Kneppelhout & Korthals: ACM publishes guidelines on sustainability agreements04/24/2017

By Eric Janssen, competition lawyer

On December 2nd, 2016, the Dutch Competition Authority (Autoriteit Consument en Markt, ACM) published  guidelines on sustainability agreements. Also, a so-called decision tree was drafted by the ACM. This decision tree provides undertakings some help in drafting sustainability agreements without violating competition law. 

The ACM has formulated the following three guidelines on supervision on sustainability agreements:

The ACM will not act – in general – with regard to widely-accepted sustainability agreements, if all concerned parties such as the government, citizen representatives and companies are positive on the agreements.

When complaints or signs on sustainability agreements arise, the ACM can launch an investigation.

The ACM helps in finding a fast and effective solution in case of potential problems.

Decision tree
By using the decision tree, undertakings can assess whether preliminary sustainability initiatives could cause competition law concerns. In such case, undertakings should decide whether the advantages outweigh the disadvantages. The ACM states that the guidelines on supervision on sustainability agreements should clarify the focus of the ACM when enforcing the Dutch Competition Act in cases of sustainability agreements.

The guidelines on enforcement are rather vague. The ACM states that it will not act in cases on “widely-accepted” sustainability initiatives. However, it is unclear when something is “widely-accepted”. Does everybody have to agree or is a different point of view also still widely-accepted? And even if one is dealing with “widely-accepted” sustainability initiatives, does this imply that ACM will never act? No, because if “complaints or signs” arise, the ACM can still decide to act and may impose fines. So, even “widely-accepted” sustainability initiatives have to be in line with the competition regulations. Can we assess this using the decision tree?

The ACM uses a rather general explanation in its decision tree on how sustainability initiatives can be exempted. In short, a sustainability initiative has to comply with the following four cumulative conditions:

(i)             The initiative needs to have an added economic or technical value
(ii)            A reasonable part of this added value has to benefit consumers
(iii)           The restriction of competition in question is necessary
(iv)          A sufficient amount of competition has to remain 

Regarding the added economic or technical value, the ACM takes the agreement to produce only energy-efficient washing machines as an example. Such an agreement could have an added value. Lower energy consumption results in lower energy fees. If goods become more expensive as a result of a sustainability initiative, the assessment whether the advantages outweigh the disadvantages should be carried out. Such assessment needs proper support of arguments and calculations, showing the advantages. The ACM allows the prospect that advantages for consumers can arise in the long term. Bottom line is that consumers cannot be put in a disadvantage. Furthermore, the restriction of the competition in question is necessary, which means that there may be no alternative which is less restrictive to competition available to realize the sustainability initiative. At last, a sufficient amount of competition has to remain if certain undertakings do not participate in the sustainability initiative. If an initiative is branch-wide, a sufficient amount of competition will remain as just one aspect is being eliminated. An agreement on a minimum quality standard can be taken as an example, as undertakings are still able to compete on prices.

What is striking on both the guidelines on supervision of sustainability initiatives and the decision tree, is the absence of a notification of the Sustainability Policy (Policy) as published by the Minister of Economic Affairs of the Netherlands on October 6th, 2016. The Sustainability Policy calls for a more accommodating approach by the ACM on sustainability initiatives. Such call was made after recent sustainability initiatives were rejected by the ACM. ‘Sustainable Chicken’ or the ‘Energy Agreement’ can be taken as examples. In both examples, the ACM ruled that these initiatives would have a negative impact on consumers.

So what has changed now? The Policy states that when sustainability initiatives are evaluated, the “advantages for society as a whole” should also be taken into account. Thus, not just consumers who purchase the concerning product of the sustainability initiative. What exactly is the ACM’s point of view? In the guidelines for supervision, the minister elaborates on sustainability agreements that are widely-accepted by “representatives of citizens and undertakings” among other things. This seems to align with the Sustainability Policy. Referring to the condition that a reasonable part of the sustainability initiative has to benefit consumers, the ACM considers “the group of consumers as a whole” in its decision tree. It is however unclear which consumers ACM is referring to.

In a response on the concept Policy, the European Commission (Commission) explicitly mentions that consumers that purchase products from the sustainability initiative have to be taken into account when evaluating sustainability initiatives. As the Commission also enforces (European) Competition law, it is advisable to align with the Commission’s views. The Commission is not bound to decisions from a national competition authority. So even if the ACM has approved an initiative, the Commission can impose fines if the ACM has not executed the European competition regulations properly. Such thing happened to transport firm Schenker several years ago. Schenker had relied on a decision from the Austrian competition authority, which turned out to be wrong after all. In a judgment of June 18th, 2013, the Court of Justice ruled that despite a positive decision from the Austrian competition authority, a fine had to be imposed for violating the European cartel prohibition. So, remain cautious, especially when sustainability initiatives have a national impact!