Is competition law holding back climate change objectives?
Competition authorities in the UK and the European Union are exploring the ways in which competition law and consumer protection law regimes may bolster climate change objectives, such as the commitment to reach net zero by all signatories to the Paris Agreement in order to ‘achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.’ 
In particular, it was reported recently that the Net Zero Insurance Alliance – a group of leading insurers and reinsurers committed to individually transitioning their underwriting portfolios to net-zero gas emissions by 2050 – has limited its activities in order to avoid potential violations of competition law. The group had proposed to exit coal insurance as part of its terms of membership, but their antitrust counsel cautioned against this proposal on the ground that there were risks that it could be viewed as anticompetitive. This news highlights the importance of the efforts of competition authorities in the UK and the European Union to review the ways in which competition law and consumer protection law may support, as opposed to hinder, their respective country’s sustainability and net zero goals.
Useful pretext or genuine concern?
It is worth questioning whether the companies, and their advisors, were overly cautious in dropping the proposal. Indeed, the European Commission has in the past favorably considered exempting so-called sustainability agreements:
- in 1998, it exempted an agreement between members of the European Association of Consumer Electronics Manufacturers to reduce the electricity consumption of equipment, on the basis that the energy-saving and environmental benefits would be passed on to consumers;
- in 1999 and 2001, it exempted agreements by the European Committee of Domestic Equipment Manufacturers to stop producing high-energy consumption appliances.This was a case where nearly all European manufacturers of dishwashers and domestic electric water heaters were party to the agreements, which were designed to improve the energy efficiency of appliances marketed in the European Union. The Commission concluded that the energy savings and environmental benefits outweighed the restrictions on competition.
- in 2001, it exempted an agreement between waste disposal firms to collect plastic waste (setting prices and establishing exclusivity), because it gave rise to a new market (plastic waste management) and consumers would benefit from the environmental benefits of reducing packaging. However, earlier that year it had decided it was an abuse of dominance by DSD to require the payment of the full licence fee for use of its Green Dot trademark in situations where it provided no service because the collection and recycling was actually carried out by competitors. No fine was payable by DSD as the Commission recognised that it could not easily have assessed, on the basis of previous decisions of the Commission or the European Court of Justice, the compatibility of its behaviour with the competition rules of the Treaty. The Commission indicated that, having now clarified the position, it would not hesitate in the future to bring proceedings in similar cases and, if necessary, to impose fines.
In the two decades since those cases, there has been no recent case law from the European Commission on such agreements – possibly because the negative clearance procedure was abolished. The Dutch Competition Authority (the “ACM”), however, has been more active recently, finding anticompetitive both an agreement between coal producers to switch to green energy and close down five coal plants, and an initiative between chicken suppliers and retailers to replace regularly-produced broiler chicken with more sustainable alternatives to raise animal welfare standards. The first could be said to be the most analogous to the initiative abandoned by the insurers – in that respect, it is of note that one of the key factors in the ACM’s conclusion was that the companies had claimed that carbon dioxide emissions would be reduced as a result of closing down the five coal power plants. However, the ACM found that, in fact, the emission rights could be used elsewhere on the European market, and therefore emissions would not be reduced but merely transferred elsewhere.
It is clear that guidance is urgently needed from the European Commission and national competition authorities.
Competition authorities’ focus on sustainability
The European Commission published a briefing note in September 2021, “Competition Policy in Support of Europe’s Green Ambition.” The note explores how EU Competition rules can complement environmental and climate policies more effectively. As part of its note, the Commission acknowledged that more guidance is needed to encourage companies to “jointly invest, identify solutions, produce, and distribute sustainable products.” For example, as with the ACM, the European Commission aims to provide “concrete examples” on cooperation agreements can be used to pursue sustainability objectives. Part of this also includes identifying what the sustainability benefits are when making an assessment under Article 101(3) of the Treaty on the Functioning of the European Union (TFEU).
In the United Kingdom, there has been significant activity by the Competition and Market Authority (the “CMA”) on the interplay between competition law and sustainability. On 20 September 2021, the CMA published guidance for companies on making positive environmental statements—i.e. green claims. The CMA has also recently concluded a consultation on 10 November 2021 for “Environmental sustainability and the competition and consumer law regimes: Advice to the Secretary of State for Business, Energy and Industrial Strategy.” As it relates to competition law enforcement, the CMA sought views as to examples where the Competition Act 1998 regime has “constrained or frustrated actual or potential agreements or initiatives that could support the UK’s Net Zero and sustainability goals as well as views in relation to private actions. In terms of the impact of these efforts, it indicated that the input will contribute to the body of evidence available to the government and may be used more broadly by the CMA to inform its own work.
In its Draft Guidelines on Sustainability Agreements, published 9 July 2020, the ACM stated that “[s]ustainbility and competition often go hand in hand”. The ACM has explored opportunities for undertakings when they wish to establish a sustainability agreement, similar to the agreement abandoned by the Net Zero Insurance Alliance. The ACM defines such agreements as “any agreements between undertakings, as well as any decisions of associations of undertakings, that are aimed at the identification, prevention, restriction or mitigation of the negative impact of economic activities on people (including their working conditions), animals, the environment, or nature.” The three opportunities for sustainability agreements the ACM explored relate to the ways in which these agreements can work within the existing Dutch and EU competition regime. First, according to the ACM, agreements which relate to “less important competition parameters” and have a negligible impact on competition may not fall under the cartel prohibition – as opposed to price-fixing agreements and collective refusals to buy or supply. Second, there is an exception under Article 101(3) of the TFEU which allows for agreements where the benefits offset the disadvantages to competition. Finally, the ACM explored other possibilities specifically related to the Dutch legal system, such as the possibility of submitting an initiative by undertakings to the legislature or minister to approve of the initiative.
Under the paragraph 3 exception, the ACM stated that the assessment of this exception would use the following criteria: (a) efficiency gains including sustainability benefits; (b) the users of products are allowed a fair share of the benefits; (c) the restriction of competition is necessary for the benefits; and (d) competition is not eliminated in respect of a substantial part of the product. The ACM cited an example where three waste collection companies collecting business waste agree to collect in a more sustainable manner and are able to do so with a 20% reduction in vehicle-kilometers. Even though the companies will no longer compete freely for the customer’s business, the agreement “is expected to produce…demonstrable, objective benefits in the form of cost savings, reduced emissions and traffic,” and it does not go further than is necessary to realise that objective.
As illustrated by the news involving the Net Zero Insurance Alliance, the uncertainty around the approach that competition authorities may take to sustainability agreements is having a chilling effect on the very real contribution that companies could be making towards net zero. As such, the time has come for the European Commission and national competition authorities to provide full guidance to companies. The recent developments set out above illustrate that they now recognise their unique and vital role in guiding companies’ behaviour and helping them pursue activities and initiatives that further sustainability objectives. Time will tell as these developments concretise into further guidance, how they will influence activities by other competition authorities, and ultimately how companies will respond.
*Wessen Jazrawi is a Partner and Connor Hounslow is a Legal Intern in the London office.
 In other words, the signatories are required to ensure that the greenhouse gases going into the atmosphere are balanced by those being removed from the atmosphere – or net zero. There is international scientific consensus that, in order to prevent the worst climate damages, global net human-caused emissions of carbon dioxide need to fall by about 45% from 2010 levels by 2030, reaching net zero around 2050.
 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32000D0475 and https://ec.europa.eu/commission/presscorner/detail/en/IP_01_1659
 Id at p.5.
 https://www.hausfeld.com/en-gb/what-we-think/perspectives-blogs/crackdown-on-greenwashing-by-uk-s-competition-and-market-authority-leading-up-to-cop26/. Other similar guidance includes: CMA (2021) ‘Environmental sustainability agreements and competition law’, available from: https://www.gov.uk/government/publications/environmental-sustainability-agreements-and-competition-law; and CMA (2020) ‘Electric vehicle charging market study’, last updated 23 July 2021
 The calls for input also cover the merger control regime, consumer protection law, and the markets regime. Viz. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1021364/CFI_-_sustainability_advice_.pdf
 Id. at Para.25.
 https://www.acm.nl/sites/default/files/documents/2020-07/sustainability-agreements%5B1%5D.pdf, para 6
 Id. at p. 5.
 Id. at p. 10.
 Id. at p. 13-14.