EU to allow cooperation between competitors in sustainability projects
In the beginning of June, the European Commission approved new guidelines for cooperation between competitors in projects that involve sustainability objectives. These guidelines help ensure that competition law will support legal cooperation to achieve climate goals and other sustainability goals. The reform provides a framework for cooperation between competitors as well as cooperation in trade associations and makes it possible for various stakeholders to work together.
This reform is a significant step in the right direction. Thus far, excessive caution and fear of competition law sanctions have hindered important sustainability projects. The reform will facilitate cooperation between companies that operate in the same sector in performing due diligence under the upcoming Directive on Corporate Sustainability Due Diligence.
The Commission is finally making it clear that cooperation to ensure compliance with legally binding international treaties’ obligations or prohibitions is allowed.
It is absurd that it has been possible to apply the cartel prohibition to cooperation between competitors trying to prevent the use of child labour in their value chain or the felling of tropical timber, for example. This will now change, allowing competitors to enter into a binding agreement to work together to pursue the goals of sustainable development. Sharing information on the sustainability practices of suppliers is also allowed going forward.
The new regulation also includes safe harbour for open sustainability standards, such as criteria for climate-friendly products or minimising packaging waste. An arrangement can be allowed under certain criteria even if the price paid by consumers increases, provided that the market share of the companies involved does not exceed 20%. It can also be allowed if the cooperation will not result in a significant price increase.
As before, merely having a sustainability goal will not justify any and all cooperation. Outside of safe harbour, a detailed assessment of efficiency gains will continue to be required. In this assessment, the willingness of the European consumer to pay for a more sustainable product is still considered important, perhaps excessively so.