The dilemma is simply put but has been occupying competition authorities around the world, including our own Commerce Commission which has offered up a solution in the form of draft Collaboration and Sustainability Guidelines for public comment.
Businesses are facing increased pressure to take action on ESG (environmental, social and governance) issues, and often believe their sustainability goals are best achieved through a collaborative approach rather than by a single business acting alone. But collaboration among competitors triggers competition law risk.
The draft guidelines, released on 31 July, are a response to the “scale of queries” the Commission has been receiving from industry on this matter so we expect they will attract a high level of interest. The consultation is open until 23 August 2023.
The guidelines would be educative rather than binding. The aim is to “assist businesses to understand when collaboration with competitors for sustainability objectives may raise competition issues under the Commerce Act”, to set out some of the compliance actions businesses can take, to step through the Commission’s thinking on how the Act applies, and to provide some transparency about the Commission’s enforcement approach.
Two key takeaways are that:
- “Collaboration between businesses is unlikely to breach the Commerce Act if the collaboration does not affect competition between businesses”; but
- “The Commission will not tolerate sustainability being used as an excuse for anti-competitive behaviour”.
We welcome the Commission’s intervention and encourage businesses to engage in the consultative process to secure an optimal result. However, we note that there are limits to what can be achieved within the existing framework and that to achieve a high degree of certainty would require changes to the law itself.
So there will inevitably be collaborations for which self-assessment will provide inadequate comfort. Parties will want and need to engage with the Commission on their collaborations. It is therefore important that, in addition to the guidelines, the Commission focuses on the quality of its formal and informal avenues for engagement.
A key theme across international developments is regulator willingness to engage with businesses on this topic. The guidelines emphasise the Commission’s willingness to discuss collaboration initiatives, which we expect will also be welcomed.
Types of collaboration
The guidelines provide examples of sustainability collaborations the Commission considers likely (and unlikely) to raise competition issues, while emphasising it remains a case-by-case assessment:
|Unlikely to raise competition issues
|Likely to warrant scrutiny
Potential areas for submission
- Could the guidance go further?
- Are there any specific examples or situations that should be expressly addressed, e.g., certain collaborations becoming more widespread in particular sectors?
- Would the societal value that is placed on the objectives of a collaboration be considered a mitigating factor in an enforcement context?
The Commission’s consultation comes on the back of recent overseas initiatives designed to ensure competition law does not unnecessarily obstruct competitors from collaborating in appropriate cases to achieve positive environmental outcomes.
Competition and Consumer Commission (ACCC)
Over the last few months, the ACCC has:
Australia, like New Zealand, has a competition law framework that allows the regulator to take account of public benefits (including environmental benefits) when considering whether to authorise conduct that would otherwise breach competition law.
Competition & Markets Authority (CMA)
|In February 2023, the CMA released Draft Guidance on Environmental Sustainability Agreements, which provides guidance on the application of competition law to environmental sustainability agreements. The guidance offers specific case studies and outlines the circumstances in which the CMA will decline to bring enforcement action. The guidance invites parties to approach the CMA for informal advice, via an “open-door policy”.
European Commission (EC)
|In June 2023, the EC released its final guidelines on “the competitive assessment of agreements between competitors that pursue sustainability objectives”. These guidelines focus primarily on sustainability standardisation agreements that are unlikely to have appreciable negative effects on competition. The Commission will provide a “safe harbour” for those agreements, as long as certain criteria are met. The Commission is also encouraging businesses to approach it for informal guidance on initiatives that may raise unresolved questions.
If you would like assistance preparing a submission, or advice on how the Commerce Act affects your business, please feel free to contact a member of our Competition & Regulatory team. If you would like to discuss how Chapman Tripp can support your business to navigate the low carbon transition and ESG issues, please feel free to get in touch with our climate, sustainability & ESG experts.
Note: Chapman Tripp is a member of the Net Zero Lawyers Alliance and is committed to providing net zero-aligned legal services. This means we have the expertise and insights to help companies navigate the transition to a low carbon economy including the complex regulatory landscape.
Our thanks to Kendyl Oakey for preparing this article.