Sustainable development and competition, a growing combination

Our world is undergoing major societal upheaval, including the urgent need to create a more sustainable and resilient society. Sustainable development has therefore become an important current topic for competition authorities both at the European level, with the ambitions of the Green Deal and the revision of the block exemption regulations, and at the national level, with the Autorité's stated desire to invest in these areas. Sustainable development issues are now playing an increasingly important role in litigation and advisory proceedings, and are also emerging in the assessments carried out in the context of merger control, particularly in the examination of new markets. Review of a year of progress.

The contours of a clarified legal framework are taking shape

When it comes to sustainable development, companies have started to take part in the change. While, at first glance, competition policy would not appear to be at the forefront of sustainability issues, competition law and sustainable development nevertheless find a meeting point to the extent that, by safeguarding the competitive process, competition law protects and promotes not only consumer welfare, which is increasingly expressed towards sustainable products, but also sustainable innovations. Even more directly, competition law provides a framework for the initiatives envisaged by the economic actors in the area of sustainable development. Nevertheless, in some cases, these initiatives may potentially contradict competition law. The examination of these initiatives by competition authorities then makes it possible to secure cooperation agreements that are favourable to sustainable development and that generate positive effects in terms of public interest that offset the negative effects on competition while sufficiently benefiting consumers.

In France, the Autorité is aware of the difficulty for economic actors to ensure, in certain cases, that their agreements do not create issues with respect to competition rules. That is why the investigation services carry out in-depth reflections on these topics, within a dedicated internal network (Sustainable Development Network) and why the Autorité participates in the various projects undertaken in international forums, whether at the OECD, within the European Competition Network or the International Competition Network, one of the major themes of the 2021 edition of which was devoted to sustainability (To watch the ICN conference, Sustainable Development and Competition Law, 13 October 2021, https://icn2021budapest.hu/site/).

At the European level, the process of revising the rules on horizontal cooperation agreements between companies is also underway. The aim is to adapt the current rules to the economic and societal changes that have taken place over the last ten years in terms of digital and green transitions. The draft guidelines include a new chapter on the assessment of horizontal agreements pursuing sustainability objectives. It therefore clarifies for businesses when they can lawfully cooperate with competitors, including, as the case may be, through individual exemption in the most complex situations. In particular, the draft gives “special attention to agreements that set sustainability standards, as this is expected to be the most common form of cooperation to achieve sustainability objectives” (EC Press Release, 1 March 2022 and Explanatory Note accompanying the draft revised Horizontal HBER and Guidelines).

Advisory action: requests for an opinion in the context of growing public action as regards the transition

The green transition prioritised by the Government and Parliament has prompted the adoption of new regulatory frameworks in various sectors. In this context, and pursuant to Article L. 462-1 of the French Commercial Code (Code de commerce), the Autorité is required to consider draft bills that present sustainable development considerations in interaction with competition issues.

For example, in 2021, the Autorité was asked to give its opinion on the criteria for allocating the markets for the collection, transport and regeneration of used oils as part of the implementation of a new extended producer responsibility (EPR) scheme for mineral or synthetic lubricating or industrial oils.

In particular, the Autorité considered that the contemplated criteria were not relevant given the historical structure of the market and existing competitive pressures. The Autorité’s Opinion (Opinion 21-A-13 of 11 October 2021) was followed with respect to this recommendation and the Ministerial Order of 27 October 2021 does not therefore contain said criteria.

Enforcement action: a gradually expanding decision-making practice

The Autorité also acts in the domain of litigation, with a focus on identifying anticompetitive practices that could harm sustainable development.

Floor covering cartel

As the Autorité indicated when it issued fines against the floor covering cartel, practices that have a negative impact in terms of sustainable development are considered particularly serious. In this case, the three main manufacturers of PVC and linoleum flooring had, inter alia, refrained from competing on the basis of the merits of their respective products with regard to environmental criteria, by avoiding using this as a selling point, even though the environmental performance of floor coverings, particularly with regard to emissions of volatile organic compounds, has become one of the main criteria of choice for client distributors, businesses or private consumers. The Autorité found that this agreement may have deterred companies from improving the technical performance of their products and investing in innovative processes intended to improve their environmental performance (Decision 17-D-20 of 18 October 2017).

Following this fine, several French hospitals decided to initiate proceedings in 2022 for compensation for the damage they suffered as a result of the overcharging of millions of meters of linoleum flooring.

Road transport

In September 2021, the Autorité fined anticompetitive practices that disrupted the digital transition in the road transport sector, with potentially negative effects on the environment. In this sector, various organisations had joined forces to boycott or incite road transport companies to boycott new digital intermediation platforms that offered optimisation services which made it possible to eliminate a level of intermediation, or reduce empty returns by road transport companies. Nevertheless, according to ADEME, a 1% reduction in empty returns would result in a 0.70% reduction in greenhouse gas emissions. The Autorité therefore took into account the fact that the practices impeded efforts to improve environmental efficiency of the sector when setting the fine (Decision 21-D-21 of 9 September 2021).

New "green" considerations examined in the context of merger control

Sustainable development issues also apply to merger control, which ensures in particular that mergers between competitors do not impair innovation. Indeed, by ensuring that mergers do not harm competition, the Autorité safeguards and encourages innovation, so that companies continue to develop new technologies, new know-how or better products that lead to environmental and sustainable improvements.

In terms of merger control, defining the relevant markets is an essential step, insofar as this makes it possible to identify the scope within which competition between companies takes place and to assess, in a second stage, the respective market powers of the players involved. As part of the examination of transactions submitted to it, the Autorité is increasingly inclined to define and examine what are known as new “green” markets.

For example, during the examination of the transaction relating to the stake acquired by Storengy, a subsidiary of Engie, in DMSE, the Autorité examined, for the first time in January 2021, the markets for the production and distribution of hydrogen, as well as the market for the development, construction and installation of hydrogen stations. The Autorité considered that although after the transaction, DMSE would be the only operator active on the hydrogen distribution market in the Dijon area, this position was not necessarily problematic, given the emerging and rapidly expanding nature of the market.

Applying the environmental criterion as a parameter for assessing the seriousness of practices

The Autorité announced in July 2021 that it intended to adapt its assessment of seriousness in its procedural notice on the setting of fines, by updating the list of factors that it may take into account in assessing the seriousness of practices. The Autorité now explicitly states that environmental damage will constitute a criterion for assessing the seriousness of a practice, when it calculates the fine to be imposed on the company in question. In so doing, the Autorité aims to underscore the fact that anticompetitive practices that have an impact on the environment may be considered more serious and that companies found guilty of such breaches may be subject to heavier fines. (Procedural Notice on the setting of fines, 30 July 2021).

Taking into account the existence of potential competitors and the absence of barriers to entry on this market, it considered that this situation did not raise competition concerns. Furthermore, given the importance of electricity in the process of producing hydrogen by electrolysis, the Autorité also assessed the effects of the transaction on the market for the retail supply of electricity. In this framework, it questioned the need to identify a separate segment of “green electricity” retail supply, grouping together the green electricity offerings that rely on electricity generated from renewable sources or covered by guarantee of origin certificates. In this regard, the Autorité noted the growing development of these offerings, which are primarily based on the system of certificates of origin and on the increasing demand from consumers (companies, local authorities and individuals).

In light of these factors, the Autorité found that there was less substitutability between the retail supply of green electricity and that of traditional electricity, a finding that seems to suggest the existence of a specific market for the retail supply of green electricity. Nevertheless, the Autorité decided to leave this question open at this stage, as the competitive analysis remained unchanged, regardless of the segmentation applied.

At the end of its analysis, the Autorité therefore cleared this transaction without imposing any specific conditions (Decision 21-DCC- 18 of 29 January 2021).

Conversely, in May 2021, the Autorité adopted a decision to block the proposed acquisition by the Ardian group, which is active in the transport, telecoms and renewable energy sectors, of Société du Pipeline Méditerranée-Rhône (SPMR), which is active in the transport of hydrocarbons through pipelines. Among other things, the Ardian group claimed that it would steer the target’s commercial policy in the direction of energy transition and that this “gain” was specific to the planned merger. While the Autorité rejected this analysis given the facts of the case, it nevertheless clarified that environmental gains could, in theory, be admissible to counterbalance the risks of harm to competition associated with a merger (Decision 21-DCC- 79 of 12 May 2021, for more details on this decision, see p. 94).

Finally, in October 2021, the Autorité examined the creation of the GMOB joint venture by AGI, EDF PEI, Genak and SAFO, which planned to operate in the sector of public charging stations for electric vehicles in Guadeloupe and, in a second phase, in Martinique and French Guiana. On this occasion, the Autorité examined for the first time the upstream market for the supply of electric vehicle charging points and the downstream market for the installation and operation of electric vehicle charging points. At the end of its analysis, the Autorité cleared this transaction without imposing any specific conditions (Decision 21-DCC-172 of 1 October 2021, for more details on this decision, see p. 92).