(Zdroj: commons.wikimedia.org)

(Zdroj: commons.wikimedia.org)

Nearing the conclusion of the follow-up on the Kyoto Protocol, which will take place this December in Paris, the European Union (EU) encourages stronger international commitment towards sustainable development. In 2013, the European Union and its Member States provided EUR 9.5 billion in grants and loans to support climate change action in developing countries. 1 However, it does not seem to follow the same environmentally-friendly approach when it comes to its internal policies, in particular its competition policy, which is a basis of the European internal market. People say that the grass is always greener on the other side of the fence. However, in this case one might also say that the European Union is watering everyone else’s front yard, while its own is slowly drying out.

This article discusses the manner in which environmental considerations have been so far, and could (or should) be in future, integrated into EU competition policy. It firstly sets out what will be required of the European Union in terms of its internal policies under the new international agreement on climate change and further what is the legal basis for integrating environmental considerations into EU competition policy. As the European Commission is the most important authority enforcing EU competition law, the article looks into its position on this matter. Further, it offers an outline of arguments in favour of a more economically-based assessment of competition law issues together with an example of a case before a Dutch competition authority, followed by arguments advocating an inter-generational approach to competition law. I conclude the article by presenting my personal vision for the upcoming fight with climate change in which I advocate for a more forward-looking shape of European competition law.

The inclusion of environmental considerations into EU policies under the new climate change agreement

By the end of this March the European Union was required to submit its contribution to the new global climate change agreement. The new agreement should, according to the European Union, take the form of a Protocol under the United Nations Framework Convention on Climate Change and is, similar to its predecessor, the Kyoto Protocol, negotiated through the process of action known as the Durban Platform for Enhanced Action. One of the major objectives under the new agreement is the reduction of global emissions by at least 60 % below 2010 levels by 2050, with the view of keeping the global average annual temperature increase below 2°C compared to the temperature in pre-industrial times and thus preventing climate change from reaching dangerous levels.

The negotiating text of the new agreement which has been agreed in Geneva this February requires the Parties to incorporate climate change objectives and considerations into their other relevant policies, strategies and activities. 2 The follow-up Communication from the European Commission dated 4th March 2015 sets forth the Union’s vision for the implementation of the obligations under the agreement, including the aforementioned one. It puts an emphasis on the potential long-term consequences of climate change. 3

According to the Communication, other EU policies can actively support the attainment of the agreement’s objectives through the inclusion of climate change considerations into scientific research, technology development, innovation, trade and environmental policies. 4 However, quite surprisingly, the competition policy, one of the cornerstones of the European internal market, is nowhere to be found in the whole document. Does the European Commission not consider the competition policy relevant enough with respect to the climate change and, more generally, environmental and sustainability objectives?

Legal framework under the Treaties

After the entry into force of the Lisbon Treaty, Art. 3 (3) of the Treaty on the European Union (TEU) stipulates that the European Union shall inter alia work for the sustainable development and a highly competitive social market economy aiming at improvement of the quality of the environment. Under Art. 11 of the Treaty on the Functioning of the European Union (TFEU), environmental protection requirements must be integrated into the implementation of the Union policies and activities. 5

Art. 101 (1) of the TFEU prohibits specific anti-competitive agreements between undertakings 6, for instance those which seek to fix prices or limit or control production on the market, and is for brevity’s sake hereafter referred to as the ‘cartel prohibition’. The Court of Justice of the European Union (CJEU) ruled in Albany 7 that certain agreements, even if restrictive of competition, fall outside the scope of this prohibition because the objectives they pursue, such as social policy objectives in the case of collective bargaining agreements, would be seriously undermined by application of the cartel prohibition. 8

Nevertheless, every anti-competitive agreement which does not escape application of the cartel prohibition on the grounds provided in Albany, may be exempt from the prohibition under Art. 101 (3) TFEU provided that it satisfies the four conditions set forth therein. 9 Firstly, the arrangement must contribute to improving the production or distribution of goods or to promoting technical or economic progress. Secondly, consumers must get a fair share of the resulting benefit. Thirdly, the arrangement must be necessary to achieve these benefits and cannot go beyond what is necessary. Fourthly, the arrangement cannot lead to the elimination of competition in a substantial part of the market. The CJEU ruled that the European Commission is allowed to take into consideration factors related to the public interest in order to grant exemptions under this provision. 10

Since more environmentally-friendly production usually entails additional costs in research and development, the cooperation between like-minded undertakings is often deemed to be necessary in order to achieve sustainability goals through economically viable means. As there is no hierarchy between various EU objectives and policies 11, there is an ongoing debate about the extent to which environmental objectives should be taken into account in the EU competition law pursuant to the integration principle under Art. 11 of the TFEU, particularly with regard to the aforementioned exemption offered by Art. 101 (3) of the TFEU. 12

Economic interpretation of the exemption from the cartel prohibition

Generally, the non-binding guidelines on the application of Art. 101 (3) of the TFEU issued by the European Commission in 2004 stipulate that goals pursued by other Treaty provisions, such as the ones related to sustainable development, can be taken into account to the extent that they can be subsumed under the aforementioned four conditions of this provision. 13 OJ C 101/97, para. 42]

As indicated above, in order to fulfil the conditions under Art. 101 (3) of the TFEU, the agreement must contribute to the improvement of the production or distribution of goods or to the promotion of technical or economic progress. In CECED 14 OJ L 187/47]the European Commission has recognised that environmental benefits could satisfy this requirement. However, these considerations were only accessory to the presence of purely economic cost-benefit gains. 15 OJ C 101/97, para. 33] According to the Commission, only the agreements that generate objective economic benefits may classify for the exemption from the cartel prohibition. 16 OJ C 101/97, para. 33]

Furthermore, the agreement must allow consumers a fair share of the resulting benefit. This requirement is (again) translated into an economic efficiency analysis comprising quantitative and qualitative efficiencies. 17 The European Commission points out that if the result of the agreement is an increase in prices, it is necessary to consider whether the claimed efficiencies will create real value for the consumer. 18 OJ C 101/97, para. 104] This value must be calculated accurately and on the basis of verifiable data. 19

Consequently, some legal scholars argue that economic efficiency should be the exclusive goal of applying Art. 101 (3) of the TFEU and that the provision is inappropriate to promote non-economic goals. 20 Too impetuous inclusion of social and environmental interests under Art. 101 (3) of the TFEU analysis could perhaps even be liable to create ambiguity as to whether these objectives constitute an accessory condition or an autonomous ground for exemption as suggested in Albany.  Furthermore, they submit that public policy considerations such as environmental protection can only be applied within provisions aimed at states and not, as in competition law, within provisions aimed at undertakings. 21 Moreover, as Art. 3 of the TEU does not have direct horizontal effect, it should not be given such effect indirectly by a balancing exercise within Art. 101 of the TFEU. 22

Nevertheless, it shall be noted that the Commission Guidelines on the application of Art. 101 (3) of the TFEU which are deemed to favour this ‘economic’ approach were published more than a decade ago. The increasing urgency of environmental protection and the Union’s strong commitment to fight climate change are therefore perhaps not sufficiently reflected in this document.

A more recent example of reconciliation of environmental benefits and economic efficiency requirements can be found in a decision of the Dutch competition authority announced this January. 23 The case concerned an industry-wide initiative ‘Chicken for Tomorrow’ under which both supermarket suppliers and retailers committed themselves to improve living standards of chicken by employing several environmental measures. Since as a result the relevant supermarket products would be more expensive and the parties to the agreement accounted for 95 % of chicken meat sold to the Dutch consumers, the agreement was within the remit of Art. 101 (1) of the TFEU and its Dutch equivalent.

The question then became whether it could be exempted under Art. 101 (3) of the TFEU. The Authority for Consumers and Markets (ACM) determined the second condition relating to consumers’ benefits precisely as suggested in the Commission Guidelines, on the basis of verifiable data. It conducted an online consumer survey in which the respondents were given a number of hypothetical choices on the basis of which their willingness to pay for certain sustainability measures would be assessed.

Although this particular initiative was not sufficiently valued by the consumers (which were willing to pay EUR 0,82/kg for the measures that generated additional costs of EUR 1,16/kg) in order for the ‘Chicken for Tomorrow’ initiative to enjoy the exemption under Art. 101 (3) of the TFEU, the study supported the assumption that consumers are, to certain extent, willing to pay more for environmentally-friendly products. If such willingness to pay exceeds the associated costs, it can be very well argued that consumers will not be worse off but will rather benefit from the arrangement between the competitors with the result of satisfying the second condition under Art. 101 (3) of the TFEU. However, the question remains whether the competition authorities should force undertakings to compete at the expense of the environment and sustainable development solely because the benefits their collaboration initiates are less visible to or not sufficiently valued by the consumers. 24

Sustainable development and future consumers‘ welfare

Consequently, many economists and legal scholars hold the view that the environmental benefits cannot nowadays be calculated to any degree of accuracy. Moreover, they usually become visible only in the long-term, thus precluding the possibility of an objective economic assessment. 25 They therefore call for a more flexible interpretation of the exemption under Art. 101 (3) of the TFEU.

In this respect, the European consumer protection laws provide a noteworthy example of how to fulfil the obligations under the new agreement on climate change with regard to incorporation of environmental considerations into European Union’s policies. The notion of consumer welfare under consumer protection laws provides a ‘challenging contrast’ to the interpretation of the same concept of consumer welfare under the competition law framework. 26

The EU regulatory framework for consumer protection extends the consumers‘ interests beyond pure economic efficiency analysis, and also takes non-economic aspects into account. It adopts a more subjective approach taking into consideration individual consumer’s needs, economic role and standard of living including environment which are then translated into the collective consumers‘ dimension. 27 Consequently, some legal scholars advocate for the same broader approach within the sphere of EU competition policy. The phenomena to be incorporated into the second condition of Art. 101 (3) of the TFEU comprise, for instance, the value of the continued presence of essential environmental resources in the future. 28 Nevertheless, it shall be noted that whereas the primary concern of EU consumer protection law is the well-being and specific interests of the final consumer, EU competition law must take a broader perspective and focus also on the maintenance of competition on the market and economic interests of the society in general. 29

Moreover, the environmental improvements generated by anti-competitive agreements might be beneficial to consumers that are not buyers in the relevant market for the product that is liable for such improvement. 30 Some also argue that, with regard to the inter-generational impact of environmental protection, the group of consumers who should benefit from the particular agreement (under the assessment of the second condition of Art. 101(3) of the TFEU) is not necessarily limited to the current consumers, but should also extend to the future ones. 31

This argumentation is in line with the definition of sustainable development, which stipulates that such development meets the needs of the present, without compromising the ability of future generations to meet their own needs. 32 The extent to which the goal under Art. 3 (3) of the TEU is fulfilled can therefore only be measured in the long-term.

A similar perspective is taken by the Dutch competition authority in its Vision document on Competition and Sustainability published in May 2014. It is argued therein that there is no reason why it should only take current consumers’ benefits into account if the improvements might manifest themselves over a longer period of time. If the long-term benefits were not taken into consideration, environmental issues such as depletion of natural resources, pollution or climate change would often not be addressed on a regulatory level at all. 33 It shall be noted, with respect to the aforementioned recent and rather narrowly economic efficiency-biased decision in ‘Chicken for Tomorrow’, that the ACM’s visionary viewpoint is still waiting for a sufficient reflection in practice.

The future of environment in EU competition policy

The EU’s competition policy is an expression of current aims of the society and therefore subject to changes, as is political thinking in general. 34 At the times when the European Union is, as discussed in the beginning of this article, encouraging a more responsible approach towards the environment during the negotiations of the new agreement on climate change, it should in my opinion also reflect these contemporary values in its own competition policy.

The President of the new European Commission in office since November last year, Jean-Claude Juncker, highlighted in the Political Guidelines for the next European Commission that this institution has an exceptional opportunity, but also an obligation, to make a fresh start. 35 He pointed out that sustainability and environmental issues are important to European citizens and that there are tools to address them in the new Commission inter alia by cooperating across portfolios and producing integrated and well-grounded initiatives. 36

With respect to these statements and the upcoming obligations of the European Union under the new agreement on climate change, I expect that the European Commission, as well as the European Union as a whole, will gradually work towards more integrated environmental and competition policies which will better reflect the importance of sustainable development in today’s European economy. I believe that Jean-Claude Juncker and Commissioner for Competition Margrethe Vestager will be good ‘gardeners’ to the European Union’s front-yard in order to make it as green as the EU encourages worldwide.

Veronika Merjavá
The author wishes to thank Pauline Phoa and Alice O’Connell for providing valuable comments. The usual disclaimer
applies.

  1.  For more information on the European Union’s position in these negotiations see also http://ec.europa.eu/clima/news/articles/news_2015022501_en.htm
  2.  United Nations Framework Convention on Climate Change Negotiating Text, 25 February 2015, p. 24, 34 available at http://unfccc.int/resource/docs/2015/adp2/eng/01.pdf
  3.  Communication from the Commission to the European Parliament and the Council: The Paris Protocol – A blueprint for tackling global climate change beyond 2020 of 25 February 2015 COM(2015) 81 final/2
  4.  Ibid., p. 11
  5.  See also Art. 37 of the Charter of Fundamental Rights of the European Union
  6.  For definition of an undertaking see Judgement in Höfner, C-41/90, EU:C:1991:161, para. 21
  7.  Judgement in Albany, C-67/96, EU:C:1999:430
  8.  Ibid., paras. 57-60
  9.  Judgement of 15 July 1994, Matra Hachette v Commission, T-17/93, EU:T:1994:89, para. 85
  10.  Judgement of 18 September 2001, Métropole télévision v Commission, T-112/99, EU:T:2001:215, para. 121
  11.  H. VEDDER, Competition Law and Environmental Protection in Europe; Towards Sustainability?, 1st ed. (2003), p. 132
  12.  See for instance M.W. GEHRING, Competition for Sustainability – Sustainable Development concerns in national and EC competition law, (2006), Review of European Community and International Environmental Law, Issue 2, p. 172-184; D.K. CASEY, Disintegration: Environmental Protection and Article 81 EC, (2009), European Law Journal, Issue 3, p. 362-381; O. ODUDU, The Wider Concerns of Competition Law, (2010), Oxford Journal of Legal Studies, Issue 3, p. 599-613; S. LAVRIJSSEN, What role for national competition authorities in protecting non-competition interests, (2010), European Law Review, Issue 5, p. 634-659; S. KINGSTON, Greening EU Competition Law and Policy, 1st ed. (2011)
  13.  Communication from the Commission of 27 April 2004 Guidelines on the application of Article 81 (3) of the Treaty (2004/C 101/08) [2004
  14.  CECED, (Case IV.F.1/36.718) Commission Decision 2000/475/EC [2000
  15.  Communication from the Commission of 27 April 2004 Guidelines on the application of Article 81 (3) of the Treaty (2004/C 101/08) [2004
  16.  Communication from the Commission of 27 April 2004 Guidelines on the application of Article 81 (3) of the Treaty (2004/C 101/08) [2004
  17.  R. WHISH, D. BAILEY, Competition Law, 7th ed. (2012), p. 163-164
  18.  Communication from the Commission of 27 April 2004 Guidelines on the application of Article 81 (3) of the Treaty (2004/C 101/08) [2004
  19.  Ibid., para. 56
  20.  O. ODUDU, The Boundaries of EC Competition Law: The Scope of Article 81, 1st ed. (2006), p. 159
  21.  Ibid., p. 164-166
  22.  Ibid., p. 166-167
  23.  The Netherlands Authority for Consumers and Markets, Analysis of the sustainability arrangements concerning the “Chicken of Tomorrow” of 26 January 2015 available at https://www.acm.nl/en/publications/publication/13789/ACMs-analysis-of-the-sustainability-arrangements-concerning-the-Chicken-of-Tomorrow/
  24.  J.P. VAN DER VEER, Valuing Sustainability? The ACM’s analysis of “Chicken for Tomorrow” under Art. 101(3) of 18 February 2015 available at http://kluwercompetitionlawblog.com/2015/02/18/valuing-sustainability-the-acms-analysis-of-chicken-for-tomorrow-under-art-1013/
  25.  S. KINGSTON, Integrating Environmental Protection and EU Competition Law: Why Competition Isn’t Special, (2010), European Law Journal, Issue 6, p. 803-804
  26.  K. CSERES, The Controversies of the Consumer Welfare Standard, (2006), The Competition Law Review, Issue 2, p. 130
  27.  Ibid., p. 127-130
  28.  S. KINGSTON, Integrating Environmental Protection and EU Competition Law: Why Competition Isn’t Special, (2010), European Law Journal, Issue 6, p. 801
  29.  K. CSERES, The Controversies of the Consumer Welfare Standard, (2006), The Competition Law Review, Issue 2, p. 133-134
  30.  N.S.R. ROSENBOOM, How does article 101(3) TFEU case law relate to EC guidelines and the welfare perspective?, Working paper presented at the 9th annual Competition & Regulation Meeting on 11 December 2013 available at http://www.acle.nl/
  31.  C. TOWNLEY, Intergenerational impacts in competition analysis: remembering those not yet born, (2011), European Competition Law Review, Issue 11, p. 582
  32.  World Commission on Environment and Development (WCED) (1987), Our common future
  33.  The Netherlands Authority for Consumers and Markets, Vision document for Competition and Sustainability of 9 May 2014, p. 15 available at https://www.acm.nl/en/publications/publication/13077/Vision-document-on-Competition-and-Sustainability/
  34.  R. WHISH, D. BAILEY, Competition Law, 7th ed. (2012), p. 19
  35.  J.C. JUNCKER, Political Guidelines for the next European Commission of 15 July 2014 available at http://ec.europa.eu/priorities/docs/pg_en.pdf
  36.  Ibid., p. 24