The Role of Environmental and Sustainability Considerations as Justification
for Cartels in the EU – Case Study of Finland
Faculty of Law
LLM of European Competition Law and Regulation Master Thesis
Submitted 23 July 2020 Anna Levonen
11253541
Abstract
Consumers in Europe are increasingly concerned with the sustainability and environmental aspects of the products they purchase. Thus, there is growing pressure on undertakings to focus on
development and innovation in order to address the demand. Such environmental concerns might, however, be difficult to address by undertakings on their own, and studies have shown that cooperation on this matter would lead to greater results. The current EU legal framework, mainly the Commission interpretation of the Guidelines on cartel exemptions, are negatively affecting the undertakings’ possibilities to cooperate to achieve environmental goals. Therefore, this thesis first looks into why competition policy and more specifically, rules on anticompetitive agreements should consider environmental and sustainability factors. Next, the Commission’s interpretation and approach to the assessment of cartel exemption cases will be analysed which shows that the ‘more economic’ approach adopted since the modernisation of EU competition rules hinders sustainability and other public policy considerations from being taken into account. The modernisation also led to the decentralisation of competition law enforcement, and now a majority of cartel cases are assessed at the Member State level. Thus, the final part of the thesis looks at the enforcement practices of competition policies in Finland, which shows that Finland has not followed the example of some other Member States where a diverging approach to cartel exemption rules compared to the Commission has been adopted.
1. INTRODUCTION ... 1
2. WHY SHOULD COMPETITION POLICY INCLUDE ENVIRONMENTAL AND SUSTAINABILITY CONSIDERATIONS? ... 3
2.1. ACHIEVING ENVIRONMENTAL AND SUSTAINABILITY GOALS THROUGH COOPERATION BETWEEN UNDERTAKINGS ... 7
3. MORE ECONOMIC APPROACH TO ARTICLE 101(3) TFEU ... 10
4. ARTICLE 101(3) TFEU – ASSESSMENT OF ENVIRONMENTAL AND SUSTAINABILITY AGREEMENTS ... 15
4.1. ARTICLE 101(3)TFEU ... 16
4.2. FIRST CONDITION - EFFICIENCY GAINS ... 17
4.3. SECOND CONDITION – FAIR SHARE FOR CONSUMERS ... 20
4.4. THIRD AND FOURTH CONDITIONS - INDISPENSABILITY AND NO ELIMINATION OF COMPETITION ... 24
4.5. CONCLUDING REMARKS ON ARTICLE 101(3)TFEU CRITERIA ... 26
5. MEMBER STATE ENFORCEMENT OF ARTICLE 101(3) TFEU - THE EXAMPLE OF FINLAND ... 27
5.1. MEMBER STATE ENFORCEMENT OF ART 101(3)TFEU ... 27
5.2. FINNISH COMPETITION LAW FRAMEWORK ... 29
5.3. NON-ECONOMIC AND SUSTAINABILITY INTERESTS UNDER SECTION 6§ OF THE FINNISH COMPETITION ACT ... 30
6. CONCLUSION... 32
7. BIBLIOGRAPHY ... 34
1 1. Introduction
In 2018, the Intergovernmental Panel on Climate Change (IPCC) published a report confirming the urgency of climate action and called for an immediate action to be taken in order to limit the global temperature warming to 1.5°C.1 The IPCC emphasised the need for reforms of policies to be made
in all aspects of society by not just businesses and individuals, but also at government and multilevel governments level. A month later, the European Commission2 responded with a
Communication where it recognised the findings of the IPCC and urged for action at the EU level as well by setting an objective of climate-neutral (net-zero greenhouse gas) EU by 2050.3 One of
the priorities set out in this Communication is the alignment of ‘growth-enhancing and supporting
policies, such as competition, labour market (…) with climate action and energy’.4 Thus, it is
acknowledged by the Commission that actions regarding the development of environment and climate change should be considered in a wider number of policy areas, including competition policy.
During the recent years, due to this emergency of climate change, there has also been increasing pressure on undertakings to adopt more sustainable goals and initiatives in their business practices. However, the current legal framework, in regards to competition, is making this more difficult. Whilst many businesses are already responding to the demand of consumers and investing in innovation that promotes more sustainable growth, undertakings would be able to achieve greater results through cooperation in this matter. It has been found that undertakings are, first of all, more likely to invest in more sustainable innovation and introduce them to the market, if it was done together with at least one other undertaking.5 In addition, some undertakings may not want to take
the risk that comes with being the first business in the market introducing a sustainability initiative;
1 IPCC, ‘Special Report: Global Warming of 1.5°C – Summary for Policymakers’ (IPCC, October
2018) https://www.ipcc.ch/sr15/chapter/spm/ accessed 16 April 2020.
2 Hereinafter ‘Commission’.
3 Commission, ‘A Clean Planet for All: A European Strategic Long-Term Vision for a Prosperous,
Modern, Competitive and Climate Neutral Economy’ COM (2018) 773 final.
4 Ibid.
5 M P Schinkel and Y Spiegel, ‘Can Collusion Promote Sustainable Consumption and Production?’
2 therefore some level of collusion with other undertakings would encourage them to take such a step.6
The discussion on the conflict of sustainability goals of the European Union, on the one hand, and the EU Competition policy and its interpretation, on the other hand, has increasingly caught the attention of not just the scholars, but also the Commission itself. However, despite the Commission addressing the need for policies that encourage more sustainable initiatives, the emphasis from the Commission’s side still seems to remain on economic growth. The assessment of cartel cases, since the modernisation of competition policies in 2004 and the introduction of Regulation 1/2003, has been done through a ‘more economic approach’, meaning that benefits that do not produce
monetary efficiencies do not appear to be taken into account in exemptions for cooperation between undertakings.7 The third paragraph of Article 101 of the Treaty on the Functioning of the European
Union (TFEU) lists requirements that need to be met in order for a cartel formed between two or more undertakings to be justified. The Commission interpretation of the first two requirements – the agreement must produce efficiency gains, and these efficiency gains must be passed on to the consumers – leaves little to no room for sustainability and environmental objectives also being considered under the exemption rules. Thus, the Commission’s approach to Article 101(3) TFEU discourages undertakings to enter into sustainability initiatives, since being caught by the cartel prohibition rules may lead to hefty fines being imposed.
The aim of this thesis is to assess the role of environmental and sustainability considerations under the assessment of Article 101(3) TFEU. This thesis first begins with a chapter with further
explanation on why an assessment and a better understanding of this topic is important. The aim of this part is to establish why competition policy and cartel rules are important tools to achieve sustainability goals. The third chapter looks into the Commission’s assessment to competition policy and more specifically cartel rules, and the adoption of the ‘more economic approach’; why and how did the Commission come to this approach and to what extent do environmental and sustainability considerations fit into it. The next chapter moves into a dogmatic analysis of the current EU legal framework on cartel prohibition and exemptions. For this, it is necessary to examine, not just the legal framework (the treaties and regulations), but also the guidelines of the
6 Ibid.
7 R Claassen and A Gerbrandy, ‘Rethinking European Competition Law: From a Consumer Welfare
3 Commission, more specifically the Guidelines on the application of Article 101(3) TFEU,8 and
what does the interpretation of the Commission mean for sustainability objectives. This part aims to apply the findings of the previous chapter in the criterion laid down in Article 101(3) TFEU, and together with the Commission Guidelines analyse to what sustainability objectives can be
considered as efficiencies exempting anticompetitive agreements from the prohibition. This thesis focuses solely on the third paragraph of Article 101 TFEU which sets the exemption for the
prohibition in the first paragraph. The focus on only the third paragraph is not due to the irrelevance of the first one in regards to environmental considerations in competition law. The assessment solely focuses on the third paragraph due to the limited scope of this thesis, and much of the debate has risen on this paragraph after the Commission limited its approach when introducing the
Guidelines. Lastly, a similar study from a Member State perspective will be conducted, since a majority of cartel cases are currently assessed at the Member States level, and due to the non-binding nature of the Commission Guidelines, National Competition Authorities are left with a margin of discretion to assess the exemption criteria differently compared to the Commission. For this, the Finnish Competition Authority’s approach to cartel justifications will be examined. The legal framework for competition policy in Finland is largely modelled from EU law, but the aim of this part is to assess whether the Finnish Competition Authority has followed the Commission Guidelines, or adopted a different approach where sustainability objectives are also considered.
In other words, the main aim of my thesis is to find out what is the Commission’s approach to the assessment of cartel exemption criteria, and how environmental and sustainability objectives fit into this. Furthermore, to what extent does the Finnish Competition Authority’s approach differ from the one adopted by the Commission?
2. Why should competition policy include environmental and sustainability considerations? Before answering the question of why competition policy should include environmental and sustainability considerations, it is necessary to define the two concepts. The concepts of environmental and sustainable development are closely linked, and they are sometimes used interchangeably, especially when discussing them in regards to competition policy. Sustainable development is generally defined as ‘development that meets the needs of the present without
4
compromising the ability of future generations to meet their own needs.’9 Environmental protection
refers to the maintaining and restoring of the quality of the environment by, for example, averting polluting emissions, recycling, protecting human health and preventing degradation of the
ecosystem.10 By looking at these definitions, it seems that there is not one without the other, but
they complement one another. On the one hand, the development of sustainable consumption will contribute to the better usage of environmental resources which consequently serves environmental protection. On the other hand, focusing on decreasing emissions or recycling will ensure that the production of goods may also continue for future generations. This paper will discuss both
sustainable and environmental agreements between undertakings or collaboration on sustainability or environmental matters. Therefore, despite the fact that a distinction can be made between the two, due to the close connection, these terms will be used interchangeably going forward.
As found in the introduction, we are currently facing a climate emergency, where drastic changes need to be taken. In addition to the IPCC report on climate change, another study was done in 2006 which showed evidence on the fundamental impact climate change had already had, and if an action was not taken immediately, the economic costs of climate change would be far higher than the costs for attacking the issue right away.11 The science on this matter is clear, and there is no question on
whether action should be taken. However, this has been acknowledged at different levels. On the global scale, the Paris Climate Agreement was signed in 2015, with almost 190 countries
participating. In the EU, several climate action plans have been adopted, most recently European Green Deal, including several policy initiatives with the main aim of achieving climate-neutral EU by 2050. While there are a number of tools that could be used to combat climate change, and many could argue that competition law is not at the centre of the issue and it cannot solely solve the problem, it can nevertheless be part of the solution. As the competition commissioner herself declared at a conference in the fall of last year, ‘every one of us – including competition enforcers –
9 ‘Glossary of Statistical Terms: Sustainable Development’ (OECD)
https://stats.oecd.org/glossary/detail.asp?ID=2626 accessed 5 July 2020; See also Commission, ‘A Sustainable Europe for a Better World: A European Strategy for Sustainable Development’
(Communication) COM(2001) 264 final.
10 ‘Glossary of Statistical Terms: Environmental Protection’ (OECD)
https://stats.oecd.org/glossary/detail.asp?ID=836 accessed 5 July 2020.
11 N Stern, ‘Stern Review on the Economic of Climate Change’ (HM Treasury 2006)
https://webarchive.nationalarchives.gov.uk/20100407172811/http://www.hm-treasury.gov.uk/stern_review_report.htm accessed 2 July 2020.
5
will be called on to make our contribution to change.’12 The competition process is also at the heart
of environmental concerns since it contributes to the consumption by people which in turn is one of the main issues behind environmental degradation. Combatting climate change is also in the
interests of the Union citizen’s since an increasing amount of people are demanding more changes that contribute to the protection of the environment. According to a Eurobarometer survey from 2017, 94% of the EU consumers consider the protection of the environment as an essential issue, and 79% believe that large businesses are not doing enough for this issue.13 More recently, a survey
from 2019 established climate change as the second most important concern amongst the EU citizens. There is, therefore, first off, no question whether there is an actual emergency, but also the concern of the people is real and increasing.
While competition policy could be an area contributing to environmental protection and sustainable development, there remains a debate on whether competition policy has room for such
considerations. This depends, to some extent, on what is perceived as the goal of competition policy. The main aim of EU competition law is to preclude any distortion of competition. Preventing distortion of competition is a tool to achieve a well-functioning internal market, and through that promote the protection of consumers and consumer welfare.14 A well-functioning and
fair competition ensures the efficiency of the companies and the markets itself, resulting in
improved production and innovation through which better products and increased choice is offered to consumers, and thus the welfare of consumers as well as the society increases.15 Therefore,
ultimately competition law serves the consumers through the objective of enhancing consumer welfare. Yet, if maximising consumer welfare is indeed accepted as the goal of competition policy, it needs to be assessed what this notion actually entails in order to find out whether environmental considerations can fit into the competition assessment. By looking at a very simple definition, the concept of consumer refers to the person purchasing the goods or services, while welfare is a wide
12 M Vestager, ‘Keynote Address’ (GCLC Conference on Sustainability and Competition Policy,
Brussels, 24 October 2019) https://www.youtube.com/watch?v=7mpWAOhkQbY accessed 27 March 2020.
13 J Nancy, ‘Two Years Until the 2019 European Elections: Special Eurobarometer of the European
Parliament’ (Public Opinion Monitoring Series, European Parliament Research Service 2017) https://www.europarl.europa.eu/pdf/eurobarometre/2017/2019ee/two_years_until_ee2019_synthesis _en.pdf accessed 2 June 2020.
14 Communication from the Commission 2011/C11/01 of January 2011 Guidelines on the
Applicability of Article 101 of the Treaty on the Functioning of the European Union to Horizontal Co-operation Agreements [2011] OJ C11 (Guidelines on Article 101 TFEU), para 33.
15 Competition Committee, ‘Roundtable on Horizontal Agreements in the Environmental Context’
6 concept encompassing, for instance, the physical and mental health and happiness of a person.16
Thus, consumer welfare is dependent on resources to continue to produce a necessary quantity and variety of products to the consumers. However, if sustainable development is not considered, there will be a detrimental effect on the availability of resources and consequently, the economy.17
Through promoting environmentally friendly and sustainable consumption and production, more efficient use of resources and decreased pollution could be achieved.18 Therefore, environment and
sustainability should also be considered in competition policy, in order to ensure continuous welfare for the consumers.
Another argument that has been raised in favour of including environmental consideration in
competition policy assessment is that protection of the environment is mentioned as one of the goals of the Union in its Treaties. When looking at the primary law of the EU, sustainability development and sustainability goals are mentioned several times. First off, under Article 3 of the Treaty on European Union (TEU), sustainable development is mentioned both in regards to the internal market, economic growth and stability,19 as well as in regards to the sustainable development of the
Earth.20 Whereas the third paragraph only lists sustainable development as means for economic
growth, the fifth paragraph grants it the status of being the sole goal within itself, and thus, one of the general principles of EU law.21 The third paragraph also links environmental issues to the
establishment of the internal market, which is in turn connected to competition policy which
essentially functions as a tool of protecting the proper functioning of the internal market. Moreover, in Article 11 TFEU, it is stated that ‘environmental protection requirements must be integrated into
the definition and implementation of the Union’s policies and activities, in particular with a view to promoting sustainable development.’ First off, this sets a clear obligation on the institutions of the
EU to consider environmental protection and sustainable development, and Commission being a Union institution, it is also bound by this. Further, this applies to all of Union activities and policy interpretations, without exception to competition law. Competition policy in the EU has a
constitutional basis and should, therefore, be considered as one of the policies for which Article 11
16 ‘Welfare’ (Cambridge Dictionary) https://dictionary.cambridge.org/dictionary/english/welfare
accessed 20 June 2020.
17 S Kingston, Greening EU Competition Law and Policy (Cambridge University Press, 2012), 168. 18 Schinkel and Spiegel (n 5).
19 Article 3(3) of the Treaty on European Union (TEU). 20 Article 3(5) of the Treaty on European Union (TEU).
21 D Casey, ’Disintegration: Environmental Protection and Article 81 EC’ (2009) 14 European Law
7 TFEU also applies to.22 In regards to this, Kingston argues that the Treaties should be seen as a
coherent system, and where the wording of the Treaty articles allow, they should be interpreted in a way that ‘help’ the other objectives of the Union.23 However, while environmental protection is
clearly one of the goals of the EU, in the absence of a hierarchy of the objectives, a conflict between different objectives may arise, and they need to be balanced against one another.24 Monti even
argued that the obligation to integrate environmental protection in all the Union policies means that environmental protection has a superior value compared to the other objectives and may, thus ‘act
as a “trump” to justify even anticompetitive environmental agreements if these are necessary to safeguard the environment.’25 Kingston argued that each situation should be assessed on a
case-by-case basis, and there should be a way to interpret the Treaty provisions so that they do not obstruct each other.26 The case-by-case approach seems logical in this matter, but environmental objectives
should not be automatically weighted less than other goals.
2.1. Achieving environmental and sustainability goals through cooperation between undertakings
A cartel is a group of independent undertakings (two or more) which through cooperation with each other aim or have the effect of distortion of competition on the market or harm consumers. A number of different actions of colluding undertakings can be considered anticompetitive, namely fixing prices, limiting production, limiting sales, exclusive dealing are considered to be by their very nature harmful to competition.27 Since cartels either (or both) limit competition on the market,
thus harm other competitors and their abilities to compete fairly, or negatively impact consumers through, for example, predatory prices or less innovation on the market, they are considered illegal.28 However, not all collusion between undertakings is considered to harm competition.
Cooperation may produce benefits that outweigh the negative anticompetitive effects. For example, through cooperation, undertakings may be able to join their forces, share costs for research which lead to innovation, which in turn leads to better products being produced for the consumers,
22 J Nowag, ‘Competition Law’s Sustainability gap? Tools for an Examination and a Brief
Overview’ (2019) 3 Lund University Legal Research Paper Series 3, 10.
23 Kingston (n 17). 24 Casey (n 21).
25 G Monti, ‘Article 81 EC and Public Policy’ (2002) 39 Common Market Law Review, 1078. 26 Kingston (n 17).
27 Guidelines on Article 101 TFEU, para 3. 28 ‘Cartels overview’ (European Commission)
8 possibly with lower prices as well.29 The European Commission has also acknowledged these
benefits of collusion by two or more undertakings operating in the same market. The Commission stated in its guidelines that such agreements ‘can be a means to share risk, save costs, increase
investments, pool know-how, enhance product quality and variety, and launch innovation faster.’30
When assessing cartel cases, the Commission will weigh these efficiency gains produced by the cartel to the anticompetitive effects, and essentially cartels which produce more harm will be declared void.
Moreover, as found before, European consumers are increasingly concerned about climate change, and consequently, they are demanding businesses to invest in more sustainable production and products. This is also reflected in a recent study by the Commission which shows that the most important change in the recent years has been the increasing demand from the consumers’ side for more environmentally friendly and sustainable product development adopted by the undertakings.31
Therefore, in order to properly respond to the demand of the consumers, undertakings may want to cooperate, since achieving sustainability goals may also be better done through undertakings colluding. First of all, sustainability initiatives done by two or more undertakings with more substantial market power would have more impact on the market.32 Combining the resources and
know-how of the undertakings will lead to efficiencies in production or quality of the products which could contribute to environmental development. Therefore, through cooperation,
undertakings are more likely to achieve sustainability goals since the initiatives would have a much stronger impact. Secondly, undertakings may be more willing to engage in sustainability plans with other undertakings, as they will avoid risking the disadvantage that may arise from being the “first-mover”.33 Producing more sustainable and environmentally friendly products likely lead to higher
prices being passed on to the consumer. The first-mover disadvantage, in this case, means that undertaking being the first and only undertaking on the market moving towards producing more
29 Guidelines on Article 101 TFEU, para 33. 30 Ibid, para 2.
31 European Commission, ‘Factual Summary of the Contributions Received During the Public
Consultation on the Evaluation of the Two Block Exemption and the Guidelines on Horizontal Cooperation Agreements’ (Summary Report 2020)
https://ec.europa.eu/info/law/better- regulation/have-your-say/initiatives/11886-Evaluation-of-EU-competition-rules-on-horizontal-agreements/public-consultation accessed 8 June 2020.
32 K Coates and D Middelschulte, ‘Getting Consumer Welfare Right: The Competition Law
Implications of Market-driven Sustainability Initiatives’ (2019) 15 European Competition Journal 318, 324; See also the conclusion of the study in Schinkel and Spiegel (n 5).
9 sustainable products may, as a result, lose customers to other undertakings on the same market with lower prices.34 In addition, setting sustainability goals often requires big investments from an
undertaking, and the risk of losing customers may be a disincentive to make such investments.35
The first-mover disadvantage is linked to the first point on why sustainability goals may be better achieved with collaboration since two or more undertakings will have a higher combined market share and, thus higher and often significant impact on the market, which may also encourage the remaining undertakings on the market to invest in sustainable development.
However, there are also some disincentives for undertakings to enter into agreements with other undertakings to achieve sustainability goals. The current legal framework on cartels in the EU is rather focused on the economic impact of agreements, and increased price is seen as harmful for the consumer. Thus, unless other quantifiable benefits are arising from the agreement that outweighs the negative effect of increased prices, the agreement will most likely be declared unlawful.36
Furthermore, undertakings do not always have the incentive to enter into such coordination with other undertakings, since cartels are considered to have the most severe harm on the market and consumers, and if caught, the participants may face hefty fines or, even in some jurisdictions, criminal charges.37 Therefore, while undertakings may have good intentions when coordinating
policies and sharing information with another company, they might not be willing to risk the competition authority finding that the anticompetitive effects outweigh any environmental benefits and thus imposing charges on the participants.
Lastly, one could argue that instead of making it easier for undertakings to cooperate to achieve environmental goals, the same results could be realised by ‘forcing’ them to do so through imposing direct regulation. However, research has shown that voluntary agreements between undertakings can create more benefits since they allow the undertakings to adapt to the new fast-changing
34 G Piscitelli and A Gerbrandy, ‘The Sustainability Dilemma in Competition Law’ (2019) 8
ECDPM.
35 G Monti and J Mulder, ‘Escaping the Clutches of EU Competition Law: Pathways to Assess
Private Sustainability Initiatives’ (2017) 42 European Law Review, 636.
36 Competition Committee, ‘Horizontal Agreements in the Environmental Context’ DAF/COMP
(2010) 39.
37 T Ferrando and C Lombardi, ‘EU Competition Law and Sustainability in Food Systems:
Addressing the Broken Links’ (Fair Trade Advocacy Office, 2019).
http://www.responsibleglobalvaluechains.org/images/PDF/FTAO_-_EU_Competition_Law_and_Sustainability_in_Food_Systems_Addressing_the_Broken_Links_20 19.pdf accessed 29 March 2020, 15.
10 environmental issue.38 While direct regulation may be more efficient means of achieving results in
for example setting limits for pollution and protecting rare natural resources (biodiversity or endangered species), there are also a number of disadvantages which could be better dealt with initiatives by the undertakings themselves.39 Such disadvantages include, for instance, lack of
sufficient information by the regulators; undertakings operating on the relevant market usually already obtain the professionals with better information on how to deal with environmental issues on the market.40 In addition, direct regulation on environmental matters is dependent on the
enforcement by the competent authority, and in case of lack of sufficient resources, the enforcement may not be sufficiently efficient.
3. More economic approach to Article 101(3) TFEU
Ultimately, the goal of competition law has been the essential guiding tool to the assessment of competition policies, and for the purpose of this thesis, Article 101 TFEU. As found in the previous chapter, in general, environmental and sustainability should have their place in competition policy, and the Treaties actually set an obligation for the competition authorities to consider them.
Furthermore, if environmental factors are not considered in the competition assessment, the ultimate goal of the Union competition policy, the welfare of the consumers, cannot be guaranteed in the future. Nevertheless, the Commission has interpreted the concept of consumer welfare in a narrow way which hinders the possibility to consider environmental and sustainability efficiencies under Article 101(3) TFEU exemptions. This interpretation of the concept of consumer welfare is what has sparked the debate on the Union’s competition policy goals and the interpretation of the rules, and the main point of this debate is that the Commission’s interpretation is far too narrow.41
However, how did the Commission come to this more economic approach of consumer welfare in its cartel law enforcement, and how can this be seen in the application of Article 101(3) TFEU? This ‘more economic approach’ will be further analysed in this chapter since it is essential to understand in order to see what it entails for environmental and sustainability agreements under the cartel exemption rules.
38 Kingston (n 17). 39 Kingston (n 17). 40 Ibid.
41 ‘Competition Law and Sustainability: Addressing the Broken Links’ (Competition Law and
Sustainability Conference, Paris 2019); Sustainability and Competition Policy: Bringing Two Worlds to Enable a Fairer Economy’ (Conference, Brussels 2019).
11 The Commission has not given an official and specific definition for the concept of consumer welfare, which has led to ambiguity and different interpretations of it. However, the Commission’s preferred approach to it can be detected from its policy papers on the competition policy
assessment. The Commission’s more economic interpretation of the term seems to be in line with the OECD definition, which states that ‘[c]onsumer welfare refers to the individual benefits derived
from the consumption of goods and services. In theory, individual welfare is defined by an
individual’s own assessment of his/her satisfaction, given prices and income. Exact measurement of consumer welfare therefore requires information about individual preferences.’42 Furthermore, the
OECD glossary suggests that consumer welfare is measured by consumer surplus, meaning the excess from the price paid compared to the price the consumer is willing to pay. The Commission has advocated this approach in its Guidelines; it has recognised that consumer welfare should also incorporate considerations on quality, innovation, choice and surplus in terms of price.43 This is a
narrow approach which focuses on economic efficiencies and benefits for the consumer in the short term, and it has been argued that a broader calculation of consumer interests should measure consumer welfare. For example, Holmes suggests that term welfare in this context should be re-evaluated.44 He argues, as found in the previous chapter that welfare is a much broader concept
encompassing the well-being and health of people, not just including welfare in economic terms, but also having enough food to eat, having a clean and safe environment to live etc.45 Consumer
welfare concept is also dependent on consumer preference, and it may not be easy to set a clear definition for this since it varies between different groups of people. However, consumers definitely have broader interests than purely economic once.46 A number of legal professionals have argued in
favour of this broader consumer welfare model, with the main argument being that consumers indeed have more preferences than just the short term economic ones.47 In addition, further
42 ‘Glossary of Statistical Terms: Consumer Welfare (OECD)
https://stats.oecd.org/glossary/detail.asp?ID=3177 accessed 30 May 2020.
43 Guidelines on Article 101(3) TFEU.
44 S Holmes, ‘Climate Change Is an Existential Threat: Competition Law Must be Part of the
Solution and Not Part of the Problem’ (2020) 0 Journal of Antitrust Enforcement 1.
45 Ibid.
46 K Cseres, ‘The Controversies of the Consumer Welfare Standard’ (2007) 3 The Competition law
Review.
47 A few examples are Holmes (n 44); Or Brook, ‘Struggling with Article 101(3) TFEU: Diverging
Approaches of the Commission, EU Courts, and Five Competition Authorities’ (2019) 46 Common Market Law Review 121; T Ferrando and C Lombardi, ‘EU Competition Law and Sustainability in Food Systems: Addressing the Broken Links’ (Fair Trade Advocacy Office, February 2019)
http://www.responsibleglobalvaluechains.org/images/PDF/FTAO_-_EU_Competition_Law_and_Sustainability_in_Food_Systems_Addressing_the_Broken_Links_20 19.pdf accessed 29 March 2020; K Coates and D Middelschulte, ‘Getting Consumer Welfare Right:
12 damages on the environment will have a direct negative effect on the consumers and their welfare, since it will affect the resources needed to produce to products and services in order to sustain the welfare in the future.
The Commission adopted this approach as a result of modernisation of competition policy in 2004. First, Regulation 1/200348 was introduced, which decentralised the enforcement of the EU
competition rules and changed the notification system to one where the undertakings self-assess whether there has been an infringement of competition law, and if so, whether the criteria for the exemption rules are met.49 This Regulation granted a new role to the NCAs, as the majority of
Article 101 and 102 TFEU cases have since been assessed at the national level. This meant that an increasing power was granted to the Member States to shape the EU competition policies, and the Commission was concerned that the new enforcement system would lead to differences in
interpretation of the rules. Therefore, the Commission issued and reformed several policy papers which aimed to give clarification and guidance on the assessment of Article 101 TFEU cases and at the same time avoid the fragmentation in the decisions of the NCAs.50 Namely, the Commission
Guidelines on the applicability of Article 101 TFEU to horizontal agreements51 as well as
Guidelines on the application of Article 101(3) TFEU (formerly 81(3))52 are essential tools for the
understanding of Article as well as the Commission’s preferred approach to it, since the wording of the Article itself is rather narrow, and a number of factors are left unclear.
Another attempt of the Commission to avoid differences in decisions, which could potentially lead to legal uncertainty, was to limit its approach to the scope of Article 101(3) TFEU. The
Commission shifted its approach to the assessment by introducing more economic tools for the
The Competition Law Implications of Market-driven Sustainability Initiatives’ (2019) 15 European Competition Journal 318; C Townley, ‘Which Goals Count in Article 101 TFEU?: Public Policy and Its Discontents’ (2010) 9 European Competition Law Review; Julian Nowag, ‘Environmental Integration in Competition and Free-movement laws’ (Oxford University Press 2017).
48 Council Regulation (EC) 1/2003 of 16 December 2002 on Implementation of the Rules on
Competition Laid Down in Articles 81 and 82 of the Treaty [2003] OJ L 1/1.
49 Commission of the European Communities, ‘Commission Staff Working Paper Accompanying
the Communication from the Commission to the European Parliament and Council: Report of the Functioning of Regulation 1/2003’ COM (2009) 206 final, para 36.
50 O Brook, ‘Struggling with Article 101(3) TFEU: Diverging Approaches of the Commission, EU
Courts, and Five Competition Authorities’ (2019) 56 Common Market Law Review 121.
51 Guidelines on Article 101 TFEU. 52 Guidelines on Article 101(3) TFEU.
13 calculation of the efficiency gains.53 The Commission established this in its new Guidelines on the
assessment Article 101(3), which states that the object of the Article is ‘to provide a legal
framework for the economic assessment of restrictive practices and not to allow application of the competition rules to be set aside because of political considerations.’54 Furthermore, the
Commission emphasised, when introducing this new approach, the need to assess economic benefits under Article 101(3) TFEU, and public policy considerations were given no room or importance. The adoption of this approach supports the argument that the main aim of the competition rule is the enhancement of consumer welfare; thus, the efficiencies produced by an agreement should
contribute to this.55 In turn, the interpretation of harm was also narrowed down since the
Commission considers an agreement to be harmful if the consumer welfare has been reduced. 56
The Commission adoption of an economic interpretation of this uses calculations on market impact and economic efficiencies to determine the effect on the consumers and their welfare.57 Therefore,
while enhancement of consumer welfare is at the heart of Article 101(3) TFEU assessment, the concept of ‘consumer welfare’ in this case is interpreted in a narrow sense, only constituting economic welfare.
The Commission’s approach is, as already stated, rather narrow compared to a general
understanding of the concept of consumer welfare which leaves room for more non-economic interests. This narrow approach, first of all, means any non-economic goals, also often referred to as public interests, can only be taken into account if they are also listed as one of the Union’s
objectives, and they fulfil the four conditions of Article 101(3) TFEU.58 Secondly, the efficiencies
need to be ‘translated’ into economic terms, since their cost value should be able to be calculated in monetary terms, which may essentially lead to some non-economic efficiencies left out from the scope, since they may not be easy to ‘translate’. Therefore, this seems to suggest that the obligation to integrate environmental policies discussed in the previous chapter, does, in principle, have room under this Article as well. This would require clear and useful tools for the valuing environmental efficiencies, which will be further discussed below. Lastly, efficiencies that create more economic
53 Guidelines on Article 101(3) TFEU, para 5; Commission, ‘Whiter Paper on Modernisation of the
Rules Implementing Articles 85 and 86 of the EC Treaty (Modernisation Whiter Paper)’ COM (1999) No 99/027.
54 Modernisation Whiter Paper (n 53), 23. 55 Guidelines on Article 101(3) TFEU, para 33.
56 A C Witt, ‘The European Court of Justice and the More Economic Approach to EU Competition
Law – Is the Tide Turning?’ (2019) The Antitrust Bulletin 172.
57 Claassen and Gerbrandy (n 7).
14 burden than benefits to the consumers lead to the case not falling within the scope of Article 101(3) TFEU exemption. First, some fundamental efficiencies, such as benefits for public health or
environment, may be left out.59 Secondly, these non-economic interests that are left out are usually
of such nature that benefit the society as a whole. Thus, have a significant beneficial impact, to fall out of the scope of the assessment of the exemption. The Commission has also been criticised for its focus solely on the need to enhance consumer welfare through these efficiencies.60 Nevertheless, it
is not necessarily the focus on consumer welfare itself problematic, but rather the economic interpretation of the concept.
Environment and sustainability objectives fall under the concept of non-economic interests. Such objectives may, however, generate indirect benefits to the consumers through, for example, production of more efficient machines which need less energy which consequently leads to
decreased costs for the consumers. Such efficiencies can easily be transposed into monetary terms, however, usually environmental benefits do not directly or indirectly produce costs savings. The Guidelines currently lack guidance on this matter; how could environmental efficiencies that produce benefits in general, not directly related to the market, for example in the form of reduced emissions or better allocation of resources, be depicted in such economic terms that they can be considered under Article 101(3) TFEU assessment. In principle, there are two ways for
environmental factors to be taken into account in the evaluation. Either, it may be possible to calculate the environmental benefits of the agreement or environmental harm. For the purpose of this thesis, calculating environmental benefits is more relevant, since the assessment of the next chapter focuses on considering environmental benefits as efficiencies under Article 101(3) TFEU criterion.
Calculating environmental benefits is, however, challenging due to their non-economic
characteristics, which means that no direct market and, thus, market prices exist for environmental goods.61 There is no one way to calculate such price and the value that should be placed on
environmental factors. This topic is somewhat debated, and some even argue that no value should be assigned for such factors.62 Due to this debate and the complexity of valuing environmental
sources and services, this thesis will not go further into evaluating different techniques and their
59 Ferrando and Lombardi (n 37). 60 Witt (n 56).
61 Kingston (n 17), 177. 62 Ibid., 179.
15 possible usefulness for competition assessment. However, it is important to note that several
environmental valuation techniques exist, and these could provide a solution to the problems that the economic approach places for environmental agreements as discussed above.63 For the purpose
of Article 101(3) TFEU assessment, a value should be put on the environment in order for it to be included in the consideration under the current commission interpretation. A way of valuing such efficiencies is based on consumer preference; how much would the consumers be willing to pay if there was a separate market for these environmental factors?64 Such willingness to pay could be
identified by analysing the already existing behaviour of consumers, by evaluating the past behaviour of consumers and analysing changes in demand that are related to environmental services, for example increasing demand of a product that is more environmentally friendly compared to less environmentally friendly products on the same market.65 The consumers’
willingness to pay could also be valued by asking them directly through surveys.66 Since it was
established that competition policy ultimately aims to serve consumers through the promotion of consumer welfare, analysing the consumer preferences on this matter seems to be a fit and
appropriate tool. These different tools for translating environmental interests mean that even under the current Guidelines of the Commission, environmental and sustainability consideration could indeed be taken into consideration. Nevertheless, due to the self-assessment system, undertakings are required to conduct a complex economic assessment for which they may not have sufficient resources. The Commission should, thus, explore these different tools mentioned above, and provide more precise and detailed guidance on this issue.
4. Article 101(3) TFEU – assessment of environmental and sustainability agreements
As stated above, cartels are considered to be unlawful. In the EU primary law, the cartel prohibition is laid down in Article 101 TFEU. The first paragraph of the Article states that ‘all agreements
between undertakings, decisions by association of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention,
63 See Kingston (n 17) for a more in-depth analysis of different techniques; S Lavrijssen, ‘The
Protection of Non-Competition Interests: What Role for Competition Authorities after Lisbon?’ (2010) European Law Review.
64 Kingston (n 17), 182.
65 This method is referred to as ‘hedonic pricing method’, see N Rosenboom, ‘How does article
101(3) TFEU case law relate to EC guidelines and the welfare perspective?’ (2013) Amsterdam: SEO Economisch Onderzoek Research Paper
https://pure.uva.nl/ws/files/2117743/139880_410358.pdf accessed 20 June 2020; See also Kingston (n 17).
16
restriction or distortion of competition within the internal market’ are prohibited. In other words,
the Article prohibits cooperation agreements which either have the object to restrict competition or an appreciable negative effect on competition on the relevant market. If the agreement is concluded to be infringing Article 101(1) TFEU, it will be declared void in accordance with the second
paragraph of the same Article. However, as already established, the focus of this thesis will be on the third paragraph of Article 101 TFEU. This paragraph sets down the criteria which need all to be fulfilled in order for an agreement to be exempted from the prohibition laid down in the first
paragraph. As found in the previous chapter, the Commission has adopted an economic approach to the assessment of competition rules and, especially Article 101(3) TFEU. In this chapter, the
Commissions approach to the assessment of the exemption criteria will be analysed and thus, to what extent the more economic approach hinders environmental agreements being exempted. The primary sources for this analysis are the third paragraph of Article 101 TFEU and the Guidelines on the assessment of Article 101(3) TFEU.
4.1. Article 101(3) TFEU
Despite the strict prohibition laid down in Article 101(1) TFEU, there is still the possibility that it is exempted under Article 101(3) TFEU, however in this case, contrary to the assessment of paragraph one, the burden of proof is on the undertakings.67 This paragraph states that any agreement between
undertakings, associations of undertakings or concerted practices ‘which contribute 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.’ In other words, this paragraph sets out four cumulative
conditions that all need to be met by conduct falling under the first paragraph of the same Article, in order to be granted an exemption. First, the agreement has to lead to either cost-efficiency gains, by contributing to the improvement of production or distribution, or qualitative efficiency gains
through, for example, technical progress. The second condition, the ‘pass-on to consumers’ requirement, means that a fair share of the benefits must be passed on to the direct or indirect consumer of the product or service in question. Thirdly, the agreement must be indispensable, i.e. there is no other less restrictive way to achieve the efficacy objectives set in the agreement. Lastly, the agreement in question must not eliminate competition, which includes actual and potential
17 competitors on the relevant market. Each of these requirements will be further discussed below, how the Commission’s interpretation of these may affect the inclusion of agreements with
environmental goals. The emphasis is in the first two criterion – efficiency gains and passing on the benefits to the consumers – since the interpretation of them has the most significant impact on environmental and sustainability efficiencies produced by agreements being considered as not to fulfil the criteria of Article 101(3) TFEU. In addition, the analysis will focus on the Guidelines from 2004 and the Commission interpretation after the modernisation, since as established in the
previous chapter, this marked a turn in the Commission’s approach.
4.2. First condition - efficiency gains
The first condition for the exemption is essential for assessing environmental agreements under Article 101(3) TFEU since one of the main questions that need to be answered is whether
environmental benefits are considered to produce efficiency gains in the form of improvement of production or distribution of goods, or promotion of technical or economic progress. Since the Article itself is not specific enough, the Guidelines on Article 101(3) TFEU provide clarity on the interpretation of the ‘efficiency gains’ concept. The benefits that could occur can be categorised into three categories; direct economic benefits, indirect economic benefits and non-economic benefits.68
Direct economic benefits are benefits that will directly occur on the consumer of the product or service through either cost efficiencies or qualitative efficiencies.69 Cost efficiencies include, for
instance, lower prices, developed (better) products, increased choice and more efficient production leading to decreased production costs per product.70 Qualitative efficiencies could constitute of
better quality, developed products or other technical progress.71 The examples of efficiencies for
this category listed in both Article 101(3) and the Guidelines are only examples and do not provide an exhaustive list.72 Indirect economic benefits occur in two-sided markets, meaning that benefits
occurring for the participant undertakings as well as consumers, will also produce benefits for other undertakings, not operating on the same market. Lastly, non-economic benefits include efficiencies that do not directly produce economic benefits in terms of the price or characteristics of the product, for example, benefits on environment, culture or national interests.
68 Brook (n 50); Rosenboom (n 65), 9.
69 Guidelines on Article 101(3) TFEU, paras 65 and 69. 70 Ibid., paras 64 to 68.
71 Ibid., paras 69 to 72. 72 Ibid., paras 59 and 63.
18 The Guidelines further provide information on the nature of the efficiencies and the standards for proving that such efficiencies will result from the agreement. First, such efficiencies need to be measurable and verifiable.73 Secondly, the undertakings need to be able to substantiate the
efficiencies occurring to show a clear link between the efficiencies and the agreement.74 Lastly, the
undertakings must be able to show how and when the efficiencies will occur.75 The requirement that
the efficiencies need to be appropriately demonstrable contributes to ensuring the consistent and transparent application of Article 101(3) exemptions and is also essential for the purpose of the weighing of the anticompetitive effects to the efficiencies.76 While the Guidelines state that
‘hard-core’ restrictions - conducts that by their very nature harm competition as defined in the Guidelines
for Article 101(1) TFEU – are unlikely meet the conditions for exemption,77 the Court has ruled that
in principle, any agreement regardless of whether it restricts competition by object or effect, may be granted an exemption.78
Thus, in principle, Article 101(3) TFEU allows environmental benefits to be considered under the exemption criteria if the participant undertakings can show that they fall under one of the possible efficiency categories. However, as established in the previous chapter, the Commission has taken a more restricted stand on this. The Commission has interpreted that any benefits arising from the cooperation needs to be shown in economic terms and they must contribute to the enhancement of consumer welfare.79 When it comes to environmental or sustainability agreements, environmental
benefits in the form of increased energy efficiency, better waste management, decreased use of raw materials or decreased volume of waste could be considered as technical or economic progress, and in precedent decisions by the Commission and the CJEU from before 2004 such efficiencies have been accepted.80 However, this category is more complex, since consumers have different
73 Ibid., paras 51 to 55. 74 Ibid., para 55. 75 Ibid., para 51.
76 Confirmed by the Court in Joined Cases C-56/64 and 58/64 Établissments Consten SARL and
Grundig-Verkaufs-GmbH v Commission of the European Economic Community [1966]
ECLI:EU:C:1966:41.
77 Guidelines on Article 101(3) TFEU, para 46.
78 Joined Cases C-56/64 and 58/64 Établissments Consten SARL and Grundig-Verkaufs-GmbH v
Commission of the European Economic Community [1966] ECLI:EU:C:1966:41 para 110. See also
Case T-168/01 GlaxoSmithKline Services Unlimited v Commission of the European Communities [2006] ECR II-2981, para 233.
79 Witt (n 59).
19 understandings on what constitutes improved quality.81 Moreover, because of the changed approach
of the Commission, which has been inconsistent with the previous decisions, a problem arises when such efficiencies need to be proved, i.e. quantified. Non-economic interests, such as the
improvement of environment or other benefits on the society as a whole are not always economic in nature and, thus proving their value in economic terms may be difficult, even impossible.82 The
undertakings must show how the environmental efficiencies generated ‘constitute an objective
economic benefit’.83 However, in as concluded in the previous chapter the issue here is not
necessarily proving that consumers will find these efficiencies to benefit them, but rather how to prove them and quantify them in order to assess whether they outweigh the anticompetitive effects.
Another problem of the interpretation of Article 101(3) for considering a wider range of efficiencies is the time frame requirement. One of the requirements for the standards of proving the efficiencies is showing the time frame in which the efficiencies will occur. The same problem arises here as above regarding the issue of how to prove rather than whether efficiencies will arise. Easily quantifiable economic benefits, such as effects on price or quality, usually occur in the short term, but efficiencies on the environment often occur in the future, and can thus be more challenging to prove.84 Such agreements are also likely to lead to higher prices on consumers which is a negative
effect that is realised immediately, while the efficiencies that could potentially outweigh these anticompetitive effects may only occur in the long run. One of the tools mentioned in the previous chapter for quantifying environmental objectives - assessing the consumers’ ‘willingness to pay’ – could be a way to solve this ‘problem’. This could be done with a questionnaire where the
consumers of the relevant products would establish whether they are willing to pay a higher price for a more sustainable product, even when the environmental benefits would not be directly visible for them. This would be a matter of case-by-case analysis and no standard guidelines on consumers’ willingness to pay could be set, since the interests on sustainable products differ from one consumer group to another.
Lastly, in regards to the relevant market on which these benefits shall occur in order to be considered under this requirement, the Commission states in its Guidelines that ‘efficiencies
generated by the restrictive agreement within a relevant market must be sufficient to outweigh the
81 Nowag (n 47).
82 Coates and Middelschulte (n 32), 320. 83 Guidelines on Article 101(3) TFEU, para 57. 84 Coates and Middelschulte (n 32), 320.
20
anticompetitive effects produced by the agreement within that same relevant market.’85 This
indicates that the efficiencies need to occur on the same market as the anticompetitive effects, and only that market is relevant for the assessment. However, the General Court (GC) has ruled in the past that ‘regard should be had to advantages arising (...) not only for the relevant market (...) but
also (...) for every other market on which the agreement in question might have beneficial effects.’86
However, since this judgement, the Commission has addressed this in its Guidelines, where it states that each relevant market shall also be considered in the assessment, as long as the consumers on the market where anticompetitive effects occur and the market affected by the benefits are
substantially the same.87 When it comes to environmental benefits, they are often of such nature that
they do not occur directly on the relevant market for the produced good or service. For instance, reduced emissions or decreased use of raw materials produce overall benefits for the environment and society that cannot be linked to a specific market. Therefore, environmental benefits are not just difficult to translate into economic terms, but even when the economic value can be shown, such efficiencies may be left out if they cannot be linked to the relevant market.
To conclude, when looking at the primary law itself, the wording of Article 101(3) precisely states that the agreement must contribute ‘to improving the production or distribution of goods or to
promoting technical or economic progress’. Only the last one is related to economic efficiencies,
but the rest are broad categories under which environmental and sustainability improvements could, in principle fit. Therefore, the wording of the primary law, would, in principle, leave room for a wider interpretation which would also take the non-economic consideration into account. As concluded in the previous chapter, a solution to solve this problem of Commission’s narrow interpretation of the first criteria is to review the Guidelines to include clearer tools on how to substantiate environmental and sustainability objectives of agreements.
4.3. Second condition – fair share for consumers
The second condition for Article 101(3) TFEU to apply, is that ‘fair share’ of the efficiencies should be passed on to the consumers. This condition also plays a significant role in whether environmental benefits can be accepted under Article 101(3) TFEU since such benefits that usually
85 Emphasis added. Guidelines on Article 101(3) TFEU, para 43.
86 T-86/95 Compagnie Maritime Belge v Commission, ECR [2002] II-1011, para 343. See also:
Case T-168/01 GlaxoSmithKline Services Unlimited v Commission of the European Communities [2006] ECR II-2981, para 248.
21 benefit the society as a whole need to be demonstrably visible for the direct consumers as well. This condition requires the interpretation of two concepts; first, what does the concept ‘consumer’
encompass, and second, how should ‘fair share’ be determined. According to the guidelines on Article 101(3) TFEU, the concept of ‘consumer’ includes ‘all direct or indirect users of the
products covered by the agreement, including producers that use the products as an input, wholesalers, retailers and final consumers, i.e. natural persons’.88 The concept of consumer
encompasses both undertakings as well as private persons.89 Direct consumers include the direct
customers of the parties concerned, and indirect consumers refer to subsequent users of the product who may end up purchasing the product in question through a wholesaler who is a direct customer of the participants. The essential element here is that there has to be a link between the product or service and the consumer.
The Commission’s interpretation of the concept of consumer still leaves some questions
unanswered. The Guidelines emphasise the need for a connection between the consumer and the product itself since it is stated that the consumer needs to be a user of the final product. This
interpretation is rather narrow and may produce difficulties in the assessment, since, first of all, this group of consumers may not always be directly identifiable.90 In addition, this interpretation would
mean that only the actual users of the relevant product/services would be taken into account, thus not considering benefits occurring to a wider group of people or the society as a whole. This ‘society as whole’ concept is actually mentioned in the Guidelines, and it is acknowledged that agreements may lead to benefits for a wider group of people than just consumers of the product, for example through a more efficient allocation of resources leading to fewer products.91 However, it is
not clarified in the Guidelines, to what extent and how such efficiencies will be taken into account in the assessment, and it seems that they would not be accepted as efficiencies compensating for the negative effects, and positive effects on the actual consumers are more important. Accepting
efficiencies that occur to a wider group of people than solely the users of the products would be especially beneficial when it comes to environmental agreements. Such environmental efficiencies may directly occur for the relevant consumers; however, they are usually not targeted to benefit individual consumers of the product, but more likely to be the type that benefits society as a whole. An example of this is the CECED case where an agreement between washing machine
88 Emphasis added. Guidelines on Article 101(3) TFEU, para 84. 89 Ibid., para 84.
90 Holmes (n 44).
22 manufacturers was exempted in the grounds that the standards for washing machines set in the agreement would reduce the energy consumption of the machines, thus resulting into lower water and energy costs for the consumers.92 Nevertheless, environmental agreements usually target a
wider group of people, for example, through the development of products or productions that lead to lower emissions. Efficiencies occurring from such cooperation between undertakings would not be passed on to the direct users of the products only.
The time period during which the benefits shall be visible to the consumers is also a factor that needs to be determined. This is a similar problem as under the first condition, where the time frame for the efficiencies needs to be assessed. First of all, in regards to the concept of consumer, the Commission acknowledges that for some efficiencies to occur on the consumer, some time may be needed. Therefore, future consumers may also be included in this category, but the value of the future efficiencies must be discounted in this case.93 From the Guidelines, it is not sufficiently clear
from the Commission’s interpretation, to what extent are future consumers being taken into account. Whilst the Guidelines recognise that some efficiencies may only be visible in the future, the future efficiencies are not given the same value as efficiencies occurring immediately. However, the current consumers still need to receive benefits, and there may only be a small time lag between the agreement and the efficiencies occurring. This interpretation does not take into account
efficiencies that will be produced in the long term for future generations; for example,
environmental agreements are usually of such nature. Such agreements often produce short term negative effects on competition, for example through increased price, but may have fundamental benefits for future generations. It is, however, understandable that considering such efficiencies produce difficulties, since the quantification of them may be difficult, if not impossible. It might also be difficult to predict the extent of the benefits in the future. However, the discounting of such future efficiencies also creates problems due to the uncertainty of future environmental damages. Nevertheless, if consumers are the ones being protected by these policies, it could be assumed that they would have an interest in protecting future generations as well. This would be a moral question to answer, and the ‘willingness to pay’ tool would be a useful tool to determine whether the
consumers are inclined to pay a higher price for a product or service that will generate efficiencies further in the future.
92 CECED (Case IV.F.1/36.718) Commission Decision 2000/475/EC [1999]. 93 Guidelines on Article 101(3) TFEU, paras 87-88.
23 Furthermore, the concept of ‘fair share’ of the efficiencies is interpreted in the guidelines meaning that the efficiencies passed on the consumer should in the least outweigh any possible negative effects resulting from the anticompetitive conduct.94 Therefore, the assessment of the fulfilment of
this condition requires a ‘balancing’ of the cost and qualitative efficiencies with the negative effects on the consumers. As a result of this test, the consumers should not be ‘worse-off’ after the
agreement, but outweighing the effects should at least lead to a neutral outcome.95 Whilst the
Commission has emphasised the importance of cost efficiencies, the fact that the agreement would lead to a higher price to the consumer does not automatically imply that the agreement will produce more anticompetitive effects than benefits. The Commission has confirmed that a higher price can be compensated by, for example, healthier and increased competition on the market, leading to a better and wider variety of products offered to the consumers.96 This condition, also, does not imply
that each and every consumer should receive this fair share of the benefits, nor it is necessary to show that a share of each identified efficiency is passed on.97 The Court has confirmed this in
Asnef-Equifax, where it stated that the relevant factor here is the effect on all the consumers in the
relevant market, not the effect on each individual consumer.98 However, the current Guidelines are
not specific enough on this. While they do not directly state that only economic benefits are considered as fair share, the interpretation of the first condition implies that this is the case. It is under the first condition that it is determined which efficiencies are being considered, and as it was established, environmental factors have little room to be considered.
In conclusion, the second condition under Article 101(3) TFEU raises significant issues in regards to sustainability and environmental objectives. The explanation in the Guidelines thus leaves some questions open regarding the second condition of Article 101(3) TFEU. The relevant consumer group, whilst in principle consist of a wide variety of consumers, from direct to indirect ones, it still focuses on the benefits passed on the ones that are linked to the product itself, but does not consider wider benefits potentially occurring to the society as a whole. Furthermore, the interpretation of the concept of consumer, whilst it does take into consideration possible future consumers, it does not
94 Ibid., para 85. 95 Ibid., para 104.
96 Synthetic Fibres (Case IV/30.810) Commission Decision 84/380/EEC [1984] OJ L207/17, paras
39-40.
97 Guidelines on Article 101(3) TFEU, paras 86 and 87.
98 Case C-238/05 Asnef-Equifax, Servicios de Información sobre Solvencia y Crédito SL,
Administración del Estado v Asociación de Usuarios de Servicios Bancarios (Ausbanc) [2006] ECR
24 leave sufficient room for actual long-term benefits to be taken into account. Therefore, the current interpretation of the concept of consumer is rather limited, and it should be reviewed whether sustainability objectives generating from an agreement which serve the society as a whole, but do not benefit individual consumers of the product in question, could be considered as sufficient to fulfil this second criterion. Another significant issue arising, that should be solved in order for this criterion better take environmental agreements into account, is the issue of to what extent future consumers should be considered. As found in the second chapter, if competition policy has the objective of consumer welfare, sustainability concerns need to be considered as well in order to ensure continuous welfare for future generations.
4.4. Third and fourth conditions - indispensability and no elimination of competition While, as already established, the first and second conditions seem to produce the most important issues when it comes to the assessment of environmental considerations under Article 101(3) TFEU, the third and fourth condition in this context will also be briefly discussed to show why they do not need further examination. The third condition of Article 101(3) establishes that the
agreement must be indispensable to achieve the objectives, meaning that there is no other less restrictive option to achieve the benefits identified under the first and second condition. Agreements including conducts that by their very nature, restrict competition are unlikely to be found to be indispensable.99 Nevertheless, this requirement does not mean absolute indispensability, but rather
the agreement must be reasonable.100 The Guidelines provide a two-step assessment process for
determining whether this condition is met. First, the agreement as a whole must be ‘reasonably
necessary in order to achieve the efficiencies.’101 This means that the undertakings shall present a
link between the efficiencies and the means of achieving them and the objectives of the agreement, and there should be no other more practical way to achieve these objectives. The second step looks at each individual restriction to competition, which also needs to be ‘reasonably necessary for the
attainment of the efficiencies.’102 If in the absence of one specific restriction, the efficiencies were
significantly reduced, the restriction itself should be considered as indispensable.103 Essentially, the
99 Guidelines on Article 101(3) TFEU, para 79.
100 J Steenbergen, ‘Proportionality in Competition Law and Policy’ (2008) 35 Legal Issues of
Economic Integration 259, 261.
101 Guidelines on Article 101(3) TFEU, para 73. 102 Guidelines on Article 101(3) TFEU, para 73. 103 Ibid., para 79.
