environmentally sustainable behavior—at the moment, the European Commission is considering allowing gas and nuclear power to pass as a sustainable form of energy production, which is not uncontroversial in Europe.
A Fair Share for Consumers
Returning to the Austrian exemption, its second important feature concerns the presumption that consumers are allowed a fair share of the resulting sustainability benefit. The clarity of this presumption is an absolute novelty and needs to be seen against the background of the legal provisions for individual exemptions: both the European and the Austrian provisions that allow for an individual exemption from the antitrust laws for certain agreements continue to foresee that a fair share of the benefits generated by such an agreement must be passed on to consumers. Some argue that the exemption only applies if the benefit is passed on to actual consumers of the product, while others adopt a broader view and also take into consideration the benefits that accrue to all consumers—or rather: to society as a whole.
The Austrian exemption makes short work of these elaborate discussions at the European level by establishing the presumption that a fair share of a sustainability benefit is passed on to consumers, thereby including all consumers. For instance, if a sustainability initiative lowers pollution at the factory and thereby helps to improve the health of residents nearby, then this could be taken into account even if the buyers of the product live on the other side of the country and now have to pay a slightly higher price. This leads to an internalization of the environmental externalities that would otherwise be borne by citizens, many of which might not even be consumers of the product.
The European Commission, on the other hand, still appears a little more cautious on this issue, as is shown in its recent Policy Brief on “Competition Policy in Support of Europe’s Green Ambition,” which was published on the same day as the Austrian exemption provision entered into force.
In the European Union, national competition laws need to be in line with EU competition law as soon as there is a (potential) effect on trade between Member States—a criterion that is easily fulfilled in a given case. In order to assess whether the Austrian exemption provision complies with this strict convergence rule, one needs to compare it with the European approach to passing a fair share of the benefit on to consumers. In a recent article, I argued that whether or not the Austrian law is seen as compatible with EU law will very much depend on how the European exemption provision is interpreted going forward. This, in turn, hinges on who interprets it: the European Commission, which has embraced a more economics-based approach to competition law, or the Court of Justice (CJEU), which is known to sometimes approach antitrust issues with a broader view. This aspect of the Austrian exemption therefore remains the most controversial issue.
As the Austrian parliament realized from the outset that the new exemption provision needs to be carved out in more detail, it invited the Austrian Federal Competition Authority to develop guidelines regarding the new provision. These are set to be published later this year, and will provide a further important part of the puzzle of building green antitrust.
Green Antitrust in the Rest of the World—and Digital Goals
The debate regarding sustainability and antitrust is very much alive and kicking in the European Union. While the European Commission is still deliberating its approach to corporate sustainability agreements, it has adopted a harsh tone when it comes to agreements hindering green innovation in the recent Car Emissions case. In that case, the Commission imposed a fine of $980 million on car manufacturers for colluding on emission cleaning for cars, thereby avoiding green innovation competition.
As if the green antitrust debate weren’t food for thought enough, European competition law currently faces a twin challenge: to reconcile the need to transition to a green economy with the goal of becoming a more digital economy. With the data protection and privacy issues surfacing in the digital world, this means that EU competition law is attempting to become privacy-friendly and green at the same time—no easy feat.
The European debate on green antitrust is bound to have spillover effects on other countries, as well. After all, climate change affects all countries around the globe. The OECD recently hosted a roundtable on sustainability and competition, and while contributions mostly came from European actors, Australia and New Zealand also submitted a joint note. When this debate turns global, however, the antitrust community will also need to address the diverse philosophical underpinnings of antitrust laws in different parts of the world.
In the current focus on environmental sustainability, it should not be forgotten that sustainable development is a very broad term: the United Nations lists a total of 17 Sustainable Development Goals, only some of which touch upon what we would call environmental sustainability. While it is certain that we must address environmental sustainability with particular urgency, the other sustainability goals—like ending poverty, fighting hunger, ensuring the health and well-being of mankind, or high-quality education—might further challenge antitrust enforcement in the years to come, particularly as regards the question of passing a sustainability benefit on to consumers or citizens at large.
* In 2007, China enacted an anti-monopoly law which contains a public interest exception for “serving public interests in energy conservation, environmental protection and disaster relief” (Section 15.4 AML). The Austrian provision was specifically enacted to foster environmental progress and regards environmental benefits as directly related to consumer welfare. The article was updated on 9/20/2023 to clarify this distincion.
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