ACCC provides clarity in draft guidelines for sustainable development cooperation | Global law firm

This article was co-authored by Susan Graham.

As businesses consider the wide range of options available to them to help them achieve their sustainability goals, the ACCC has published draft guidance that explains how they can work with competitors to achieve better, faster progress in this area. Competition law experts Claire Forster, Charlotte van Beek and Zoe Lonard discuss the key risks and what the ACCC publication adds to the regulatory picture in Australia.

The Australian Competition and Consumer Commission (ACCC) recently published draft guidelines on “Cooperation on Sustainable Development and Australian Competition Law” and is seeking comments from industry. The guidelines formalise the ACCC’s recognition “a clear need for urgent action for environmental sustainability” and that “competition law should not be seen as an insurmountable obstacle to sustainable development cooperation that can deliver public benefits”.

Well-intended collaborations between competitors to achieve environmental and sustainability goals can conflict with antitrust and other anti-competitive agreements. In Australia, as elsewhere, collaboration often involves some degree of harmonisation or coordination of activities that mitigate competition. For example, supply chain criteria to meet sustainability goals, the formation of purchasing groups or the imposition of recycling fees in industry.

Some of the competition law obstacles to sustainable development collaboration were identified in our previous article . However, we also noted that if there is a genuine basis for collaboration, it can be managed in a way that does not raise competition law risks and, if not, the ACCC is very keen to be involved in assessing whether it can be approved under the authorisation process.

In line with our earlier observations, the ACCC Guidance aims to provide clarity in this area – identifying “low risk” engagements where participants can proceed without involving the regulator, as well as those that are riskier and require ACCC engagement through its authorisation or similar processes. The Draft Guidance also includes information to help businesses make a stronger case for authorisation of “high risk” engagements.

Low Risk Collaboration

Cooperation for sustainable development has the following characteristics: less likely to increase competition law risks: Sustainable development cooperation that takes the form of any of these practices is unlikely to have a significant impact on, or harm, the competitive process in the market. If any collaboration were to go beyond these types of issues, ACCC authorisation may be required. We often work with participants to establish appropriate ‘guardrails’ from the outset to ensure that the collaboration remains within permitted areas of activity and does not inadvertently stray into higher risk areas.

Collaboration with higher risk

In keeping with the orthodox approach in competition law circles, the ACCC guidelines also identify certain “high risk” areas for potential collaboration. These include situations where the collaboration involves agreeing prices which will be collected or paid by the participants, markets participants will work in customers or suppliers participants will have to face participants delivery output or purchase of a contributionor the way in which participants will be respond to tender. If any of these areas are covered by cooperation, there is a high risk of cartel conduct. Cartel conduct is strictly prohibited, regardless of its impact on competition. Such cooperation generally cannot take place without a permit, so advice should be sought before initiating any coordination or sharing of confidential information. The ACCC guidelines indicate that the following examples are probably pick up risks associated with cartel activities: With this in mind, this type of collaboration may be permitted if it is likely to produce tangible public benefits that outweigh the negative anti-competitive effects, but requires authorisation from the ACCC.

The draft guidelines provide information and guidance to increase the likelihood of successful authorisation.

One of the issues that potential collaborators seeking a high-risk collaboration authorisation have faced to date is uncertainty about the weight that the ACCC will give to the SDGs in assessing whether to grant authorisation and how long the process will take. In making a decision on authorisation, the ACCC must weigh the public benefits of the proposed conduct against the likely public harm, which includes anti-competitive harm. Authorisation processes can typically take more than 6 months.

The draft guidelines clearly state that the ACCC “(accepts) that reducing greenhouse gas emissions is a public good of significant importance.” This will come as a significant relief to businesses looking for a way to legally work together to help Australia meet its emissions reduction targets.

The Guidelines also indicate that the ACCC will streamline the authorisation process if there does not appear to be any significant harm associated with the conduct and/or the application relates to a subject matter or industry in which the ACCC has prior experience. In such cases, the ACCC will seek to bypass the first stage of public consultation and proceed directly to a draft determination.

The ACCC also offers guidance on how applicants can make persuasive public benefit claims, which could reduce the time it takes to process applications by weeks or months:

• appropriate supporting evidence is (of course) crucial;
• The ACCC will place greater importance on benefits that flow to the wider community and are sustained over time;
• Evidence of why cooperation is necessary (for example, why companies are unable to address environmental or sustainability issues individually) would be helpful.
• If the cooperation is aimed at mitigating market failures (for example, where providing the good or service involves a higher cost to society than the cost to the buyer or to overcome a “first-mover disadvantage”), this should be highlighted.

A recent example of a sustainability authorisation is the ACCC’s provisional authorisation from 18 July 2024, which allowed major supermarkets to continue to cooperate on the recycling of collected soft plastics and continue their in-store collection programme. While the substantive authorisation process is still ongoing, the ACCC noted the importance of the provisional authorisation to “keep stocks out of landfills and… enable supermarkets to process stocks with a sense of urgency, without disruption”.

Applicants should seek expert competition law advice at an early stage when considering a potential “high risk” collaboration in order to apply for authorisation in the manner that is most likely to be successful.

Observations

We welcome the ACCC’s efforts to acknowledge its practice (and our recent experience) in undertaking sustainable development initiatives and other public good initiatives.

The ACCC guidelines confirm that it views these initiatives in a similar way to regulators in other countries,¹ many of them have similar tips aimed at “ensure that competition law does not hinder legitimate cooperation between enterprises that is necessary to promote or protect environmental sustainability.”² The approaches to this issue in the United States, the United Kingdom and the European Union (as of January 2023) are discussed in this article. The European Commission recently introduced detailed guidance on the application of the exception to European Union antitrust law for sustainability agreements involving agricultural producers, which is discussed in this article.

Public consultation on the draft ACCC Guidelines is open until 26 July 2024. Following consideration of comments, the ACCC expects to publish the final Guidelines on its website in late 2024.

We regularly work with individual businesses and industry groups to help them plan and manage their sustainability collaborations at an Australian and global level. Contact us if you need help.