Transcript Competition & Environmental Objectives

EU Competition Law &
Environmental Protection
Meeting

Meeting for the first time!
Objectives

To evaluate the role of the ‘company’;

To understand the position of competition
law in the greater EU economic
constitutional framework;

To discuss the application of horizontal
provisions of the treaties;

To
understand
how
environmental
protection arrives in competition law.
Lecture Structure
Part I
a) The Position of the Private Organisation;
a)
The Space Occupied by Competition Law.
Part II
a) The Competition Law Provisions;
a)
The Influence of Environmental Policy.
Part I(a) - The Role of the
Organisation
International
EU Level
Predominantly a Public Law
Flavour
Member
States
Political Agreement

This results in, for example:
◦ Primary legislation; (Article 191TFEU)
◦ Secondary legislation; (Regulation (EU) No 510/2011)
◦ State policy; (International commitments, investment or non-investment
commitment; EU policy (Air Quality Standards))
State Non-Compliance (EU) = Infringement.
Environmental Policies

Organisations feeling the pressure?
◦ Legislation;
◦ National Mandatory Standards;
◦ EU Mandatory Standards.
Private Non-Compliance = Penalty
But what about in private spheres?
Private Environmental Goals
Non-legal pressure about environment:
◦
◦
Investors;
Shareholders, etc.

AstraZeneca:

BP:

Volvo: Environmental Care is a Volvo Group Core Value. The Volvo Group is to be
As we move ahead, we continue our efforts to meet our 2015 global
targets to reduce dependence on natural resources and to use them even more efficiently. We will
also continue to support both the EPA Energy Star Program through building and plant
certifications and the Green Power Partnership by investing in offsite wind energy in the form of
renewable energy certificates.
BP recognises the world's growing need for energy and aims to produce it
affordably with minimum impact on the planet, without damaging the environment.
ranked as a leader in terms of Environmental Care among the world’s top producers
of transport-related products, equipment and systems.
What about the Private Sector?

Freedom to operate a business (Art. 16 EU
Charter);
◦
◦
◦
◦
To choose a business partner;
To choose a business structure;
To choose a business practice;
To set trading policies.
But markets still need regulating, so freedom is not
absolute.
Limits to Freedom

Business Freedom is Conditional?
◦
◦
◦
◦

Industry;
Size of company;
Behaviour;
Type of Agreement.
What?
◦ Imposing unfair terms on trading partners;
◦ Disguised unfair trading practices;
◦ Disguised cartel behaviour;

Why?
◦ Protection on adverse effects on trade between Member States
How are these limits regulated?
Competition Law

The Treaty requirement that competition
shall not be distorted implies the
existence on the market of workable
competition, that is to say the degree of
competition necessary to ensure the
observance of the basic requirements and
the attainment of the objectives of the
Treaty, in particular the creation of a
single market achieving conditions similar
to those of a domestic market.
Pure Competition Objectives
Competition law exists to protect the process of
competition in a free market economy
◦ A system where the allocation of resources is
determined solely by supply and demand in free
markets
Competition wanted because of the market result it
produces
◦ Efficiency
◦ Low prices
◦ Innovations
Competition rules limits the freedom of the market
players to protect the process of competition
Fitting Competition Law In
Category Article
A
B
C
D
E
F
Addressee
Provision
Free Movement of Goods
Articles 28 -29 TFEU
Member States
Articles 30-32 TFEU
Member States
Articles 34-37 TFEU
Member States
Quantitative Restrictions
Articles 110-113 TFEU
Member States
Tax Provisions
Articles 101-102 TFEU
Companies
Competition Provisions
Articles 107-109 TFEU
Member States State Aid
and Undertakings
Customs Union
Part I(b): The Space Occupied by
Competition Law

Competition law forms a predominant Union
control mechanism.

Unlike US antitrust law, the EU competition rules
are not part of a separate statute. They are part
of a web of interrelated Treaty articles and fulfill a
function in the general scheme of the Treaties.

The normative structure of the Treaties and the
presence of cross-sectional clauses occasionally
demands an orientation of competition provisions
directed at accommodating various non-efficiency
considerations.
TFEU Cross-Sectional
Title II of Part One of the TFEU begins
“shall ensure consistency between its
policies and activities, taking all of its
objectives into account.”
In addition to the considerations that are
accorded a privileged status in the Treaties, the
European Council has repeatedly stressed the
need to take other legitimate interests into
account in the application of the competition
rules.
The EU Maze

The CJ has traditionally privileged a
teleological method of interpretation,
holding that competition Articles should be
construed in the light of the overall
objectives of the EU and the activities
indispensable for their achievement.

It follows that EU competition enforcement
is one of a broad range of activities that
should help attain the objectives of the
Treaties.
Cross-Sectional Conflicts
The objectives of the Treaties are not necessarily
mutually compatible. Sometimes one objective can
only be achieved at the expense of another. This
potential for conflict between the different
objectives might affect the implementing provisions,
which aim to achieve the respective objectives.
Given the growing diversification of constitutional
values, and the notable expansion of social values in
particular, this potential for conflict only increases.
The Treaties do not provide an express mechanism
to resolve such conflict.
Examples

Case 209/98 Sydhavnens v Københavns
Kommune *free movement

C-171/11 - Fra.bo *free movement

Case C-67/96 Albany International BV
*Social policy and protection of workers
Lecture Structure
Part II
a) The Competition Law Provisions;
a)
The Influence of Environmental Policy.
Part II – Competition Law
Provisions

Competition law provisions made up of a
number of sources:
◦
◦
◦
◦
◦
Treaty provisions (Articles 101 and 102 TFEU);
formal guidelines;
notices;
communications, and
papers.
Uniqueness of the EU

Competition law is one of the main tools for the
prevention, permitting, curing or prohibiting
intended action of a company or companies
where the behaviour could constitute a threat to
or cause damage to the internal market. NB:
More than minimal effect on trade between
Member States!

Environmental Policy as cross-sectional provision:
◦ As environmental Agreements;
◦ Environmental Efficiencies.
Article 101 TFEU
1. The following shall be prohibited as
incompatible with the internal market: all
agreements
between
undertakings,
decisions by associations of undertakings and
concerted practices which may affect trade
between Member States and which have
as their object or effect the prevention,
restriction or distortion of competition
within the internal market, and in
particular those which:…
Environmental Policy (Old
Horizontal Guidelines)
The (old) Horizontal Guidelines define environmental agreements as
agreements ‘by which the parties undertake to achieve
pollution abatement, as defined in environmental law, or
environmental objectives, in particular, those set out in … the
Treaty’.
In such agreements, the parties may set out environmental product or
production standards, provide for the common attainment of an
environmental target (e.g., for the recycling of materials,
emission reduction, or improvement of energy efficiency), or
establish industry-wide waste take-back and recycling schemes.
To qualify as an environmental agreement, the target of the measure
must be directly linked to the reduction of a pollutant or a type of
waste, identified as such in the relevant regulations.
Environmental Agreements
For example, agreements between undertakings to set
up collective, industry-wide packaging waste recycling
schemes qualify as environmental agreements, since
they target the reduction and recycling of packaging
waste, which is required by the Packaging and Packaging
Waste Directive.
Environmental agreements were frequently encouraged
or even made necessary by public authorities in the
exercise of their public prerogatives. In such situations,
undertakings must comply with the EU competition
rules within the margin of maneuver that remains after
the public intervention.
Environment not Absolute!

Environmental agreements are caught by
Article 101(1) ‘by their nature’ if the
cooperation does not truly pursue
environmental objectives, but serves as a
tool to engage in a disguised cartel, or if
the cooperation is used as part of a
broader restrictive agreement which aims
at excluding actual or potential
competitors.
For Example…

In VOTOB, the Commission objected to a fixed
‘environmental charge’ that was mentioned separately on the
invoice and that was intended to cover part of the cost of
implementing a voluntary emission reduction covenant
concluded between Dutch chemicals storage companies and
the Dutch Government.

The horizontal fixing of an ‘environmental and safety charge’
was also found to violate Article 101(1) in Industrial and
Medical Gases.

In NAVEWA-ANSEAU, the Commission held that the
labelling scheme for washing machines and dishwashers,
arguably based on environmental considerations, was in fact
discriminatory and essentially aimed at isolating the Belgian
market by protecting it from parallel imports.
Consider This…
Almost all producers of washing machines agree to no longer
manufacture products which do not comply with certain environmental
criteria. Together, the parties hold 90 % of the market. The products which
will be phased out of the market account for a significant proportion of
total sales. They will be replaced by more environmentally friendly, but
also more expensive products.
Furthermore, the agreement indirectly reduces the output of third parties
(for example, electric utilities and suppliers of components incorporated
in the products phased out).
Without the agreement, the parties would not have shifted their
production and marketing efforts to the more environmentally friendly
products. Product variety, which is partly focused on the environmental
characteristics of the product, is reduced and prices will probably rise.
Article 101 (3)
The provisions of paragraph 1 may, however, be declared inapplicable in the
case of:
-
any agreement or category of agreements between undertakings,
-
any decision or category of decisions by associations of undertakings,
-
any concerted practice or category of concerted practices, which
contributes to improving the production or distribution of goods or to
promoting technical or economic progress, while allowing consumers a fair
share of the resulting benefit, and which does not:
(a)
impose on the undertakings concerned restrictions which are not
indispensable to the attainment of these objectives;
(b)
afford such undertakings the possibility of eliminating competition in
respect of a substantial part of the products in question.
Environmental Policy and 101(3)
Under Article 101(3), agreements may not impose restrictions
that are not indispensable to the attainment of the economic
efficiencies pursued.
The (old) Horizontal Guidelines note that the more objectively
the economic efficiency of an environmental agreement is
demonstrated, the more clearly each provision might be
deemed indispensable to the attainment of the environmental
goal within its economic context.
The Guidelines further state that provisions which might prima
facie be deemed not to be indispensable must be supported
with a cost-effectiveness analysis showing that alternative
means of attaining the expected environmental benefits would
be economically or financially more costly, under reasonable
assumptions.
All Washed Up? Not Yet…
Newer, more environmentally friendly products are more technically
advanced, offering qualitative efficiencies in the form of more washing machine
programmes which can be used by consumers.
Furthermore, there are cost efficiencies for the purchasers of the washing
machines resulting from lower running costs in the form of reduced
consumption of water, electricity and soap.
The efficiency gains outweigh the restrictive effects on competition
in the form of increased costs. Other alternatives to the agreement
are shown to be less certain and less cost-effective in delivering the
same net benefits. Various technical means are economically
available to the parties in order to manufacture washing machines
which do comply with the environmental characteristics agreed
upon and competition will still take place for other product
characteristics. Therefore, the criteria of Article 101(3) would
appear to be fulfilled.
CECD
The Commission granted an exemption to an agreement between
virtually all the European importers and manufacturers of domestic
washing machines to stop importing or producing the least energyefficient machines, thereby reducing the polluting emissions from
power generation.
The environmental benefits for society were stated to meet the
criteria for exemption although there may be no benefits for individual
purchasers who apart from a reduction in choice will see the
purchase price of such machines going up to cover the added costs.
The Commission stated that the agreement contributed to EU
environmental policy objectives to such an extent that ‘the benefits
very largely exceed potential cost increases triggered as a result of
the agreement’ and even if individual purchasers were not to derive
the financial benefits ‘the magnitude of environmental benefits is such
that the net contribution to society's economic welfare would still be
positive’.
Backward Trend?

CECD no longer referred to in literature;

Environmental agreements withdrawn
from the Commission Guidelines;

Little or no mention of environmental
policy in any other literature from the
Commission in relation to its impact on
competition provisions.
Recent Case

Netherlands Energy Companies
◦ This case concerns an agreement by electricity producers active
on the Dutch market, who agreed to a plan ‘National
Energieakkord’ which is supported by social actors,
environmental NGO’s and employee representatives, to close
down a number of five old coal powered plants.
◦ Such a collaboration raises competition concerns and is likely to
reduce production capacity, so the Netherlands Competition
Authority was consulted on the compatibility of this plan with
Article 101 TFEU. They took the preliminary view that the plan
is incompatible with competition law.
◦ Their opinion is very thin and there is hardly any consideration
of the environmental motivators behind the preliminary view.
Concluding Thoughts