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Keynote speech Martijn Snoep voor IBA Annual Competition Conference

09-09-2020

Martijn Snoep, bestuursvoorzitter ACM, sprak tijdens de 24e Annual Competition Conference van de International Bar Association (IBA) over Mededingingsbeleid in de transitie naar een duurzame samenleving. De ACM wil de mogelijkheden verruimen voor samenwerking tussen concurrerende bedrijven op het gebied van duurzaamheid. In zijn speech ging Martijn Snoep in op de leidraad ‘duurzaamheidsafspraken’ die de ACM onlangs publiceerde. Daarin wordt uiteengezet hoe bedrijven samen kunnen werken aan duurzaamheid, zonder de concurrentieregels te overtreden

Lees de volledige speech hieronder

IBA 2020 - 24th Annual Competition Virtual Conference
KEYNOTE MARTIJN SNOEP, 9 SEPTEMBER 2020

Competition policy in the transition to a sustainable society

[Good morning, good afternoon, good evening, good night everyone, depending from where you log into the conference] 

[Introduction]

First, I do need to thank the IBA for inviting me to join you today. But to be honest, when I accepted the invitation, I had something else in mind. I had visions of glorious Florentine palaces, Italian dinners with colleagues, and all of this in the warm Tuscan autumn sun. Then the covid-19 crisis came, and shattered my Italian dreams. I’m now addressing you from my home office in Amsterdam, under typically Dutch grey skies with occasional rain showers. Just having finished  a simple cheese sandwich and the proverbial Dutch glass of milk.

However, the covid-19 crisis also produced good things. Most importantly, it reminded all of us that our lives, our economies and our welfare are vulnerable. We saw how quickly a virus can destabilize the entire world. And we all know that only through a joint and cross-border effort we can weather this storm. In that spirit, the covid-19 crisis led to an unparalleled response of competition authorities around the world. Within a matter of days, authorities were ready to give guidance on cooperation between competitors, and on government intervention in the economy. The European Competition Network showed its crucial function as the conduit for a uniform application of European competition law. Private practitioners, in-house lawyers and economists provided an abundance of newsletters, online seminars and free advice. In the wake of the covid-19 crisis, the competition community really rose to the occasion.

Our lives, our economies and our welfare are also facing another threat. The looming climate crisis may not be as immediate as the covid-19 crisis, but it could have an even bigger impact on our lives and on those of future generations. So we need to act now. And fortunately, we’re seeing many good initiatives everywhere. Yet more is necessary, much more. Governments around the world have an enormous responsibility to act, but they can’t do this alone. Also businesses and consumers need to do their bit to ensure that future generations have the opportunity to live lives that are at least as good as ours. 

In the Netherlands, the Supreme Court stepped into this discussion in an unprecedented way. It found that, under its obligations arising out of the European Convention of Human Rights, the Dutch State did not fulfill its obligations to do its part in reducing greenhouse gas emissions. According to the Supreme Court, the government must ensure that these emissions are cut significantly more and faster than it originally intended to. 

[Role ACM and guidelines]

The ACM is an independent authority but it is also part of the State. And, therefore, the ACM took up the duty that rests on the entire State to do its part in reducing greenhouse gas emissions. So we looked critically at our own competition policies and enforcement practice to see what we could contribute. As a multifunctional authority, we also looked in other areas than competition, like consumer protection, energy regulation and public transport regulation. But for now, I will focus on our sustainability policies with respect to collaborations between competitors. 

Around the globe, many businesses are responding to the call for more sustainable production and consumption. For example, in July, Apple announced its plan to eliminate its contributions to climate change this decade. And more recently, Uber, IKEA and Unilever made pledges into a similar direction.

However, not all companies can do this alone. For example, small and medium-sized businesses do not always have the means, the knowledge or the market strength to change traditional production processes single-handedly. Fierce competition and first-mover disadvantages could trap them in a prisoner’s dilemma, leading to inaction and suboptimal outcomes for society. Since SMEs have an important role to play as driver of the economy and GDP in many countries, it is important that this group of companies, too, will be able to switch to more sustainable production. 

In the past few years, several public interest groups, trade organizations and companies publicly advocated that competition rules stand in the way of a more sustainable economy. That was and is not our perception. Competition and sustainability can go hand-in-hand. 

But to avoid a battle of perceptions, we took the opportunity to issue a new guidance paper. We already had one but there was more we could do. For example, providing more concrete examples that could inspire companies and trade organizations to take new joint initiatives and by being a bit more daring and innovative in our interpretation of the law.  

A draft of our guidelines was published just before the summer, and I’ll share with you three important elements of these guidelines. First, our thoughts on competitor collaborations that do not restrict competition. Second, our thoughts on collaborations that do restrict competition, but fall within the statutory exception of paragraph 3. And third, our views on guidance and enforcement in this area. 

So first of all, in the guidelines, we clearly set out the types of collaborations that generally do not restrict competition, such as agreements to introduce joint sustainability marks and labels. Another example are joint agreements to comply directly and indirectly via suppliers with the laws in other countries, such as laws against unlicensed rainforest logging or laws against bribery.

Another example of agreements that are not considered anti-competitive are those which do not appreciably affect price, quality or product diversity. For example, at least most of the times, agreements that are aimed at a more efficient use of packaging materials or at no longer using certain types of packaging. 

A final category of agreements that fall outside the scope of the cartel prohibition, concern joint initiatives where new products or markets are being created, and where joint production or distribution is necessary for achieving sufficient scale. 

While for some of you this may sound pretty unrevolutionary, and you’re probably right in that, we received feedback that such a signal from us was indeed needed. Apparently, some companies and their advisors were really in doubt about the application of competition law. Whether this doubt was caused by our own actions, by risk adverse or fearmongering lawyers, or whether competition law was used as a comfortable scapegoat for inaction, will remain a mystery. And it doesn’t really matter. We gave plenty of examples now that companies can use and if it is still not enough, do let us know. 

The second element of the guidelines I would like to elaborate on are agreements that do restrict competition but that are exempted by law from the cartel prohibition. The Dutch Competition Act is identical to Article 101, paragraph 3.  

The main new element in our guidelines is the proposed interpretation of what a fair share for the users is with regard to the alleged benefits that the agreement brings. Traditionally, a fair share is interpreted as follows: users must be fully compensated for the restriction of competition by the benefits of the agreement. But we believe that, under specific circumstances in some well-defined cases, a fair share does not entail full compensation. These circumstances are the following:

First, the benefit is a reduction of environmental damage that contributes to the fulfillment of a legal requirement to which the State is bound. For example as a result of a treaty, like the Paris Treaty or the European Convention of Human Rights.

Second, the anticompetitive agreement makes an efficient contribution to the reduction of the environmental damage that is the result of a negative externality.

Under these two specific circumstances, we believe that users receive a fair share of the environmental benefits if they benefit from the agreement in the same way as the rest of society. Even if the environmental benefits for the users do not outweigh the higher prices paid by them, their share of the benefits is still fair, as long as the benefits to society as a whole outweigh the harm to users. 

I’ll give a simple example to further illustrate this:

The greenhouse gas reduction plan of the Dutch government sets ambitious goals. Suppose six producers of a certain product, let’s say commercial-grade refrigerators, agree with each other to make their production fully CO2-neutral. Users and non-users of the refrigerators will benefit equally from the reduction in CO2-emissions. The higher costs of these refrigerators are paid by the customers of these six producers only. 

Under the traditional approach, the benefits for users of these refrigerators (the benefits which they enjoy from lower CO2 emissions) must be at least equal to the expected price increase. Under the interpretation of the rules in the new guidelines, the trade-off is different. As long as the expected price increase is smaller than the benefits due to lower CO2-emissions for society as a whole, the agreement is exempted. Off course, assuming the other conditions of paragraph 3 are met and the specific circumstances set out before apply. If these benefits for all of society will be taken into account, the benefits will obviously more easily outweigh the expected price increase. 

As to the reason why we propose this new interpretation, it’s important to stress first that it has never been established in the case law of the Court that users must always and regardless of the circumstances be fully compensated for the disadvantages of the anticompetitive agreement. That would also be strange, because the text of the Treaty refers to a “fair share”. That in itself suggests that it depends on the circumstances whether a 100% compensation is fair or whether a partial compensation is also fair.

Normally, the ACM would be very reluctant to allow agreements that restrict competition that lead to redistribution between users and non-users. Normally, it is up to the democratically elected legislature to determine who contributes to what extent to the achievement of public interest goals. But, in this situation, there are three special elements that justify this redistribution.

First, we didn’t make this up because we thought it’s the right thing to do. To the contrary, we believe that this is what the founding fathers of the Treaty of Rome intended when they drafted paragraph 3.  

Second, this interpretation of a “fair share” is limited to environmental-damage agreements that aim to limit negative externalities and do so in an efficient way. The counterfactual of this situation is that non-users carry the burden of the externalities that users create, without having the advantages of lower prices that are the result of competition. That is neither fair nor efficient. 

Third, another circumstance that justifies a deviation from the principle of full compensation is that there is an explicit legal requirement to which the State is bound to reduce the environmental damage to which the agreement contributes. This embeds a redistribution between users and non-users in a democratic process.

The third and final element of our guidelines I would like to address refers to guidance and enforcement. In individual cases, ACM is open to find solutions to any bottlenecks. And in that context, if sustainability agreements have been discussed with us well in advance, and we have not identified any major concerns, but afterwards these agreements turn out to be incompatible with competition law, we will not impose any fines. 

This quasi-immunity from fines also applies to sustainability agreements that have not been discussed with us but that are out in the open, and where the new Guidelines have been followed in good faith. If, in those cases, the parties involved expeditiously adjust their agreements if so requested by ACM, we will not impose any fines either. Again, at all times, companies have the opportunity to contact us and discuss the intended sustainability agreements that they wish to enter into. The door is clearly open.

[Final words]

Obviously, I realize that our guidelines are just a very small step in reaching the world’s sustainability goals. But, at the very least, our guidance document blows away a smoke screen behind which the business community could hide, saying things like "We would really like to do something for the environment, but unfortunately competition law does not allow it". Now it comes down to the business community and their advisors to take the next step.

Hopefully, our approach will be understood and followed by other authorities in Europe and elsewhere in the world. It would be wonderful if we as competition community could look back after the current covid-19 crisis, and conclude that this difficult time has also shown us a way to deal with the other big crisis. A competition policy with a long-term perspective, facilitating the transition to a sustainable economy is what we should aim for. I hope to see you all again in person in a sustainable and covid-free 2021. 

Thank you.