Clifford Chance

According to the recent report of the Scientific Advisory Board of the German Federal Ministry for Economic Affairs and Climate Action, categorizing sustainability as a guiding principle of competition law would unduly politicise the work of national competition authorities. Instead, politics should focus on this issue. Current competition law instruments already available - such as the European Commission's Horizontal Guidelines - could additionally promote sustainability efforts, if needed.

The UN's 2030 Agenda and the EU's Green Deal are just a few examples of how the topic of climate protection and sustainability is finding its place in various areas of society and politics. There are also more and more efforts to anchor the issue in legal terms – in court decisions as well as continuous discussions about environmental, social and governance ("ESG") in corporate law. In addition, the German Federal Ministry for Economic Affairs and Climate Action announced in its economic policy agenda that it would focus on the aspects of sustainability and social justice in the further development of competition law. The Scientific Advisory Board of the German Federal Ministry for Economic Affairs and Climate Action has also taken a position on this in its report on "Antitrust Law and Sustainability".

The Advisory Board is clearly in favour of and explicitly suggests to continuing to concentrate exclusively on the protection of competition and not including other political goals, such as sustainability, in the work of the German competition authorities.

From the Advisory Board's point of view, the biggest point of criticism is the associated mixing of competition law and politics:

(i) If the focus were no longer solely on ensuring effective competition, the scope of the German Federal Cartel Office's ("FCO") decision-making would expand considerably: For example, it would have to be decided whether a higher price for a product for a certain group of consumers is justified and potentially balanced by the positive effects of more climate-friendly production for the whole population – in other words whether a small group of people should bear a disadvantage for the benefit of a larger group. These balancing decisions between consumer welfare and sustainability goals, which are a genuinely political task, should not burden the German FCO.

(ii) According to the Advisory Board, competition authorities also lack the necessary compensation mechanisms for a group disadvantaged by the balancing decision, which instead would be available to politicians tasked with a similar balancing test.

(iii) The report also emphasized that concentrating on the sole goal of competition would also eventually benefit climate protection: Strong competition promotes innovation and optimizes the allocation of economic resources.

At the same time, however, the report shows which instruments are already available under German and European antitrust law to sensibly incorporate sustainability aspects into the assessment of companies' behaviour under competition law: Special mention is made of the European Commission's updated Horizontal Guidelines, including the new chapter on sustainability. Competition Commissioner Margrethe Vestager sees this as a "key tool to push forward the green and digital transitions".

All the more reason to consider what current competition law can already do today to promote sustainability efforts.

(i) The Horizontal Guidelines set out the European Commission's decision-making practice and thus the framework for horizontal cooperation between competitors in accordance with competition law – applicable to sustainability agreements as well as "normal" agreements.

(ii) Requirements for agreements on sustainability that are permissible under competition law have been given a whole new chapter in the new guidelines. Agreements that make sense not only from an economic point of view, but also from an ecological and social point of view should be made easier by this. In order to provide legal certainty for companies, the Commission provided a defined safe harbour and generally considers agreements, which meet certain conditions as not having an appreciable negative effect on competition.

(iii) Also, the efficiency plea under Article 101(3) TFEU – enabling companies to benefit from an exemption from the prohibition of restrictive agreements between competitors under certain conditions – theoretically also leaves room for sustainability aspects to be taken into account. Although this point is also highlighted in the Horizontal Guidelines, actual decisional practice will have to prove its practical relevance.

It therefore remains to be seen whether, as recommended by the Advisory Board, existing German antitrust rules will be left as they are or whether companies will be provided with further instruments to assist them with the promotion of sustainability goals within the framework of competition law.