ESG and Antitrust: The Austrian Rules Exempting Environmental Collaborations Explained

In September 2022, the Austrian Federal Competition Authority (FCA) published its Guidelines on sustainability cooperation agreements between companies (Guidelines). The Guidelines explain how to assess these agreements under the sustainability exemption, which was introduced a year earlier.

Background

Section 2(1) of the Austrian Cartel Act is the equivalent of Article 101(3) TFEU. It establishes an exemption from the ban on agreements that restrict competition, provided certain cumulative conditions are met.

In September 2021, Section 2(1) was amended, expanding the scope in favor of certain sustainability agreements.  

Before the revision, agreements that lead to efficiencies in the production or distribution of goods or “to promote technical or economic progress” could be exempted under certain conditions, including the requirement that consumers receive a fair share of the resulting benefits.

The amended Section 2(1) establishes a presumption that an agreement that “significantly contributes to an ecologically sustainable and climate neutral economy” will allow a fair share of those benefit to accrue to consumers.

Scope of the exemption and the Guidelines

As discussed below, the amendment to Section 2(1) and the accompanying Guidelines are an effort by the FCA to show the way in an area where significant discussions remain regarding application of EU competition rules to sustainability agreements.

Acknowledging this, the presumption introduced in Section 2(1) is applicable only to agreements that are focused on Austria and that do not affect trade between EU Member States.

Further, the new construct is limited to collaboration agreements with an environmental benefit. It does not extend to other aspects of ESG  collaboration, such as social and governance.  

As detailed by the Guidelines, the “exemption is limited to specific types of sustainability goals, namely a contribution to ecological sustainability (particularly including transition to a circular economy, the prevention and reduction of environmental damage, the protection and restoration of biodiversity and ecosystems, and the sustainable use and protection of water resources) or a climate-neutral economy.”

Conditions for application

Where a sustainability agreement with environmental benefits, as described above, entails a restriction of competition, it will qualify for exemption under Section 2(1) if the following five conditions are satisfied:

1. The agreement leads to efficiency gains in the form of overall social welfare.
2. The efficiency gains contribute to an ecologically-sustainable or climate-neutral economy.
3. Such contribution is “substantial” in the sense that the efficiencies must compensate for the restriction of competition. This assessment requires comparing the positive environmental benefits of the cooperation against the restrictive effects in qualitative and/or quantitative terms. In some cases, qualitative efficiency gains will need to be translated into approximate monetary amounts to allow comparing against the restrictive effects of the cooperation, e.g. on pricing. The Guidelines recognise the complexity of this assessment, and provide some guidance on the type of analysis and data that are acceptable, but remains to be seen how this will work in practice.
4. The restriction of competition is indispensable in order to achieve the efficiency gains.
5. The coopetition does not result in the elimination of competition for a substantial part of the products but possibilities remain for residual competition.

Compared to a traditional analysis, the key difference now is that the “fair share of benefits accruing to consumers” leg of the analysis no longer needs to be assessed individually.

To avail themselves of the presumption that consumers will get a fair share of the benefits, the key requirement is that the agreement brings about an original contribution to environmental sustainability goals. 

It is thus not enough to collaborate on ways that are merely simpler or more cost efficient in achieving such goals. This largely is captured in the first three conditions, requiring substantial gains to overall social welfare in the form of a more ecologically sustainable or climate-neutral economy.

Procedure

The change to Section 2(1) and the new Guidelines do not do away with the need for companies to self-asses their sustainability initiatives.  

However, where reasonable doubts remain, the FCA invites companies to reach out for informal advice, and the FCA will assess together with the Federal Cartel Prosecutor.  

Parties are encouraged to reach out in good time, signalling that the FCA may want to look in detail at agreements on which it is consulted and may raise genuine questions.

Commentary

Other competition authorities, and most notably the European Commission, so far have taken a more narrow stance on the question whether benefits for society more broadly should count in the analysis. It is one of the most significant points of debate when it comes to the application of competition rules of sustainability agreements.

The FCA has taken a more expansive approach, establishing a presumption for agreements that make original and significant contributions to the environment. The Dutch Competition Authority has made similar efforts to show the way. We anticipate that both the FCA and Dutch approaches could likely  influence the Commission and other national competition authorities in Europe.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.