A Company's Guide to Environmental Action

Abstract: While industries stand responsible for many of the emissions leading to global warming, tackling climate change seems to fall upon individuals and states. The limited course of corporate action may in many ways be traced back to competition law. Corporations that collaborate with the aim to reduce their environmental pressure will run the risk of breaching Article 101 TFEU, as such collaborations often qualify as illegal horizontal agreements or ‘cartels.’ Environmental agreements between undertakings may be an essential tool for combating the prevailing environmental crisis. With an economic approach to competition law it however seems unlikely that environmental objectives would receive exemption from prohibition pursuant to Article 101 TFEU. Meanwhile, the Commission has taken a positive approach to standardisation agreements, which also may take the form of horizontal agreements between competitors. Standardisation agreements are, in contrast to traditional horizontal environmental agreements, provided with an unofficial safe harbour that stipulates defined criterions for compliance with competition law. Horizontal environmental agreements and standardisation agreements many times overlap to an extent that makes it difficult to distinguish between the two; an overlap that perhaps enables the usage of standardisation regulations for environmental purposes. This paper carries out an exploration of horizontal environmental agreements and standardisation agreements respectively in an attempt to map a lawful path to horizontal collaboration between undertakings. The paper first examines how horizontal environmental agreements are currently assessed under Article 101 TFEU. It then carries out the same investigation with regard to standardisation agreements, before comparing and contrasting the two in order to demarcate and display differences relevant to their legal assessments. Finally, the paper deduces a guide for constructing environmental agreements that are compliant with current competition law regulations. The paper argues that horizontal agreements have a greater chance of compliance if constructed and assessed as standardisation agreements, rather than traditional horizontal agreements. To fall under the regulations for standardisation agreements, environmental objectives must be declared in the form of limits rather than action. Agreements are required to have unrestricted access and be transparent, fair, reasonable and non-discriminatory. Adopting this format allows parties to agree upon defined terms and construct compliance mechanisms, as long as the agreement does not give rise to commercial liability. It also allows the agreement to affect product or production outcome, which probably would be prohibited if assessed as a traditional horizontal agreement. Further, the format allows firms to collaborate despite holding large market shares. Finally, the paper finds that although the European rule of reason provides a means to include public policy consideration, is too uncertain to rely on when constructing environmental agreements. Ultimately, the paper aims to map a guide for undertakings wishing to construct horizontal environmental agreements to target climate impact.