How to protect the environment without infringing the competition: A study on environmental vertical agreements in theory and in practice

University essay from Lunds universitet/Juridiska institutionen; Lunds universitet/Juridiska fakulteten

Abstract: As humanity is facing its biggest challenge ever – the climate crisis – it is now more important than ever that environmental protection is integrated in all parts of the European Union. Environmental protection is considered a main objective of the EU. In Article 3(3) of the TEU is stated that the internal market of the Union should work for a sustainable development and a high level of protection and improvement of the environment. The internal market should however also work for an effective competition and ensure that it is not distorted. Environmental vertical agreements mean agreements that aim at protecting the environment and may include restraints that infringe competition under Article 101 TFEU. Restraints such as single branding agreements, where a supplier hinders a distributor from buying similar products from other non-sustainable suppliers, or selective distribution systems, where only distributors that fulfill certain criteria such as a sustainable waste disposal can be included, are considered to restrain competition within the meaning of Article 101(1) TFEU. Such restraints may however be exempted if the four cumulative criteria of Article 101(3) TFEU are fulfilled. The examination of this thesis concludes that an objective of environmental protection does not provide any special advantages for vertical restraints to be exempted, however the area is uncertain as there are no precedents regarding environmental vertical agreements. Furthermore, the research of this paper shows that environmental protection can to a certain extent be included in the concept of consumer welfare. Under the applicable definition of consumer welfare, environmental protection will not have a considerable impact on the assessment. The suggestion is that the European Union would benefit from a more American rule of reason approach which would allow for the Commission and the CJEU to take into consideration all circumstances to the agreement and thereby make a decision based on the individual facts of the case to a greater extent. Additionally, environmental protection should be seen as part of ‘technical and economic progress’ within the meaning of Article 101(3) TFEU. The conclusion is that environmental protection is not given enough weight in the assessment of environmental vertical restraints under EU competition law. Hence, this thesis provides suggested measures to be taken by the Commission and the CJEU in order to incorporate environmental protection in the competition law. By suggested measures, the main objective of Article 3(3) TEU to protect and improve the environment can be achieved to a greater extent.

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