EU relaxes antitrust guidelines on green initiatives

The European Commission has relaxed antitrust guidelines for companies that team up to solve climate problems, in response to concerns about cartel-like green coalitions driving up energy prices.

Republican politicians in the US have accused initiatives that push for a phaseout of fossil fuels of breaching antitrust rules, piling pressure on competition authorities around the world to take a stance.

Major insurers quit the Net-Zero Insurance Alliance (NZIA) last week for fear of being accused of breaching competition law, in a major setback for the financial sector climate coalition known as the Glasgow Financial Alliance for Net Zero.

The EU commission said that from July 1 it would create a “safe harbour” from prosecution for groups of companies that enter into “standardisation agreements” — for example, a boycott of plastics, fossil fuels or steel produced from coal-fired power plants — even if this pushes up prices. 

Companies must not make up more than one-fifth of a given market, and must not exchange commercially sensitive information unless necessary, or prevent other companies from joining the agreement, under the guidelines.

The guidelines, published on Thursday, are not legally binding but designed to help the European Commission, the European Court of Justice and national regulators interpret a prohibition on cartels enshrined in the EU treaties.

The commission said its new guidance was aimed at helping companies assess “legitimate” and “genuine” sustainability co-operation, not “disguised cartels with a sustainability ‘veneer’“.

The new guidelines also open up the possibility of immunity for companies that come together to align with the Paris climate agreement on limiting global warming to 1.5C above pre industrial levels. 

Initiatives whose sole goal is to meet the requirements of international treaties are “unlikely to raise competition concerns” and will fall outside the scope of the EU’s competition regime altogether, according to the guidelines.

The Glasgow Financial Alliance for Net Zero said it welcomed the EU’s decision and encouraged other jurisdictions to “follow suit”.

The disproportionate impact of rising temperatures on developing countries has tested the limits of modern competition regimes, legal experts say. These fail to recognise that some consumers are prepared to pay a higher price for “ethical” products whose positive effects will only be felt by people in other continents, or by future generations.

John Denton, secretary-general of the International Chamber of Commerce, told the Financial Times the EU’s new rules were “without doubt very positive”.

The UK competition regulator had been even “bolder” in creating the protection “needed to encourage more businesses to take the leap in collaborating with their competitors to accelerate climate action,” he added.

The UK’s Competition and Markets Authority published a draft proposal in February to greenlight climate collaborations as long as these had a substantial and demonstrable impact on climate change, without any express limit on market share. The “sheer magnitude of the risk” represented by climate change and “the degree of public concern” around it justify a more “permissive” approach to this type of agreement, it said.

The EU’s new rules are more nuanced, acknowledging that “collective benefits” and “non-use value” can only justify anti-competitive agreements in some cases. “Consumers may opt for a particular washing liquid not because it cleans better but because it contaminates the water less,” they said, by way of example. 

The EU “missed an opportunity” to be as ambitious as the UK or the Netherlands, said Maurits Dolmans, an antitrust specialist and partner at Cleary Gottlieb Steen & Hamilton, speaking on his own behalf. “The glass is a bit more than half full, but not as full as it could have been.”

Collective commitments to net zero emission are now likely to be “fine from an EU perspective”. But Dolmans added this would do little to protect groups like the NZIA, given that the invocation of antitrust in the US is about “politics rather than law”.

The Netherlands said last year it would approve sustainability agreements aimed at limiting environmental harm. But, unlike the UK, it is limited by the stance taken by the EU bloc as a whole. The head of the Dutch Authority for Consumers and Markets previously told the FT that companies should challenge the European Commission at the European Court of Justice in Luxembourg if they are prevented from collaborating on the climate.

The bloc was stung in 2014 by a cartel of Europe’s biggest truckmakers, which clubbed together to fix prices and delay the introduction of new emission technologies.

“It is the natural caution of a competition authority that you always have to overcome: if they say something more permissive it will be abused,” said Simon Holmes, a member of the UK Competition Appeal Tribunal and visiting law professor at the University of Oxford.