In de onderstaande Engelse tekst (A sustainable future: competition law as a tool and a distraction) maakt dr. Magali Eben (Lecturer in Competition Law, University of Glasgow; Co-director ASCOLA UK) een analyse over hoe het mededingingsrecht als instrument kan ingezet worden om een meer duurzame toekomst te verwezenlijken. In een verander(en)de wereld moet het mededinginsgrecht immers verder durven kijken dan zijn klassieke werkveld.

Competition law’s journey

Competition lawyers tend to believe that competition cures most ills. Where the market fails to achieve desired outcomes, we have an answer at the ready: the abuse of market power has impeded its effective functioning, and competition law ought to step in to put it to rights.

And yet, for many years, we have accepted the limitations of our field. Ever since the modernisation of competition policy in the early 2000s and the turn to a ‘more economic approach’ in the EU (inspired by but not completely following the US and its Chicago School), we have anchored competition law on ‘purely economic’ criteria, considering it unsuited to the consideration of ‘non-economic’ public interests. In all its rules the focus has been on ensuring that markets remain competitive, in order to achieve the efficient allocation of resources and the corresponding benefits to consumers.

This narrowing of competition law’s focus was, for most, not the result of a loss of faith in the power of the competitive market. Many still believed that competition in the market might generate benefits for society: increasing justice and fairness, improving labour relations, alleviating inequality or poverty or achieving a more ideal wealth distribution. This belief did not translate, however, into a belief that competition law should actively consider these goals.

We are all better off if competition law retains a narrow focus, it was argued. If competition law takes on too many goals, its key task will be jeopardised, and so in turn will wider societal goals. According to this line of reasoning, if markets function competitively, people will have the opportunities to lead fulfilling lives, the economy will prosper, and society will have the means to achieve its other loftier aspirations. Competition law is, in the words of Baker, the result of a ‘bargain’ within society: different societal groups ‘accepted that they would do better in the long run by sharing a growing pie than by grabbing a larger slice of a smaller pie’.[1] If markets are competitive, the resulting efficiency gains can be shared out, and social policies can be adopted through other laws and regulations.

This narrow, ‘more economic’, focus of competition law enforcement has held its intellectual appeal for at least two decades. But in a changing world, the calls for competition law to do more have grown louder. Competition law is, at least in theory, a formidable tool in the European Union’s arsenal, which can not only safeguard markets but also shape them. With such power, it is felt, comes responsibility: many have called upon the European Commission, first instance enforcer of competition rules, to consider wider concerns: from fairness and opportunity, and democracy and equality, to the fight against injustice and the striving for wealth redistribution.[2]

Unsurprisingly, this movement has seen significant pushback: indeed, many question the legitimacy and the feasibility of using competition law to further these purposes. Notably, however, this pushback has been less vigorous when it comes to climate change. There is now a growing consensus that sustainability concerns should be part of competition law enforcement.[3]

A main driver behind this shift has been the realisation that governments alone will not be able to ‘secure a liveable and sustainable future for all’[4] on this planet. In describing the causes of climate change, the Intergovernmental Panel on Climate Change (IPCC) refers to human economic activity, in particular ‘lifestyles and patterns of consumption and production across regions, between and within countries, and among individuals’.[5] Although it is essential that governments take measures at a national and international level to secure climate targets and provide the political impetus and legal means to achieve them, this will not be sufficient to reach wholesale changes in production and consumption. The private sector too will play ‘a crucial role in enabling and accelerating shifts in development pathways towards sustainability and climate resilient development’.[6] Private action, and in particular initiatives by companies, will be essential to ensure we reach our climate goals. Reduced carbon use, changes in production and consumption, and replacements of technology and infrastructure will not only require significant investment, but also room for action by willing and able companies.

Competition law as a tool

Scholars have argued that the Green Deal, the EU Treaties and the Charter on Human Rights all oblige the Union to consider sustainability in all its policies.[7] As competition policy grants the European Commission (and the courts) significant powers to intervene in the economy, and particularly in the conduct and structure of companies, it is chief among the policies on this list.

The Union has listened: both the European Commission and national competition authorities (and legislators) have put forward proposals or guidelines on how to consider sustainability in some of the areas of competition law.[8] Although voices of dissent remain, it seems that the question is no longer whethersustainability should be part of competition law, but rather how it can be.

It is commonly said that sustainability considerations could be used in two ways. First, they could be used by companies to justify business practices which restrict competition, on the grounds that they are more sustainable than other practices (sustainability as a ‘shield’). Second, authorities could use competition law to stop companies from engaging in business practices which are unsustainable (sustainability as a ‘sword’) in so far that these practices have a relationship with a restriction of competition and/or use of market power.

Competition law broadly contains three categories of rules to limit the anti-competitive effects of the collective or unilateral use of market power. First, competition law prohibits cooperation between economic actors which can restrict competition: anti-competitive agreements or concerted practices. Second, competition law prohibits powerful companies from abusing their dominant position in a market. Third, mergers and acquisitions can be prohibited or be subject to certain commitments if they raise concerns for competition on the market post-merger. In addition to these three categories, the EU also has state aid rules, which limit the subsidies which can be granted to companies, and is an important but distinct area in its own right.

In all these categories of rules, sustainability could feasibly play a role. Most of the discussion on sustainability has so far focused on cooperation between companies, rather than on unilateral conduct or mergers. This is unsurprising, as lasting changes in production are likely to require significant investments and action across an industry, which can be achieved more readily through collective action than through the action of individual companies.

Under EU competition law (as well as its national equivalents in Member States), cooperation between companies may violate Article 101 TFEU, if it reduces competition on the market in an appreciable manner. If companies cooperate in a manner which reduces competition for the production or distribution of more sustainable products, it is pretty evident that this could violate competition law.[9] It is a very different situation, however, if companies decide to cooperate on ‘green’ projects which reduce competition on price or on output, but generate benefits for the environment. It is these types of sustainability improving agreements which are the most intriguing: how do they stack up against our current understanding of the law?

The law provides for an opportunity to ‘save’ cooperation where it satisfies certain conditions. Most notably, that it leads to certain improvements in production or distribution or promotes technical or economic progress, and that consumers enjoy a fair share of the resulting benefits. Under the more economic focus of the last two decades, the Commission has given a narrow interpretation to what kind of improvements count. Not only did the improvements have to be clearly economic and quantifiable, they also had to be shared with largely the same consumers who were affected by the anti-competitive effects of the cooperation. This means that sustainability improvements would have to be economic and measurable and offset any increases in prices that the consumers in the market may suffer. More interestingly perhaps, benefits could not be considered if they emerged in the longer term for ‘future’ consumers (i.e. future generations) at the expense of current consumers, or emerged for consumers of different products or in different territories at the expense of consumers of a current product or territory. Can companies agree no longer to manufacture cheaper diesel cars in favour of more expensive electric vehicles, on the grounds that you will make the air cleaner for all people? Can they collectively increase the price of flights and reinvest the profits to provide more affordable train tickets? Can they agree with each other no longer to sell products with palm oil in Belgium in order to put a halt to deforestation in Brazil? Under the traditional framework, the answer to these questions might have been no.

Fortunately, both the European Union and some Member States have taken first steps to broaden the sustainability improvements which can be used to justify cooperation. The European Commission issued draft Revised Horizontal Guidelines, which expand the type of benefits which can be accepted under Article 101(3) TFEU.[10] It has, however, taken a compromise position on the question of different consumer groups (so called ‘out of market’ benefits): the group who benefits still has to be ‘substantially the same’ as the group who suffers the reduction in (price or output) competition.[11] Flyers should not pay for more environmentally friendly train passengers. Brazilian forests are not material to Belgian markets. It remains to be seen whether the European Commission will relax its still restrictive approach in the future.

Less progress has been made with regards to the individual conduct of powerful companies, or mergers between companies. A proper analysis of these laws would require a convincing answer to at least two questions. First, do companies with market power pose bigger threats to the environment? Second, does that increased risk of harm imply they have a responsibility to safeguard the environment, in a manner analogous to their responsibility towards price competition? These are questions which do not yet have conclusive answers.[12] Competition scholars are on the task, however, and we may soon have some answers.

Competition law as a distraction

As the competition law community embarks on its journey to incorporate sustainability in its activities, it may be wise to pause and consider the wisdom of our enduring belief in the competitive market. A growth mindset underpins our economy. Competition law has focused on consumer benefits, phrasing them in terms of more production, ever increasing efficiencyand ever decreasing costs and prices. It is not a given that this is the right answer to the climate crisis. The reduction of lifestyle consumption emissions which scientists have argued we need, particularly in the West,[13] may require a much more fundamental shift in production and trade, one which focuses not on more but rather on less. Initiatives which bolster investment in greener technology and production processes may be part of the answer, but are likely not sufficient on their own.[14] Competition law may help in removing the barriers to cooperation in the development of such technologies, but as long as the underlying consumption preferences remain the same, competition law itself will not radically alter the course we have set. It is conceivable to imagine a new market economy, one which focuses less on growth… But until we do, competition will remain focused on more production and lower prices; and competition law will reflect this.

Ultimately, if our economic system does not consider a sustainable future (including a just transition[15]), competition law itself will lose its relevance. Markets allocate scarce resources across society, not just at a national but at a global level. If these resources become more scarce and their allocation more fraught, the bargain which supports competition law is jeopardised. Competition law has to be part of the discussion, but it cannot be the whole answer.

dr. Magali Eben– Lecturer in Competition Law, University of Glasgow; Co-director ASCOLA UK

Notes

[1]Baker, J. B. The Antitrust Paradigm: Restoring a Competitive Economy (2019 Harvard University Press) p.41.

[2] See, inter alia, The Counterbalance; Broulík, J. and Cseres, K. (eds.), Competition Law and Economic Inequality (Hart Studies in Competition Law, Bloomsbury Publishing 2022).

[3]See, for example, recent or forthcoming reviews and books dedicated entirely to the subject: Concurrences (Revue des Droits de la Concurrence / Competition Law Review) n°4-2020, Sustainability and competition law and n°1-2023 Sustainability and competition policy; Holmes, S., Middelschulte, D. and Snoep, M. (eds.) Competition Law, Climate Change and Environmental Sustainability (2021 Concurrences); Nowag, J. (ed.) Research Handbook on Sustainability and Competition Law (Edward Elgar, forthcoming 2023).

[4] Intergovernmental Panel on Climate Change Press Release ‘Urgent climate action can secure a liveable future for all’ (20 March 2023).

[5] Synthesis Report 2 of the IPCC, Sixth Assessment Report Summary for Policymakers, p.4.

[6] Synthesis Report 2 of the IPCC, Sixth Assessment Report Summary for Policymakers, p.25.

[7] Holmes, S. ‘Climate Change, sustainability, and competition law’ (2020) 8(2) Journal of Antitrust Enforcement 359; Iacovides, M. C. and Vrettos, C., ‘Falling through the cracks no more? Article 102 TFEU and sustainability: the relation between dominance, environmental degradation, and social injustice’ (2022) 10(1) Journal of Antitrust Enforcement 40; Nowag, J. ‘Competition Law’s Sustainability Gap? Tools for an Examination and a Brief Overview’ (2022) 1 Nordic Journal of European Law 150; Kingston, S. ‘Competition and sustainability in EU law: Nearer resolution of the old debate?’ (2023) Concurrences n° 1-2023, 8.

[8] For example, in the Netherlands, Greece, France, Germany, Austria, and the United Kingdom (former EU Member State).

[9] And indeed, there are cases in that regard, see for example the European Commission’s decision to fine car manufacturers €875 million for restricting competition in emission cleaning for new diesel passenger cars: AT.40178 ‘Car Emissions’ BMW/Daimler/Volkswagen Group (2021).

[10]COMMUNICATION FROM THE COMMISSION – Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements (2022, draft) Section 9.4., now open to consultation: https://competition-policy.ec.europa.eu/public-consultations/2022-hbers_en.

[11] Para 602 of the draft Guidelines.

[12] See attempts by Iacovides and Vrettos (supra footnote 7), and Holmes, S. and Meagher, M. ‘A sustainable future: how can control of monopoly power play a part?’ (2022) 44(1) European Competition Law Review 16.

[13] See various contribution in Thunberg, G. The Climate Book (2022 Penguin), including Kevin Anderson ‘The New Denialism’ (p.204) and Nicholas Stern ‘Emissions and Growth’ (p.306).

[14] The merits of ‘green’ growth versus degrowth are an ongoing debate, better suited to others. For an accessible reflection on the decoupling of growth and on the ‘Doughnut’, see Raworth, K. Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist (2017 Penguin).

[15] Which may include the historical debt of the Global North and consideration of the differentiated impact of the climate crisis on different socio-economic groups. See The Climate Book (supra footnote 13) for multiple reflections on how the Global North’s historical debt may influence carbon budgets and other international cooperation. See also Doughnut Economics (ibid) chapter 7 on the risk of an abrupt abandonment of growth.