Where we stand

Following progressive advances by the Dutch and Greek competition authorities, professors, judges, representatives of competition authorities and other members of the German competition law community have dedicated their annual conference of the Working Group on Competition Law to the topic "Open Markets and Sustainable Business – Public Goals as a Challenge for Competition Law Practice". The conference took place (in virtual form) on 1 October 2020 at the invitation of the Federal Cartel Office ("FCO"). In a background paper to the conference (currently only available in German), the FCO presents the results of the discussion and what competition law and competition authorities can – and cannot – do to achieve public interest goals such as environmental protection. The paper (for now?) refrains from taking a clear positioning. However, the different views expressed on the conference topics and the discussion of the various legal angles show two things: this topic is here to stay and the future path is wide open.

Competition watchdogs are no politicians

The background paper makes it clear on several occasions that it primarily sees the legislator and political decision-makers to be legitimized in promoting environmental protection and sustainability. Authorities that are exclusively obliged to protect competition are not in principle called upon to promote non-competition public interest objectives independently of the legislator. Private self-regulation as an instrument to achieve sustainability goals, which is repeatedly brought into play in the public debate, is only considered adequate in exceptional cases, i.e. if the legislator has deliberately refrained from regulating this area and private cooperation is actually the preferable solution to a legislative measure.

Public interest objectives and the ban on cartels - not an easy relationship

A substantial part of the paper deals with the question of the extent to which sustainability, environmental protection and other public interest objectives can actually be taken into account within the current framework of the ban on cartels under Art. 101 TFEU or Sections 1, 2 of the German Act Against Restraints of Competition. In this context, it is first clarified that the ban on cartels is only applicable if cooperation between at least two companies is potentially restrictive. Unilateral decisions to advance sustainability are therefore excluded from the ambit of the provision, as are agreements that, while entered into between several companies, do not lead to any restriction of competition to begin with. Regarding the latter, the paper expressly points to the creation of non-binding or non-exclusive standards and labels. As examples from the FCO's enforcement practice the Fairtrade label and the Initiative Tierwohl (ITW) are highlighted. Exercising its discretion to intervene, the authority had in both cases decided not to initiate an investigation, as the respective standards of conduct and production were not binding for the participating companies and continued to allow the parallel production of "conventional" products.

In addition, the paper also considers a restriction of the scope of the ban on cartels in line with the ECJ's Wouters decision or a sectoral exemption in line with its Albany decision. While the paper does not ultimately conclude on this thinking, it does express doubts – not least because the environmental policy provisions of EU law are primarily directed at the EU institutions (and not at individuals or companies, making it difficult to argue that they necessarily have to reflect aspects like environmental protection standards in their business activities). A similarly critical view is held on exemptions based on the notion that agreements specifically directed at environmental protection are "neutral" in terms of competition law as they only affect competition (marginally and necessarily) as a "by-product" (similar to the "ancillary restraints" concept under EU competition law).

Not every end justifies the means

In contrast, more leeway for taking public interest objectives into account is seen for an exemption under Art. 101 (3) TFEU – at least in theory. However, the paper advocates to strictly consider all four elements of this provision and emphasizes in particular the need to demonstrate the creation of efficiency gains and corresponding consumer participation. For sustainability improvements, both are difficult to grasp by current standards. While it is possible for the achievement of public interest objectives such as environmental protection, animal welfare or the improvement of working conditions to (also) represent efficiency gains under certain circumstances, these would, however, have to be quantified precisely – which may well prove difficult with (typically rather abstract) sustainability topics. 

This then makes it hard in practice to prove consumer participation. With reference to the European Commission's Horizontal Guidelines, the paper therefore advocates a restrictive interpretation of Art. 101 (3) TFEU and excludes the consideration of purely abstract public interest objectives (without quantification of efficiency gains). In this respect, the German background paper differs significantly from the initiative of the Dutch Autoriteit Consument & Markt (ACM). The latter favors a much more flexible application of the exemption provision for all sustainability topics. While the Dutch paper was discussed at the conference – including with Martijn Snoep, the president of the ACM – it is portrayed but not further analyzed or evaluated in the German background paper.

German merger control is free of non-competition considerations...

In the field of merger control, the background paper once again underlines the separation between decisions by competition authorities on the one hand and political decisions on the other. It emphasizes that the competition authority has no discretion in merger control and that its decision has to be measured exclusively by competition standards. The consideration of non-competition aspects, such as environmental and climate protection, could – at least at the German national level – be taken into account by ministerial approval, since this is (legally intended) a political decision made by political stakeholders. However, the paper makes it clear that merger control as a whole is not seen as the right instrument to promote sustainability goals.

... But seeds are planted in Europe

Meanwhile, the first steps are already being taken at EU level. In the past, the European Commission has already considered more specific guidance on how to deal with public interest criteria when revising its Horizontal Guidelines. Driven by the current dynamic – the draft guidelines of the ACM quickly garnered sympathy in Brussels – it has now launched a consultation on "Competition contributing to the European Green Deal". In this consultation, all interested parties can answer specific questions on the role of state aid law, the ban on cartels and merger control on the way to a sustainable EU economy.

In addition, an amendment to the "Regulation establishing a common organization of the markets in agricultural products" (Regulation 1308/2013) is currently in the legislative process. Here, the EU Parliament proposes to provide for an exemption from the ban on cartels in certain cases, namely when the achievement of public interest objectives is the primary concern. Specifically, a new Article 210a is proposed, which – although limited to certain agricultural products and vertical relationships (i.e. agreements between non-competitors such as producers and processors) – would exempt such agreements from the ban on cartels that aim at introducing standards that go beyond the legal minimum in the area of environmental and animal protection. A prerequisite would be, however, that the public interest promotion associated with this would outweigh any possible consumer disadvantages and that the associated restrictions of competition would not go beyond what is absolutely necessary.

Although the legislative process is far from complete and only a narrow section of the EU's internal market activities is covered, EU legislators are clearly keeping up with the zeitgeist and sending an important signal – especially against the backdrop of the Working Group on Competition Law's paper calling out legislators as the legitimate driving forces behind any "green competition law". If taken up, the current regulation proposal could therefore spur a lot of broader action going forward.

What lies ahead

The question of whether and how competition law can make a contribution to achieving environmental and climate protection goals has been increasingly discussed recently and has now definitely made its way on the political agenda. The background paper of the Working Group on Competition Law contains some important basic ideas and guidelines which will influence the enforcement practice of the FCO in the future.

We would not, however, expect the FCO to spearhead development in this area and push the limits of current competition law in the short term in the interest of climate protection. The background paper does put a question mark behind the FCO's previous practice to consider environmental concerns primarily in the context of its intervention discretion, i.e. by not pursuing cases in that area. However, it does not chime in with the sometimes very progressive tones from Brussels and (above all) The Hague and Athens – which appear to see competition law more or less as stirrups for the European Green Deal.

It therefore remains to be seen how the discussion in Europe – especially in Brussels and Strasbourg – will unravel and what effects this will have on the European competition enforcement practice (including in Germany).

For companies, the Commission's consultation now offers an excellent opportunity to present their views and thus to help shape European competition practice sustainably (sic!) and at an early stage. This opportunity is available until November 20. At the same time, it is advisable in any case to observe further developments and examine what opportunities there are for cooperation to promote sustainability in accordance with competition law.
 

Authored by Christian Ritz, Dr. Florian von Schreitter and Oliver Cook