Sustainability and competition law: moving beyond the conflict narrative towards a structured debate

Should competition law take sustainable development goals into account and, if so, how can this be done? Julian Nowag highlights that many competition authorities are already addressing these questions and posits that sustainability and competition goals may not necessarily be in conflict ahead of the  2021 OECD Competition Open Day discussion on the topic.

Julian Nowag is an Associate Professor at the Faculty of Law of Lund University Sweden and Lecturer in competition law and Associate at the Oxford Centre for Competition Law and Policy.

Sustainability has been on the agenda of international organisations and States, for many years. Not least since 1987, when the famous UN World Commission in its report ‘Our Common Future (also known as Brundtland Report) provided the now well-known definition of sustainability:

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

UN World Commission

With global warming, the businesses community has increasingly embraced the concept and a drive for more sustainable business activity is visible.

Competition authorities are thus more frequently confronted with questions around sustainability and competition although, from a competition agency’s perspective, regulation to achieve sustainability might be the preferred option. The debate around sustainability and competition is occasionally reduced to competition vs public policy. This is an unhelpful simplification that suggests a clear dividing line and binary choice between them.

To provide a foundation for constructive debate, a recent OECD paper explores the interaction between competition law and policy and sustainability and identifies the more and less controversial issues in the concrete application of competition law in this context. The paper finds that the integration of sustainability variables in competition law does not require the abandonment of the consumer welfare standard.

Should competition law take sustainability concerns into account?

When discussing sustainability and competition law it makes sense to first ask whether competition law should take sustainability concerns into account. The answer to this question can depend on a number of moral and practical considerations but for lawyers the answer is primarily provided for by the law. In particular, international law and domestic constitutional arrangements, or specific provisions in domestic competition laws might require competition authorities to take sustainability into account in their decisions.

How can competition law account for sustainability?

When addressing this question, it helps to distinguish between different cases.

In cases where anticompetitive practices are also detrimental from a sustainability perspective, competition authorities can foster sustainability by targeted enforcement. This includes, for example, cases where cartels prevent consumers from buying sustainable products. Similar active engagement in support of sustainability can be achieved by the use of more dynamic theories of harm that protect sustainability innovation. The investigation of the diesel scandal where car manufacturers are suspected to have colluded to hamper the roll out of better filtering techniques provides a recent example. Debate exists in the context of using dynamic innovation theories: How far can such theories be pushed? Similarly, it is more contentious whether competition authorities should focus on exploitative abuses to protect the social dimension of sustainability, namely with regard to poverty.

Cases where business wants to move into a more sustainable direction lead to another sort of interaction between competition law and sustainability. The main debate here is about how to balance restrictions of competition against improvements from a sustainability perspective. Yet, several tools ensure that potential conflicts between competition law and sustainability do not require balancing. For example, activities that are non-commercial – such as the management of a national park – are not subject to competition law. Similarly, not every restriction of commercial freedom is also a restriction of competition within the meaning of competition law. For example, standard setting, also in the sustainability context, is not prohibited by competition law if certain conditions are complied with. Yet, even where a balancing between restrictions of competition and sustainability may be required, it is not always controversial. Such balancing seems rather uncontroversial in jurisdictions that have (general or specific) public interest exceptions. In such jurisdictions, sustainability can readily be considered. It seems balancing can be contentious only in jurisdictions which do not have such public interest clauses. The question in this regard is: how to apply the established economic frameworks of consumer welfare and efficiency? The report highlights that even within these frameworks, balancing does not need to be contentious. Sustainability can readily fit within this framework as for example as a quality parameter. The more contentious issues relate to questions of how far the dynamic nature of sustainability can be pushed. As known from the context of other innovations, the question is: How and to what extent can benefits of innovation in terms of sustainability be taken into account where they occur in the future and/or in other markets?

After these matters related to substantive competition law, the report finally emphasises the importance of agency objectives and priority setting and formal and informal guidance. It also touches upon questions of approval procedures, sandboxing, admissible evidence, capacity, fining, and international cooperation.

Overall, a broad consensus in many areas can be observed. However, this consensus is sometimes obfuscated by the debate about the contentious issues. Yet, it should be noted that these debates only become relevant in extreme (and often hypothetical) cases where all the other (commonly agreed) options do not apply. Thus, it might not be surprising that the report shows that many OECD countries are already consider sustainability matters within their enforcement practice, whether they do so knowingly or unknowingly.

These and other issues will be explored on 24 February 2021 at the third OECD Competition Open Day further to an OECD hearing held in December 2020. Register here and join us for this discussion.

2022 OECD Competition Open Day Blog Series

Blog 1: Acquisition Killed the Innovation Star?

Blog 2: ‘How tech rolls’: Potential competition and ‘reverse’ killer acquisitions

Blog 3: Digital Ecosystems: A New Economic Paradigm

Blog 4: Sustainability and competition law – moving beyond the conflict narrative towards a structured debate

Blog 5: Data-driven Platform Envelopment with Privacy-Policy Tying

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