On 14 March, the European Economic and Social Committee (EESC), the Fair Trade Advocacy Office (FTAO) and the Global Competition Law Centre of the College of Europe organised an online conference on Competition Policy and Social Sustainability to continue the debate on how joint sustainability initiatives can be compatible with competition law.
Modern-day global supply chains are often characterised by imbalances of power: unfair sharing of value and the continuous struggle to produce cheap goods. This puts a huge burden on the environment and on people's livelihoods, through a race to the bottom.
Over the years, competition law has had a crucial beneficial shaping effect on global supply chains. Today, competition law is being called on to address new concerns: to take sustainability into account and contribute to the objectives of the 2030 Agenda for sustainable development.
Traditionally, the basic objectives of competition policy were to promote efficient use of resources while protecting the freedom of economic action of various market participants. However, competition policy has also been seen to achieve a number of other objectives: pluralism, decentralisation of economic decision-making, preventing abuses of economic power, promoting small business, fairness and equity as well as sociopolitical values. These objectives tend to vary across jurisdictions and over time, reflecting the changing nature of competition policy as it addresses current concerns of society.
Competition policy should facilitate, not hinder, the transition to sustainability – a transition that should leave no one behind! This is essential if we want to achieve a European Green and Social Deal, emphasised Peter Schmidt, president of the NAT section of the EESC, in his opening remarks.
More sustainable development needs all policies to play their part
Regulation and legislation are crucial answers to key sustainability issues such as climate change or violation of human rights. In this regard, the Commission’s legislative proposal on Sustainable Corporate Due Diligence puts increasing responsibility on market actors.
In this context, business cooperation and working together are often essential prerequisites for achieving the necessary scale and responding to the sustainability challenges. While in many cases individual businesses are already going beyond existing legislation in a collective manner, there seems to be growing consensus that businesses feel inhibited from collaborating more with competitors for fear of breaching competition law.
The revision of the Horizontal Block Exemption Regulations and Guidelines is therefore an important policy initiative as
it clarifies for businesses when they can cooperate with competitors, leading to substantial economic and sustainability benefits, including support for the digital and green transition, stressed Executive Vice-President Margrethe Vestager, at the beginning of the consultation procedure on 1 March 2022. Olivier Guersent, Director-General, DG COMP, European Commission, stressed at the conference that
competition law is still not the cure for all the problems. However, it is important that it does not become too much of a burden on environmental issues.
Social sustainability and legal certainty should be the backbone of the new revised rules
Competition policy must actively contribute to achieving the EU’s climate and environmental objectives. In this sense, it is important that the authorisation of state measures for the promotion of the circular economy and renewable energy do not neglect the social aspects, pointed out Giuseppe Guerini, EESC rapporteur for two opinions on this topic.
We must not forget the social dimension of sustainability as it is highly intertwined with the environmental issues. Alex Assanvo, Executive Secretary of the Ghana and Ivory Coast Cocoa Initiative made clear that we have to accept that many of the environmental problems that we are facing today are actually resulting from poverty.
We tend to go straight to consequences rather than look for the root cause, which for us is how to ensure that farmers today get a decent income and help us make the transition.
Sergi Corbalan, Executive Director of the FTAO, reinforced this idea, stating that:
Living incomes can allow farmers to apply more environmentally‑friendly business practices, which is way more difficult to for them to achieve and unfair to expect of them if they do not receive a decent income.
To pursue tailored guidelines that consider sustainability to its full extent we need to challenge each other, to be concrete and build best legal certainty for companies. The difficulty is to put things into practice, as Marjolein De Backer, Dechert LLP and pro-bono for the FTAO, stressed:
On the one hand, companies argue that they need guidelines to expose risks, but on the other hand authorities continue to say that they need more cases to provide clear guidelines.
Article 101(1) of the Treaty on the Functioning of the European Union ("the Treaty") prohibits agreements between undertakings that restrict competition unless they generate efficiencies in line with Article 101(3) of the Treaty. This happens if they contribute to improving the production or distribution of goods or services, or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits. The prohibition contained in Article 101(1) of the Treaty covers, among other things, agreements entered into between actual or potential competitors (so-called "horizontal agreements").
Horizontal Block Exemption Regulations (Research & Development Block Exemption Regulation – "R&D BER") and (Specialisation Block Exemption Regulation – "Specialisation BER"), exempt from the prohibition contained in Article 101(1) of the Treaty those R&D and specialisation agreements for which it can be assumed with sufficient certainty that they satisfy the conditions of Article 101(3) of the Treaty. The Commission Guidelines on horizontal cooperation agreements ("HGL") provide binding guidance for the Commission in interpreting the HBERs and applying Article 101 of the Treaty to other horizontal agreements.
On 1 March 2021, the European Commission published its draft revised Horizontal Guidelines, together with the two draft revised Horizontal Block Exemption Regulations (the Research & Development Block Exemption Regulation and the Specialisation Block Exemption Regulation), and invited interested stakeholders to comment during the public consultation until 26 April 2022.
New revised horizontal rules and guidelines will enter into force on 1 January 2023 (as the current Horizontal Block Exemption Regulations will expire on 31 December 2022).
INT/959 - Report on Competition Policy 2020: stressed the need to adapt and adjust EU competition policy to social and economic changes.
INT/971- A competition policy fit for new challenges (ongoing, to be adopted in May 2022)
INT/981 - State Aid Rules Applicable to Health and Social Services SGEI in a Post Pandemic Scenario. Thoughts and Proposals on the Commission Evaluation to Amend the 2012 Legislative Package (ongoing, to be adopted in July 2022)