THE NEED FOR A SUSTAINABLE COMPETITION POLICY

By Keerthana Shroff

INTRODUCTION:
 
In 2015, the United Nations stated that a universal call to action was integral, to ensure that by 2030, all people on the planet would enjoy peace and prosperity. This call was formulated in the shape of the Sustainable Development Goals (SDGs); 17 Global Goals that were said to balance social, economic and environmental sustainability, while working towards development. Sustainable development essentially requires for development to meet the needs of the present while also maintaining the ability of future generations to meet their own needs. According to the Bruntland Commission Report, ”Our Common Future”, sustainable development requires looking at  environmental policy and economic development strategies from a intersectional perspective so as to sustain exhaustible resources and ensure that the environment is minimally exploited  as a result of economic development. The objectives of the SDGs, which is the long-term stability of the environment and economy, can only be brought to fruition by taking into account environmental, economic and social factors into the decision making processes of countries, vis a vis development.
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In recent years, conversation has been growing about employing competition law and policy to achieve the SDGs. This has prompted competition authorities to contemplate the viability of this approach. A sustainable competition policy framework can curb anti-competitive practices and promote sustainable development. This article will examine the implementation of such a policy by studying approaches taken by countries within the EU, and  compare India's sustainable competition policy approach with it.

WHY COMPETITION POLICY?

Economists have traditionally believed that environmental regulations increase costs for businesses and reduce productivity, leading to a potential loss of competitiveness for domestic companies. Furthermore, according to conventional economic thinking, if environmental policies vary between countries, it puts some firms at a disadvantage compared to their foreign counterparts.

 Although this is the case, recent studies on the viability of competition policy changes resulting in favourable changes concerning sustainable development have shown that competition policy, if designed appropriately based on the social, economic and environmental considerations of a country, supplement other governmental policies that support sustainable development. Amongst numerous instances, Nordic Competition Agencies have examined the intersection between competition and environmental policy, while emphasizing the value of effective competition policy for environmental growth. Market conditions framed around sustainable development, supported by competition policy lead firms in a market to heighten innovation, widen consumer choice and increase product quality; thereby allowing firms to sustain higher efficiency. It has been seen that these conditions have the possibility of leading firms to produce safer, healthier, sustainable and more ethical products that satisfy the need of more environmentally conscious customers.

Competition policy enhances efficiency, fosters innovation and expands product options while improving quality, leading to better consumer welfare. It also helps regulate the actions of companies. Competition law is classically used through the sword and shield paradigm. In the context of sustainability, competition law can be manipulated as a “sword” to promote the former, so long as provisions are not inferred in a way that is harmful from a sustainability point of view. Lastly, competition law can be used to reconcile anti-competitive impacts with policies aimed at promoting sustainability, or exempt such measures from competition law restrictions if they advance sustainability.
 
SUSTAINABLE COMPETITION LAW POLICIES AROUND THE WORLD
 
 THE EUROPEAN UNION

Post the 2030 Agenda for SDGs and the Paris Agreement, the EU instituted the European Green Deal, which has been considered its foremost force in realising the UN SDGs. In the European Commission’s competition policy brief in September 2021, special emphasis was laid upon how the success of environmentally focused policies depends on market compliance to these new regulations and incentives, while driving innovation through intense and fair competition among firms.  It was noted that competition law is not applicable in a political vacuum, and therefore, competition policy must change in accordance with the implementation of the SDG principles and the EU Green Deal. Various stakeholders emphasised the necessity to reduce funding for fossil fuel producers via State aid and called for a pervasive evaluation of environmental impact assessment procedures. The participants of the conference recognised the importance of antitrust enforcement in the context of sustainability; antitrust enforcement supports sustainability by promoting fair competition and protecting against anticompetitive practices. This leads to cost-reflective pricing and incentivizes companies to find efficient, sustainable solutions. The Commission plans to enforce Articles 101 and 102 TFEU in all sectors, to ensure European consumers have access to high-quality products at competitive prices. Finally, regarding merger control, the respondents and participants contemplated upon the European Merger Regulation (EUMR) and how its enforcement would be in tandem with the European Green Deal. In March 2021, the Commission adopted guidance for the use of the referral mechanism between Member States and the Commission under Article 22 of the EUMR, to encourage more referrals, even for transactions that don't meet national thresholds. This revised approach is meant to address gaps in enforcement for acquisitions of new competitors, which may harm innovation and sustainability.
 
THE NETHERLANDS
 
The Authority for Consumers and Markets (ACM) in the Netherlands, the country's leading competition authority, released a "Vision Document Competition and Sustainability" in 2014 that challenged the traditional view that lower prices always equate to consumer welfare. Instead, the ACM proposed a new approach to competition law evaluation that takes into account factors beyond just prices. For example, in the Energy Agreement for Sustainable Growth (Energieakkoord vor duurzame groei), four electricity producers approached the ACM about their plan to shut down five of their coal-fired power plants in order to reduce environmental harm. This cooperative effort was expected to reduce the overall energy supply by 10% and result in higher electricity prices. The ACM found that this initiative violated Article 6(1) of the Dutch Competition Act as there was no convincing evidence that it would improve consumer welfare, such as having a significant impact on health and carbon emissions. When cases such as the above raised concerns about  sustainability, the ACM developed the Sustainability Guidelines Draft in 2020 which was revised in 2021. The draft set out by  offering  opportunities to businesses to meet the sustainability goals. The draft guidelines for sustainability agreements under Article 101(1) TFEU and its domestic equivalent section 6(1) MW have indicated that such agreements will not be considered anti-competitive if they don't affect key competition parameters. The revised conditions under Article 101(3) TFEU include reference to sustainability benefits and a fair share of benefits to society. The self-assessment of agreements by the undertakings or assessment by the ACM is also included.

The ACM also recently, through its self-assessment of agreements, cleared the arrangement of four soft-drink suppliers, regarding the removal of plastic handles from all soft-drink and water multipacks. ACM utilized the preliminary Sustainability Agreement Guidelines to evaluate this agreement. These guidelines classify five types of agreements that are permissible and not considered to be anti-competitive. The present agreement satisfies at least two of these categories. Through this, we can see that effective implementation of a sustainable competition policy is considered positive for industry and business.
 
AUSTRIA

Austria has taken a bold step compared to the previous soft approaches by the ACM, as it becomes the first EU Member State to include sustainable practices through legislation, highlighting its growing significance. The Austrian law makers have assessed the role of sustainability in competition law enforcement and considered whether competition restrictions can be excused for greater sustainability benefits.

To this end, the Austrian Parliament  has proposed to extend the exemption for companies within Article 101(3) TFEU from the cartel ban in the Cartel and Competition Law Amendment Act 2021 (Kartell und Wettbewerbsrechts Änderungsgesetz 2021. For the first time in Austrian antitrust law, section 2(1) permits out-of-market efficiencies to have environmental benefits, even if they don't benefit the relevant market directly, as long as they serve society. The provision specifically mentions that consumers should would significantly benefit if the improvement in production or distribution or the promotion of technical or economic progress significantly contributed to a sustainable or climate-neutral economy. The focus seems to be mainly on environmental issues rather than the full range of SDGs. During the consultation process, the Austrian federal competition authority (BWB), an autonomous authority at the Federal Ministry of Science, Research and Economy, stressed the importance of a broad definition of consumer welfare that takes into account quality, variety, and innovation, rather than solely focusing on low prices. However, the BWB also advised that the new concepts and the definition of environmental and climate benefits should be further clarified to avoid legal ambiguities. Despite the lack of regulatory guidance, the legislative materials outline the types of environmental benefits that may be considered sufficient to exempt from the cartel prohibition.
 

INDIA

As the world's most populous country, India was ranked at the bottom of the Environmental Performance Index (EPI) in

  1. As one of the participating states with the SDGs, India is committed to sustainable development. However, no legislative push has been made vis a vis the integration of sustainability with competition policy. Even with the release of the Competition Act Amendment Bill in 2022, there has no mention of sustainable initiatives or incentives. It is only recently that discourse on sustainable competition policy has reached Indian policy making. In a recent conference in December 2022, Jyothi Jindgar Bhanot, Secretary of the Competition Commission of India (CCI), stated that the present competition law framework has the flexibility to consider sustainable development and climate change, with "environmental friendliness" being seen as a factor in competition evaluation. Bhanot states that innovation and competition are crucial drivers of economic growth and when combined with sustainable development, they can ensure a safe and secure future.
     
    CONCLUSION
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    From a comparative analysis of the India’s competition policy with  the aforementioned EU countries, India seems to be in the nascent stages of developing a more sustainable competition policy. In order to do so, an effective policy that accounts for a country’s unique economic, social and environmental conditions must be implemented. Various measures, such as encouraging green and sustainable business practices through competition, incorporating sustainability considerations in merger control and also in consumer welfare consideration, along with promotion of sustainable innovation has the potential to instigate a robust change in the development of the country.

    Globally, the urgency to address climate change is palpable, and in light of this, it is crucial that exploration of competition law as a means of combating climate change is integral for a more environmentally friendly future.