Sustainability cooperations in antitrust law

Key Takeaways:

1. Sustainability cooperations between competitors must be assessed under (European) antitrust law. The assessment is generally carried out by way of self-assessment by the companies willing to cooperate.
2. EU law provides established antitrust principles for exceptionally permissible cooperation between competing companies. These principles have been expanded in favor of promoting sustainability.
3. Restrictions of competition must nevertheless be reduced to the extent absolutely necessary for the sustainability objective. It is therefore important to pay close attention to this issue at an early stage, i.e. when planning and structuring a sustainability cooperation in order to ensure that the project receives the blessing of antitrust law.

For further information and details on our legal support for the sustainability cooperation Euro Plant Tray, see our client briefing “Major Developments in German Competition Law in the First Half of 2024”.

Importance of antitrust law for the promotion of sustainability

Despite the noble goal of promoting sustainability, all forms of cooperation between competitors must be assessed under antitrust law. In the case of cross-border effects, European antitrust law applies, which also has a decisive influence on national antitrust law.

If the thresholds of merger control are not reached, the necessary legal review must be carried out by means of a so-called self-assessment, i.e. it is the responsibility of the companies willing to cooperate. In other words, administrative clearance or approval is not required.

Agreements between companies that restrict competition are generally prohibited, but may be benefit from an exemption depending on the outcome of the antitrust review.

Only sustainability agreements between companies without the purpose or effect of restricting competition are unproblematic, i.e. if they do not have a negative impact on competition parameters such as price, quantity, quality, choice or innovation. In the absence of a restriction of competition, agreements on technical standards or quality labels are therefore usually unproblematic in practice if they have been developed by means of a transparent procedure, only minimum standards are set, which are also non-binding, and no minimum prices are set. Certain marketing measures are also possible without further ado, such as the organization of an industry-wide awareness campaign for environmental impacts, provided that this does not involve joint advertising by competitors for certain products.

Antitrust problems for sustainability projects

If there is a restriction of competition, companies can argue that their project serves economic and socio-political objectives that take precedence over the disadvantages of the restriction of competition, and that it is therefore permissible under antitrust law. For such an exemption, the agreement must contribute to the improvement of the production or distribution of goods or to the promotion of technical or economic progress and allow consumers a fair share of the resulting benefit.

The European Commission has published new guidelines on the relevant antitrust assessment of horizontal cooperation agreements (Horizontal Guidelines). For the first time, the Horizontal Guidelines contain guidance on how to deal with sustainability initiatives. Insofar as competing companies pursue sustainability goals in the context of joint R&D, production, purchasing or specialization through their cooperation, the established antitrust framework continues to take precedence.

• Efficiency gains: The demonstrable improvement in the production or distribution of goods or the promotion of technical or economic progress is essentially expressed through objective efficiency gains. This traditionally includes a reduction in production and distribution costs, but also an increase in product variety and quality, an improvement in production or distribution processes or an increase in innovation. However, a broad spectrum of sustainability benefits resulting from the use of certain ingredients, technologies and production processes, such as the use of clean production or distribution technologies, improved production and distribution conditions or more resilient infrastructures, are now also to be recognized.
• Sustainability concept: In theory, this is conceivably broad. It includes (but is not limited to) combating climate change, preventing pollution, limiting the use of natural resources, protecting human rights, ensuring a living income, promoting resilient infrastructure and innovation, reducing food waste, facilitating the transition to healthy and nutritious food and ensuring animal welfare.
• Proof of efficiency gains: In practice, the required objective, concrete and verifiable proof of such efficiency gains can be quite challenging. For example, if a cited efficiency gain is a product improvement, the exact characteristics of the product improvement should be demonstrated. Or if it is a reduction in water pollution, it must be demonstrated how exactly the agreement contributes to the reduction of water pollution and an estimate of the extent of the claimed benefit must be available.

Other key criteria for sustainability cooperations

Avoiding restrictions on competition is not decisive for a legally compliant project, but reducing them to what is absolutely necessary for the sustainability objective is. In any case, the following parameters have emerged as further key criteria that must be weighted depending on the specific case:

• Permissibility of cooperating companies also participating in other sustainability initiatives
• Exchange of competitively sensitive information limited to the extent necessary
• Further restrictions of competition only to the extent absolutely necessary
• Transparent and open development of sustainability standards
• Non-discriminatory access to sustainability standards for all market participants
• Restraint of any price-related agreements

Traditional restrictions of competition by object, such as price fixing, market or customer allocation and the restriction of production or innovation among competitors, are still not permitted in the context of sustainability. The antitrust authorities are even urged to pay attention to appropriate concealment.

Exchange of information within sustainability cooperation

The exchange of information between cooperating companies has been viewed with particular suspicion by the antitrust authorities for some time now. Therefore, the (exceptionally) permissible flow of information must be limited to what is absolutely necessary to achieve the objective also regarding sustainability cooperations. When exchanging company-specific and strategic data, security precautions must be taken through suitable personnel, organizational and other operational measures. The type of information must also be taken into account, so that it may be advisable to handle data as accumulated and aggregated as possible. Finally, data collection and feedback via neutral third parties can also be a suitable means of securing the antitrust blessing for the overall project.

For example, the EU Commission expressly considers the exchange of information on non-sustainable suppliers to be permissible, i.e. this should not fall within the scope of the ban on cartels from the outset. The creation of a market information system, on the other hand, cannot be justified by the sustainability objectives alone and would have to be assessed in accordance with established antitrust principles.

Application practice of sustainability cooperations

Apart from the requirements outlined above, which can be particularly demanding in terms of proving efficiency gains, a sensitive approach to the planning and design of sustainability cooperations facilitates their admissibility under antitrust law. When applying the law, the implementation and key considerations of the antitrust self-assessment should always be clearly documented.

For companies, despite the principle of self-assessment, two paths can lead to a certain degree of regulatory blessing, at least in Germany.

• Formal application pursuant to Section 32c (4) ARC: This requires a significant legal and economic interest and leads to a decision according to which the German Federal Cartel Office sees no reason to take action, for example in form of a cease and desist order.
• Voluntary presentation of a project: This involves notifying the authority about the key parameters and objectives of a project. Such an approach may be desirable for companies, e.g., from a compliance perspective, but must be carefully considered for strategic reasons. Unlike some other national antitrust authorities, the German Federal Cartel Office has so far refrained from issuing its own written guidelines, but has a growing case practice and has recently received and assessed a number of sustainability initiatives through this channel.

Special constellations of sustainability cooperations

Special European law applies to the production of or trade in agricultural products, provided that producers are also involved in the agreements. As part of the Common Market Organization for agricultural products (CMO), new EU law rather generously allows certain restrictions of competition that aim at a higher standard of sustainability than is prescribed by EU law or national law. Finally, specific antitrust exemptions also exist for the fisheries and aquaculture sector.

This article provides a non-binding overview of the topics covered and does not replace legal advice. For further information or personal advice, please do not hesitate to contact us:

Dr. Christina Malz

Dr. Stephanie Birmanns