ACCC's draft guide cautiously encourages sustainability collaborations
11 July 2024
11 July 2024
The ACCC has published long-awaited draft guidance for businesses proposing to collaborate on sustainability initiatives. It is seeking feedback from stakeholders on the draft guide by 26 July 2024. The ACCC expects to publish the guide towards the end of this year.
In the draft guide, the ACCC recognises “the clear need for urgent action on environmental sustainability” and that “environmental harm, including climate change and biodiversity loss, represents a special category of threat to the environment and economy which requires action by all stakeholders, including the business community.”
The ACCC is the latest in a number of competition regulators (including in the United Kingdom, the European Union, New Zealand, Japan, the Netherlands and Singapore) to publish guidance for businesses collaborating to achieve sustainability goals.
The guide highlights that in Australia, unlike some other jurisdictions, the ACCC is able to give businesses certainty about their exposure to the risk of legal action through the authorisation process. If businesses obtain authorisation before engaging in a sustainability collaboration, they can engage in the authorised conduct without risk of the ACCC, or third parties, taking legal action against them for a breach of competition law.
The Chair of the ACCC, Gina Cass-Gottlieb, observed earlier this year that one in four conduct authorisations considered by the ACCC in recent years have involved assessing environmental sustainability claims. In October 2023, for instance, the ACCC approved the proposed takeover of Origin Energy by Brookfield and EIG, despite not being satisfied that the takeover would not substantially lessen competition.
The ACCC’s draft guide seeks to assist businesses in understanding the competition law risks of entering into sustainability collaboration initiatives, while identifying a potential path for mitigating those risks. The guide is intended to complement existing ACCC guidance and businesses should also have regard to the ACCC's recently published 'Making environmental claims' guide in structuring their sustainability collaborations to ensure compliance with competition law.
Similar to other jurisdictions (notably, New Zealand), the draft guide provides specific examples of sustainability collaborations that are unlikely to raise competition concerns:
The guide notes that the examples are for illustrative purposes only. However, the examples share common principles that provide guidance more generally on what other types of sustainability collaborations are unlikely to adversely impact competition—namely, they are collaborations in which the businesses:
The ACCC has not, at this stage, proposed to issue a class exemption for sustainability collaborations. Instead, if a proposed collaboration raises competition concerns, the guide explains that it may be appropriate for businesses to seek a formal authorisation exemption for the collaboration from the ACCC.
The draft guide acknowledges that an exemption can be sought via a notification, which enables eligible businesses to seek an exemption for specific types of conduct (such as small business collective bargaining, collective boycotts, resale price maintenance and exclusive dealing). Where groups of small businesses seek to collectively bargain, the collective bargaining class exemption may be available.
However, the ACCC primarily encourages businesses to seek exemptions through authorisation applications to the ACCC.
The ACCC may grant authorisation if it is satisfied that the likely public benefit resulting from the proposed collaboration outweighs the likely public detriment. The ACCC can take sustainability benefits into account coming from the conduct sought to be authorised. In particular, the ACCC has accepted that a reduction in greenhouse gas emissions is a public benefit of considerable weight, because it assists in global efforts to avoid the most severe effects of climate change. The ACCC can take into account sustainability benefits that flow to society generally, with a particular focus on public benefits to Australians.
The guide provides some practical guidance for how businesses considering to collaborate should frame their application for authorisation. An application for authorisation should, among other requirements:
Beyond authorisations, the guide provides limited discussion of the exceptions to the cartel and other anti-competitive prohibitions against which businesses considering to engage in sustainability collaborations can self-assess their conduct, rather than seeking an authorisation which can be time consuming, uncertain and costly—most notably the joint venture exception. Further guidance on these exceptions would be a welcome addition in encouraging sustainability collaborations.
The ACCC must make a determination in relation to an application for authorisation within 6 months of the application being validly lodged. Ordinarily, the authorisation process involves the following phases: targeted consultation with interested parties, publication of a draft determination, a period for written submissions to be made on the draft determination, and the issuing of a final determination.
However, in some cases the timeframe for granting an authorisation application can be expedited. Where a proposed sustainability collaboration does not appear to have any significant detriments associated with the conduct, or the application deals with a subject matter or industry that the ACCC has previous experience with and has concluded there was a clear net public benefit, the ACCC may skip the initial consultation phase and proceed to directly issue a draft determination. The ACCC will still consult publicly after issuing the draft determination.
Businesses can seek interim authorisation from the ACCC to enable them to engage in the proposed conduct while the ACCC considers the substantive application. The ACCC may grant interim authorisation where it considers it appropriate to do so.
The guide encourages businesses to discuss proposals for sustainability collaborations with the ACCC before lodging an application requesting authorisation for the collaboration. The ACCC cannot however provide legal advice.
The ACCC has not extended its encouragement to discuss proposals to businesses seeking guidance as to whether another type of exemption might be appropriate.
Where businesses are looking to collaborate in respect of sustainability initiatives, they should seek legal advice as to whether a proposed collaboration raises competition concerns and whether it would be appropriate to rely on an exception to the cartel and other anti-competitive prohibitions, or to seek a formal exemption (eg an authorisation) for the collaboration from the ACCC.
Businesses are encouraged to comment on the draft guide. We are able to assist businesses wishing to comment on the guide and to advise on proposed sustainability collaborations.
Authors: Justin Jones, Partner; Alain van der Westhuizen, Senior Associate; Victoria Beswick, Senior Associate; Oscar Han, Lawyer; and Pippi Mitchell, Graduate.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.