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Sustainability Agreements and the New EU Guidelines on Article 101 TFEU

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In June 2023, the European Commission updated its Horizontal Guidelines, clarifying how Article 101 of the Treaty on the Functioning of the European Union (TFEU) applies to various forms of cooperation agreements, including sustainability-focused collaborations. Here’s a concise guide to the essentials of Article 101, its application to sustainability agreements, and the assessment criteria under the new Guidelines.

Overview of Article 101 TFEU
Article 101(1) prohibits agreements that restrict competition within the EU's internal market, such as price-fixing, market sharing, and production control. However, Article 101(3) provides an exemption if such agreements generate efficiency gains, benefit consumers, impose necessary restrictions only, and do not eliminate competition. If these criteria are met, agreements may be permissible despite having anticompetitive effects.

What Are Sustainability Agreements?
The revised Guidelines define sustainability agreements as collaborations between competitors aimed at advancing environmental or social objectives, such as reducing pollution or improving working conditions. These agreements address "negative externalities" (unintended societal harms) through collective action, potentially supporting EU sustainability goals. However, if they restrict competition, they must meet Article 101(3) requirements for an exemption.

Assessing Sustainability Agreements Under Article 101(1)
An agreement is restrictive if it aims to limit competition ("by object") or if it has anticompetitive effects ("by effect"). Agreements directly seeking anticompetitive outcomes are automatically prohibited, while those with unintended but restrictive effects may be allowed only if such effects are demonstrably outweighed by societal benefits.

Exemption Criteria Under Article 101(3)
For a sustainability agreement to qualify for exemption:
  • Efficiency Gains: The agreement must offer concrete improvements, like lower emissions or enhanced production processes.
  • Fair Share for Consumers: Benefits must reach consumers, outweighing any harm, though the Commission requires firms to show that a "fair share" of societal benefits also accrues to consumers.
  • Indispensability: Restrictions must be essential to achieve the stated sustainability goals.
  • No Elimination of Competition: The agreement must preserve sufficient competition within the market.
Conclusion
The EU’s updated Guidelines provide a structured approach for assessing sustainability agreements within competition law. Firms pursuing such agreements must rigorously demonstrate societal and consumer benefits, indispensability, and minimal competitive harm. By meeting these standards, businesses can contribute to EU sustainability goals while remaining compliant with competition laws.
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DISCLAIMER: the content of this news is for informational purposes only and neither represents, nor can be construed as a legal opinion