COMPETITION LAW: IS COLLABORATION AND COOPERATION A WAY OF ACHIEVING ENVIRONMENT SUSTAINABILITY?

By Muskaan Aggarwal

Climate change and competition law have not always crossed paths. However, over the years, the interplay between competition law and sustainability has seen a rapid increase. Today, many believe that competition law acts as a hindrance towards the achievement of the Sustainable Development Goals, which otherwise could be achieved through cooperation and collaboration of businesses. Competition laws are crucial considerations for businesses, and the actions taken by businesses affect the sustainability and competition. Therefore, competition regulation to achieve sustainability might be an ideal option considering the current state of Affairs.  

 

The term ‘sustainability’ refers to the capacity to sustain something for an indefinite period.  One of the commonly used definitions of sustainability can be derived from the Brundtland report of the World Commission on Environmental and Development (WCED).They defined sustainable development as a “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” Further, WCED in 1987, in their report titled “Our Common Future” acknowledged that economic development, social development, and environmental development, are all interconnected, and changes in any, would affect the others. Therefore, the report, for the first time, shifted the focus from the environmental problems to the causes of those problems, which could be found in the economic framework of the country. Therefore, sustainability may be understood as the product of economics, environment, and social equity, which if balanced, results in ecological protection.

SUSTAINABILITY AND COMPETITION

The relationship between environmental sustainability and competition law is derived primarily from economics. Lawyers and economists, together believe, that more regulation in laws helps achieve more sustainability. Regulation may have some advantages, as sustainability concerns are more directly highlighted, with more accountability and more effect on the public. However, this view is not commonly shared by all, and specifically the government might have something else to believe in. Command, control and regulation are many times considered inefficient, due to compromises and limitations, or sometimes even insufficient implementation, that arises due to such regulations.

Therefore, when regulation does not seem to be the best solution, voluntary measures taken by private sector industries gain importance, and are more conveniently encouraged by the State. Sustainability achieved due to private measures, is where most of the interaction between competition law and sustainability takes place, and the most common way of achieving such sustainability can be through collaboration and cooperation between entities. This might seem perfect till now, but the problem arises when private firms do not have incentives to invest in sustainability. While competition provides superior outcomes, co-operation possibly can give better results to firms. After all, the willingness to sacrifice some profits must be inherent for any corporate socially responsible concept, and firms might need to make internal compromises between sustainability and profit sacrifice, along with the public sustainability debate and investor pressures. This sacrifice in the short term will result in long term gains for the Corporates.

WHEN COMPETITION HAS POSITIVE EFFECTS ON ENVIRONMENTAL GOALS

There are many areas within competition law, where the strong enforcement of law has a positive effect on environmental goals. One of them is the energy sector. India has huge energy consumption and has been facing issues with the shortage of supply and the exceeding demand for energy inputs. Moreover, the conflicting Indian laws between the Electricity Act, 2003, and the Competition Act, 2002, has not made the situation any easier. This has led to environmental exploitation, where around 37% of the total greenhouse gases emissions are through the power and energy contribution.

In such a case, Germany might act as a good inspiration for India. The market conditions within Germany have given rise to the emergence of huge energy conglomerates and collaborations. As a result, the German Government has avoided the strict implementation of the Competition laws and has rather introduced a market share guarantee for small producers of renewable energy (mainly for the windmills in Northern Germany). Even when Preussen Electra, a dominant energy company in Germany, accused this law to be violative of the EU competition and subsidies provision, the European Court of Justice (ECJ) ruled that even though the law was violative of the provisions, the fact that this was done for the legitimate goal of protecting the environment was good enough reason for the law to prevail.[1] The ECJ ruled, “[t]he use of renewable energy sources for producing electricity, which a statute such as the amended Stromeinspeisungsgesetz (The Original Energy Feed Law) is intended to promote, is useful for protecting the environment in so far as it contributes to the reduction in emissions of greenhouse gases which are amongst the main causes of climate change which the European Community and its Member States have pledged to combat.”[2]

 

WHEN COMPETITION IS AN OBSTACLE FOR ENVIRONMENTAL GOALS

While Competition might act as an advantage for some sectors, it can have its harmful effects as well. The same can be seen in the area of waste management, where the growing producer liability, results in problems for the interaction between competition and environment. This is because, while on one hand there is a capacious disposal of electronic waste, on the other hand, the recycling industry takes in a substantial economic interest through a part of this waste. Due to the statutory obligations, provided in the law, for entering into an agreement with the producing sector of the country, competition concerns arise, and environment faces difficulties.

Such an example can also be seen through the green channel amendment, brought by the Competition Commission of India (CCI). The addition of Regulation 5A under the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019, came into effect from 15th August 2019. The added regulation is called the “green channel route”, which relates to obtaining an approval for specific transactions (combinations) by the CCI. The amendment has provided for some requirements that the firms need to keep in mind, before entering into an agreement or having a transaction with each other. If the acquirer group and the target group are not engaged in any activities which demonstrate any sort of horizontal, vertical, or complementary overlaps, then you can approach the Commission under the Green Channel Route. Within overlaps, we even look at those entities which may not necessarily be group entities, but which either the acquirer or the target holds shares, or exercises control.

 

Therefore, under this amendment, two chocolate manufacturers cannot enter into a transaction, and a manufacturer of a product and a distributor of the same product cannot enter into a transaction. So, to obtain the approval of the CCI faster, without any delay, the manufacturer of electric vehicles cannot enter into a transaction with the seller of the electronic vehicles. Now even though the sound of this amendment does not have any environmental relation to it, the fact that the company cannot enter into a transaction with another company within the same industry as them, acts as a discouragement for companies to collaborate and work together. This thus, results in companies individually working on the manufacture and sale of a product, which results in more individual waste by the companies, as the process is not divided. This just becomes another example of when economic growth is given more importance than the environmental growth.

CONCLUSION

The main problem arises when the law does not encourage collaborations and rather, makes it difficult for firms to consider having an environmental approach. For instance, the environmental taxes are held to be much less than the costs of pollution and emissions and are also not properly implemented. While collaboration and cooperation seem to be the best way to achieve the Sustainable Development Goals, firms are reluctant to collaborate due to the fear of limiting or unpredicted enforcement of competition law. Therefore, the best solution can be to adopt consistent guidelines for cooperation, as permitted under the competition law, and to broaden the scope of cooperation, along with providing incentives for the same. Moreover, cooperation which is necessary and proportional to pursue public interest objectives should be given better incentives, and firms should be encouraged to not just focus on economic growth, but also environmental growth. 

REFERENCES:

[1]Preussen Elektra AG v Schleswag AG (C-379/98), E. C. R I-2099, [2002] Celex No. 698J0379, Mar 13, 2001.

[2] Id. para. 73.

 

 

ABOUT THE AUTHOR

Muskaan Aggarwal

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Muskaan Aggarwal is a second-year student at Jindal Global University, pursuing B.A. L.L.B. She is hardworking and is ready to take on challenges and go out of her comfort zone. Her interest in Climate Change brought her to ENACT, where she understood some life-changing facts related to climate change and is all set to motivate people into acting on the cause.

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