Does Competition Law Stand in the Way of Sustainable Industry?

In 2015, the ‘Chicken of Tomorrow’, meat from chickens raised in more organic conditions, was born in the Netherlands as a collective move by farmers’ organizations and chicken producers. This decision was the result of producers conceding to fierce campaigning from animal protection organizations. However, the ‘Chicken of Tomorrow’ also came at a higher cost to consumers. In a similar vein, over forty public and private sector organizations signed the energy agreement for sustainable growth in the Netherlands. They consulted the competition authority, the Netherlands Authority for Consumers and Market (ACM), regarding their intention to close their five old coal-fired power plants to lessen environmental damage. This collaborative practice would solidify their commitment to developing renewable energy sources and decrease the total energy supply by 10%. However, it also increased electricity prices. As a result, ACM shut down both initiatives, finding them in violation of Article 6 of the Dutch Competition Act. ACM’s focus on consumer preferences, price sensitivity, and reduction of choice meant that they valued cost to consumers over the positive spillovers from the initiatives – both of which contributed to a decrease in social welfare.

Looking at the above cases, to what extent are regulatory authorities responsive to conflicting economic and non-economic value-sets? In a recent paper, Tobias Besselink and Kutsal Yesilkagit discuss a recurring problem in regulatory studies: competition policy goals are often disparate and the logic of market regulation conflicts with sustainability goals. Discussing ACM’s decisions in various cases, they suggest that legal and regulatory frameworks of competition laws restrict regulators’ responses to conflicting concerns. This conflict is particularly notable in sustainable products and services that impose costs on consumers.

Economics, in a demand and supply rationality, treats value conflicts as a form of market externality (Parker and Haines, 2018). Besselink and Yesilkagit’s study illustrates dilemmas faced by competition authorities in responding to ethical and normative conflicts, particularly those concerning ecological values and sustainability. The conception of market regulatory and competition authorities points to progressive and liberal economic agendas. However, the authors note that the laws governing these authorities give preference to economic or market competition values over sustainability. Hence, the willingness of agencies to consider and respond to a wide range of interests, economic and non-economic, pertaining to diverse audiences, becomes a significant element of the legitimacy of democratic systems.

The issue of unnecessarily restrictive or unpredictable competition law enforcement holds relevance considering the recent European Green deal. The European Commission has highlighted the critical role of regulations, taxes, and investments, and competition enforcers in accomplishing the goal of making Europe a climate-neutral continent by 2050 (Malinauskaite, 2022). Although the traditional approach has been to have divergent goals for competition law and non-economic goals, many studies, agencies, and economists now advocate that competition law should change from a barrier to a proponent of industry initiatives for sustainable development.

Malinauskaite notes that while sustainability is not a notion clearly defined, it relies on three main pillars of social, economic, and environmental aspects, each with varying significance across different jurisdictions. She suggests that different pillars could be balanced utilizing the proportionality test, such that initiatives that protect ecological functions can be considered proportionate despite creating economic losses. This subjective concept of sustainability is reflected in the variations among different countries in defining sustainable policies. While some countries focus solely on environmental or climate change related issues, others have broader definitions that encompass environmental as well as social dimensions (e.g., addressing working conditions etc.).

There is wider recognition of the need for greater cooperation as environmental concerns and the need for sustainable values become more pressing (ICC, 2020). Regulatory decisions have been criticized and contested by stakeholders and the broader public, particularly in specific cases of sustainability issues. In response to the previously discussed cases rejected by ACM, they have published the draft Guidelines on Sustainability Agreements in 2020 (further revised in 2021).  ACM, through this proposal, allows for a broader approach to competition law assessment, promoting a sustainable economy that creates benefits for consumers as well as businesses. Thus, these guidelines offer clarity on situations where competitors can collaborate, encouraging businesses to realize sustainability objectives. Similarly, countries such as Greece, Austria, Hungary, and the UK are proposing initiatives at the intersection of sustainability and competition law (Malinauskaite, 2022).

The International Chamber of Commerce sets out proposals for further action by competition authorities, governments, international bodies, businesses, advisers, and other stakeholders. They propose that competition authorities adopt clear, pragmatic, and consistent guidance, such as that done by ACM, on the types of arrangements that would not generally raise concerns under competition laws and factors that are likely to result in infringement of competition laws. They advise that it is vital to maintain an international level playing field around new sustainable technologies and encourage significant investment in sustainability challenges (ICC, 2020).

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Besselink, T. and Yesilkagit, K., 2020. Market regulation between economic and ecological values: Regulatory authorities and dilemmas of responsiveness. Public Policy and Administration, 36(3), pp.304-322.

Malinauskaite, Jurgita. 2022. “Competition Law And Sustainability: EU And National Perspectives”. Journal Of European Competition Law &Amp; Practice. doi:10.1093/jeclap/lpac003.

“Competition Policy and Environmental Sustainability.” International Chamber of Commerce, November 26, 2020. https://iccwbo.org/publication/competition-policy-and-environmental-sustainability/

Parker, Christine, and Fiona Haines. 2018. “An Ecological Approach To Regulatory Studies?”. Journal Of Law And Society 45 (1): 136-155. doi:10.1111/jols.12083.