Sustainability and Competition Law: Interplay, Global Developments and Relevance to Pakistan

Climate change has become a crisis of current times affecting every country on every continent. The 2030 Agenda for Sustainable Development (including its 17 sustainable development goals (SDGs)), adopted by the United Nations General Assembly in 2015, provides a shared blueprint:

“…a ‘plan of action for people, planet, and prosperity’ to guide all countries’ policies towards sustainable development until 2030.”[1]

Another global response to climate change, to strengthen these goals in the form of a global legal instrument, is the Paris Agreement.[2] In response to these international commitments, the European Union (EU) has also launched the European Green Deal which is an ‘integral part of the European Commission’s strategy to implement the United Nations’ 2030 Agenda’, particularly the UN’s SDGs.

Interestingly, due to such developments, the discussion around sustainability is high on the agenda of many competition regulators around the globe. Until recently, sustainability concerns had not been debated much within the milieu of competition. The European Green Deal has played a pivotal role in sparking this discussion.

“The European Green Deal, launched in December 2019, aims at making Europe the first climate-neutral continent by 2050 setting an agenda for sustainable economic growth in light of environmental and social policy priorities.”[3]

Following the European Green Deal, the European Commission has also instigated debates on greening competition law and policy, namely, ‘how competition policy can support the EU’s focus on sustainability and progression towards climate neutrality by 2050.’ As a result, the interplay between competition law and sustainability has become one of the most debated topics in the EU.[4] The Authority for Consumers and Markets (ACM), the Dutch competition authority and the Dutch courts have been leading this debate within the EU.[5]

Similarly, the Competition Committee of the Organization for Economic Cooperation and Development (OECD), in cooperation with national competition authorities of its members—realizing the importance of the issue—have organized a series of discussions and studies underlining the interplay between competition and sustainability goals.[6]

Businesses globally have also recognized the need to proactively address the issues relating to sustainable development and are actively trying to play their role in this regard. While some will be able to make progress alone, many will often require collaborations within industries to bring about efficient and long-lasting changes.

According to a recent survey in the UK, USA, France, Germany and The Netherlands on the interplay between competition law and sustainability, 93% of businesses want to work closely with peers when pursuing sustainability goals, with 9 in 10 agreeing that collaboration is key to achieve progress on sustainability issues.[7] When it comes to investments, sustainability concerns are considered the new normal.

“While many areas of law have already adapted to this shift, competition law still seems to be searching for its place in the ‘sustainability movement’.”[8]

Regardless of how laudable or pious the aims may be, cooperation between competitors will bring competition laws into play. Generally, under competition law, any collaboration or cooperation in the form of an agreement, decision or concerted practice between competing businesses is prohibited.[9] This is due to the rationale that such collaborations result in restriction, prevention or distortion of competition in the market. However, as an exception, if the advantages of any so-called anti-competitive agreement, on balance, outweigh the disadvantages then such collaboration can be permitted. The assessment of these advantages broadly include efficiency gains i.e. improvement in the production or distribution of goods, promotion of technical or economic progress and potential benefits for the consumers, etc.

It is also evident from the frameworks guiding these exemptions that sustainability improvements or considerations have traditionally never been a part of the aforementioned assessment of advantages.

For example, under EU competition law, there do exist individual exemptions and block exemptions relating to cooperative agreements. Individual exemptions relate to the exclusion of a specific agreement from prohibition, while block exemptions relate to a generic type of agreement.[10] The European Commission, the primary authority for applying competition law within the EU, has issued guidelines and enacted a framework to guide the undertakings in making an assessment about an agreement and whether it is exempt from prohibition. Until recently, none of the guidelines explicitly touched upon sustainability considerations, however, the Commission in March 2022 approved a revised draft of these guidelines which includes inter alia a specific chapter guiding on the exclusion of sustainability agreements from prohibition.[11]

As far as the national regulators are concerned, the ACM (Authority for Consumers and Markets) was one of the first to publish detailed guidelines on how competition law would be applied to sustainability agreements.[12] The UK’s competition authority, namely the Competition and Markets Authority (CMA), has also published guidance regarding cooperation agreements between businesses for the attainment of sustainability goals.[13] The Hellenic Competition Commission (HCC), the Greek competition authority, has also taken the initiative with a working paper promising new guidelines to support businesses entering into sustainability collaboration arrangements.[14] The HCC has further launched an initiative called the ‘Sustainable Development Sandbox’ to foster innovation and contribute positively to the public interest, aiming to encourage businesses to adopt innovative business ideas in favor of sustainable development. Businesses can apply to the HCC through this sandbox for the evaluation and approval of their proposals in this regard.[15]

Austria incorporated the sustainability exemption into its antitrust laws, making it the first legally binding exemption of its kind to be included in competition laws worldwide.[16] The Austrian Federal Competition Authority (AFCA) has also recently published draft guidelines on the application of sustainability agreements.[17] The German Federal Cartel Office (FCO), Bundeskartellamt, is also actively participating in the debate on how to integrate sustainable development topics into competition law. This has been providing helpful guidance to businesses regrading the interplay of sustainability and competition law.[18] Unfortunately, at this stage, there is no clear focus on the intersection of sustainability and competition law in Asia and Pakistan is not an exception to this.

The substantive provisions of Pakistani competition law are modeled after the competition law of the EU. As a result, the general framework and conditions to grant an exemption for cooperative agreements are identical to that of the EU. Similar to the EU, Pakistani competition law also provides two types of exemptions: individual exemption and block exemption. The Competition Commission of Pakistan (CCP), the regulatory authority for competition law in Pakistan, recently enacted a regulation[19] and detailed guidelines[20] dealing with these exemptions. Surprisingly, the CCP has so far not even granted any block exemption for any category of cooperative agreements let alone issued any guidelines on sustainability agreements. As of recent times, the CCP has not initiated any discussion on the matter.

“Pakistan affirmed its commitment to the 2030 Agenda for Sustainable Development by adopting the Sustainable Development Goals (SDGs) as its own national development agenda through a unanimous National Assembly Resolution in 2016.”[21]

In 2018, the Government of Pakistan designed and approved a National SDGs Framework envisaging a national vision to prioritize and localize SDGs.[22] Since Pakistan has ratified the Paris Agreement, the obligations under this treaty also apply to Pakistan.[23] According to the latest statistics, Pakistan ranks 125 out of 163 on the Sustainable Development Goals (SDG) index.[24]

For the effective realization of SDGs, private institutions, academic institutions, civil society organizations and government institutions, especially the regulators, have a vital role to play. This has also been emphasized in the National Responsibility Framework for Sustainable Development—devised jointly by the Planning Commission (PC), a financial and public policy development institution of the Government of Pakistan, and Responsible Behavior Institute (RBI), a private organization—to highlight and prescribe the potential role of stakeholders and actors in the implementation of the SDGs.[25]

Under the aforementioned national commitments, each state institution must be aware of its role and responsibility in contributing towards the achievement of such commitments with regard to the ongoing global developments. Therefore, the CCP must also not turn a blind eye towards ongoing developments, particularly the developments occurring in a jurisdiction which has inspired the legal transplant of its entire framework of competition law i.e. the EU. It is a great opportunity for the CCP to contribute, as a state institution, towards fulfilling state commitments. It may take the initiative to enact the very first category of block exemption that guides any collaboration between businesses based on sustainability considerations. This will make Pakistan the first mover, even in the Asia-Pacific (APAC) region, taking the lead and inspiring other countries to follow suit. Currently, within the APAC region, only Chinese competition law can be claimed to indirectly accommodate the collaboration on sustainability grounds, there is still no direct reference. It provides that if any agreement or collaboration serves public interest in terms of energy conservation, environmental protection or disaster relief, it may attract a potential exemption. These provisions can be applicable to collaboration agreements between companies on sustainability issues,[26] yet no country has taken any such initiative with a clear focus on sustainability.

Indeed, not every sustainability agreement or collaboration entered into by businesses can be allowed merely on the ground that it pursues sustainability goals. Cooperation that does not truly concern sustainability objectives or the criteria formulated by the authorities cannot be used as a pretext to engage in a disguised cartel, price fixing arrangement, or any other anti-competitive act that distorts competition. This can be illustrated by the European Commission’s decision leading to cartel proceedings against Daimler, BMW and the Volkswagen Group which had colluded to avoid competing and not implement the technology they possessed to reduce harmful emissions (as had been required under EU law).[27]


References

[1] Jurgita Malinauskaite, ‘Competition Law And Sustainability: EU And National Perspectives’ (2022) 13 Journal of European Competition Law https://academic.oup.com/jeclap/article/13/5/336/6533512 accessed 16 August 2022; see also ‘The Sustainable Development Agenda – United Nations Sustainable Development’ (United Nations, 2022) https://www.un.org/sustainabledevelopment/development-agenda/ accessed 16 August 2022.
[2] ‘What Is The Paris Agreement?’ (UNFCCC.int, 2022) https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement accessed 16 August 2022.
[3]Jurgita Malinauskaite, ‘Competition Law And Sustainability: EU And National Perspectives’ (2022) 13 Journal of European Competition Law https://academic.oup.com/jeclap/article/13/5/336/6533512 accessed 16 August 2022; see also ‘A European Green Deal’ (European Commission, 2022) https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en#Highlights accessed 16 August 2022.
[4] Jurgita Malinauskaite, ‘Competition Law And Sustainability: EU And National Perspectives’ (2022) 13 Journal of European Competition Law https://academic.oup.com/jeclap/article/13/5/336/6533512 accessed 16 August 2022.
[5] David Wouters, ‘Sustainability Agreements Vs Greenwashing Under Article 101 TFEU’ (Kluwer Competition Law Blog, 2022) http://competitionlawblog.kluwercompetitionlaw.com/2021/06/03/sustainability-agreements-vs-greenwashing-under-article-101-tfeu/ accessed 16 August 2022; Nicole Kar and Bella Spring, ‘Dutch Competition Authority Continues To Bubble To The Top On Sustainability’ (Linklaters, 2022) https://sustainablefutures.linklaters.com/post/102htsw/dutch-competition-authority-continues-to-bubble-to-the-top-on-sustainability accessed 16 August 2022; Susan Black and others, ‘Competition Law And Sustainability | Practical Note’ (Thomson Reuters Practical law, 2022) https://uk.practicallaw.thomsonreuters.com/w-035-2035?transitionType=Default&contextData=%28sc.Default%29 accessed 16 August 2022.
[6] ‘Sustainability and competition’ (OECD 20220)
https://www.oecd.org/daf/competition/environmental-considerations-in-competition-enforcement.htm accessed 16 August 2022.
[7] Nicole Kar and others, ‘Competition Law Needs To Cooperate: Companies Want Clarity To Enable Climate Change Initiatives To Be Pursued | Publications | Insights | Linklaters’ (Linklaters.com, 2020) https://www.linklaters.com/en/insights/publications/2020/april/competition-law-needs-to-cooperate-companies-want-clarity-to-enable-climate-change accessed 16 August 2022.
[8] Susan Black and others, ‘Competition Law And Sustainability | Practical Note’ (Thomson Reuters Practical law, 2022) https://uk.practicallaw.thomsonreuters.com/w-035-2035?transitionType=Default&contextData=%28sc.Default%29 accessed 16 August 2022.
[9] Giancarlo Piscitelli and Anna Gerbrandy, ‘The Sustainability Dilemma In Competition Law’ (ECDPM, 2019) https://ecdpm.org/great-insights/civil-society-business-same-direction/sustainability-dilemma-competition-law/ accessed 16 August 2022.
[10] Craig PP and Búrca Gráinne De, EU Law Text, Cases, and Materials (7th edn Oxford University Press 2020) p.1060 & p.1063.
[11] ‘Communication From The Commission – Approval Of The Content Of A Draft For A Communication From The Commission – Guidelines On The Applicability Of Article 101 Of The Treaty On The Functioning Of The European Union To Horizontal Co-Operation Agreements (2022/C 164/01)’ (EUR-Lex, 2022) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2022.164.01.0001.01.ENG&toc=OJ%3AC%3A2022%3A164%3ATOC accessed 16 August 2022.
[12] Susan Black and others, ‘Competition Law And Sustainability | Practical Note’ (Thomson Reuters Practical law, 2022) https://uk.practicallaw.thomsonreuters.com/w-035-2035?transitionType=Default&contextData=%28sc.Default%29 accessed 16 August 2022.
[13] ‘Environmental Sustainability Agreements And Competition Law’ (GOV.UK, 2021) https://www.gov.uk/government/publications/environmental-sustainability-agreements-and-competition-law/sustainability-agreements-and-competition-law accessed 16 August 2022.
[14] ‘Competition Law & Sustainability’ (Hellenic Competition Commission, 2022) https://www.epant.gr/en/enimerosi/competition-law-sustainability.html accessed 16 August 2022.
[15] ‘Sustainable Development Sandbox’(Hellenic Competition Commission, 2022) https://sandbox.epant.gr/en/ accessed 16 August 2022.
[16] Viktoria H S E Robertson, ‘Sustainability: A World-First Green Exemption In Austrian Competition Law’ [2022] Journal of European Competition Law https://academic.oup.com/jeclap/advance-article-abstract/doi/10.1093/jeclap/lpab092/6508742?redirectedFrom=fulltext accessed 16 August 2022.
[17] ‘AFCA Publishes Draft Guidelines On The Application Sustainability-Agreements, Asking For Comments’ (AFCA, 2022) https://www.bwb.gv.at/en/news/detail/afca-publishes-draft-guidelines-on-the-application-sustainability-agreements-asking-for-comments accessed 16 August 2022.
[18] See generally ‘Guidance by FCO in cases involving sustainability issues’ https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2022/25_01_2022_Agrardialog.html?nn=3599398 accessed 16 August 2022.
[19]‘Competition (Exemption) Regulations 2020’ https://www.cc.gov.pk/images/Downloads/regulations/exemptions_regulations_2020.pdf accessed 16 August 2022.
[20]‘Guidelines on Exemption’ https://www.cc.gov.pk/images/Downloads/guidlines/exemption_guidelines.pdf accessed 16 August 2022.
[21] ‘Sustainable Development Goals | The United Nations In Pakistan’ (United Nations|Pakistan, 2022) https://pakistan.un.org/en/sdgs accessed 16 August 2022.
[22] Ibid.
[23] ‘United Nations Treaty Collection: Status: Paris Agreement’ (Treaties.un.org, 2022) https://treaties.un.org/Pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXVII-7-d&chapter=27&clang=_en accessed 16 August 2022.
[24] ‘Rankings: Sustainable Development Report 2022’ (sdgindex.org, 2022) https://dashboards.sdgindex.org/rankings accessed 16 August 2022.
[25] Ambreen Waheed, ‘National Responsibility Framework For Sustainable Development’ (Sdgpakistan.pk, 2019) https://www.sdgpakistan.pk/uploads/pub/NRFoSD_Final_Draft_National_Responsibility_Framework_Ambreen_Waheed.pdf accessed 16 August 2022.
[26] Susan Black and others, ‘Competition Law And Sustainability | Practical Note’ (Thomson Reuters Practical law, 2022) https://uk.practicallaw.thomsonreuters.com/w-035-2035?transitionType=Default&contextData=%28sc.Default%29 accessed 16 August 2022.
[27]For details see ‘Antitrust: Commission Fines Car Manufacturers €875 Million For Restricting Competition In Emission Cleaning For New Diesel Passenger Cars’ (European Commission, 2021) https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3581 accessed 17 August 2022.

The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any other organization with which he might be associated.

Rana Touseef Sami

Author: Rana Touseef Sami

The writer has pursued an LLM degree as a Mastermind Scholar at the University of Antwerp, Belgium.

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