ACCC consults on draft guidance for sustainability collaborations

In some industries, addressing climate change and biodiversity loss will require businesses to collaborate and coordinate. But how can this be done within the bounds of the law?

This month, the Australian Competition and Consumer Commission (ACCC) issued long-awaited draft guidance for business regarding the application of Australian competition law to sustainability collaborations.

The draft guidance released on 8 July 2024 follows in the footsteps of competition regulators in other jurisdictions and reflects the ACCC’s 2024/25 enforcement priority to address competition concerns in relation to environmental claims and sustainability.

In the AICD Climate Governance Study 2024, prepared with Pollination, directors repeatedly highlighted the challenges of competition law constraints as a policy obstacle to whole sectors decarbonising at a more rapid pace.

ACCC Acting Chair Mick Keogh said, “Our intention in developing this guide is to make clear competition law should not be seen as an immovable obstacle for collaboration on sustainability that can have a public benefit.”

The AICD understands that many organisations are considering well-intentioned sustainability collaborations to reach net zero targets. It is important that directors are mindful of the competition risks associated with these collaborations while understanding how they can be mitigated, including via ACCC authorisation where necessary.

This article provides an overview of the ACCC’s Sustainability collaborations and Australian competition law guide for business, and some of the AICD’s initial observations.

What does the draft guidance cover?

The ACCC’s draft guidance recognises that climate change and biodiversity loss represent a category of threat to the environment and the economy that requires collective action. To this end, the guidance provides a useful restatement of the law and explains how the ACCC authorisation process can facilitate sustainability collaborations even if there are potential competition concerns. This process allows businesses to submit that an arrangement (e.g. a collaboration between three competing manufacturers on the joint development of technology with environmental benefits) that may otherwise result in competition or cartel concerns has a net public benefit, with the ACCC weighing claimed benefits against likely detriments. The ACCC authorisation process requires a decision within six months of an application being lodged.

Importantly, the draft guidance includes examples of sustainability collaborations that they view as having low competition law risk. These include jointly funded research into reducing environmental impact; pooling information about the environmental sustainability credentials of suppliers; and industry-wide emissions reduction targets. Many sustainability collaborations will fall within these examples. The guidance recommends that businesses consider the particular facts of the collaboration and assess their risks before proceeding, including obtaining legal advice where necessary.

In short, the draft guide for business:

• Provides an overview of competition law risks of sustainability collaborations. These include –
  • collaborations that involve cartel conduct (where there is an agreement between competitors to act together rather than compete against each other); and
  • other collaborations that have the purpose, effect or likely effect of substantially lessening competition in a market in Australia (including anti-competitive agreements, concerted practices and exclusive dealing).
• Provides reassurance that businesses can have preliminary discussions about potential collaborations without ACCC authorisation. However, caution must be exercised. Where there is a risk that the collaboration may involve a breach of competition laws, the guide recommends:
  • Any agreements should be clearly conditional on ACCC authorisation; and
  • Commercially sensitive information should not be shared with competitors unless authorised by the ACCC.
• Encourages businesses to have informal discussions with the ACCC before lodging proposals for sustainability collaborations. The ACCC can provide feedback on a draft application, identify areas of concern and indicate where more information may be required.
• Includes an overview of the authorisation process and makes clear that sustainability benefits accepted by the ACCC are broad. Essentially, the ACCC may grant authorisation if it is satisfied that the likely public benefit resulting from the proposed conduct or agreement outweighs the likely public detriment (such as to mitigate a ‘market failure’). The draft guidance includes examples of sustainability benefits such as reducing plastics use (such as soft drink manufacturers agreeing not to use single use plastics in their drink multipacks), decreasing greenhouse gas emissions (such as competitors agreeing to conduct joint research to develop technology to reduce greenhouse gas emissions during cement production), safe disposal of potentially harmful end-of life products and biodiversity conservation.
• Notes that ‘interim authorisations’ may be sought and will be assessed on a case-by-case basis as part of the authorisation process. If approved, this would allow collaborators to engage in the proposed conduct while the ACCC considers the substantive application.
• Streamlined consideration of applications are available in limited circumstances. For instance, where there are no significant detriments associated with the proposed conduct or where the application deals with an industry or subject matter that the ACCC has previously reviewed and approved for a similar arrangement.

Initial observations 

The AICD supports the ACCC providing guidance to businesses on sustainability collaborations as a useful first step, given the complexities of competition law and the need for collaboration for Australia to meet net zero emissions commitments. The examples provided are in most cases helpful and relatively clear, however we query whether further low risk examples of sustainability collaboration which do not require authorisation can be provided. We note that there has been some criticism that some of the examples may be too restrictive and fail to incentivise sustainability collaborations.

As competition laws apply equally to not-for-profits (NFPs) as for-profits, we also believe that it would be useful to have examples that apply to the NFP sector where organisations are not well resourced and collective buying groups are common.

As mentioned, the guide relies on the ACCC's formal authorisation process to provide certainty to businesses that they will not be in breach of competition laws. This process can take time, is public, can be costly and there is limited scope for flexibility or adjustments. While interim authorisations are available, it is unclear how quickly these will be approved in practice and the streamlined process is only available in limited circumstances.

Regulators in other jurisdictions (e.g. the UK's Competition and Markets Authority and Japan’s Fair Trade Commission) have provided guidance to business about how they will apply their enforcement powers to sustainability collaborations (rather than requiring formal approval). While the legislative framework that regulators are required to enforce in both jurisdictions differ significantly, we are interested in members’ views as to whether the ACCC should consider providing similar guidance or whether a well-marked safe harbour should be outlined in the guide. 

It may be that legislative reform is needed to address rigidity in Australia’s competition laws and accelerate progress towards national sustainability goals. There is an ongoing competition policy review being conducted by Treasury, supported by an Expert Advisory Panel, which may be an appropriate avenue for these issues to be taken up.

Finally, while the ACCC guidance notes that the principles could be applied to other sustainability issues, the examples provided are all environmentally focused. We note that there may be utility in extending the guidance to cover collaborations between competitors to address modern slavery and other human rights issues that raise similar concerns.