7 Takeaways for Businesses from the ACCC’s Draft Guide on Sustainability Collaboration

Why is sustainability collaboration a problem?

Sustainability collaboration can involve competition law risk – for example, competitors agreeing to transition away from certain products or inputs (a potential supply or acquisition restriction) or agreeing on a levy (a potential price fix). “There is a fine line between ensuring compliance with competition laws and removing unnecessary barriers to sustainability initiatives that a misapprehension of competition law risk can cause.”[2]

The ACCC is alert to sustainability goals being used artificially as a “green veneer” for anti-competitive conduct. However, the ACCC also recognises the need to remove competition law as an impediment to collaboration to achieve “legitimate sustainability objectives”.[3]

Authorisation: a pathway for sustainability collaboration

The focus of the Guide is on authorisation. Authorisation is a voluntary process for businesses to seek an exemption from the ACCC and removes the risk of legal action for breaches of competition law.[4] It enables the ACCC to consider the net public benefits from collaboration, including likely environmental benefits, and whether this outweighs any possible public detriment (the net public benefit test).[5] Authorisations are public, with opportunities for consultation with affected stakeholders.[6] Conditions can also be imposed by the ACCC before granting an authorisation. With a quarter of authorisations referring to environmental considerations, the Guide provides further information for businesses seeking to collaborate on that basis.[7]

7 Key Takeaways

1. Is your sustainability collaboration low risk? The Guide identifies factors and gives examples that businesses can use to self-assess whether their sustainability collaboration is low or high risk. Low risk collaborations may not need to go through authorisation or may qualify for other exemptions. This will need to be considered on a case-by-case basis. Factors which can inform businesses in making this assessment include: [8]

2. You can have preliminary discussions about sustainability collaborations without ACCC approval – with appropriate protocols (particularly governing the making of any agreements or exchange of sensitive information). You should ensure that any agreements are conditional on legal advice and any necessary authorisation and not share any commercially sensitive information until authorisation is in place. Given there are heightened competition law risks from competitor interaction or meetings, a set of rules or ‘competition protocols’ should be in place to ensure discussions remain on track. Even so, competition law advice is recommended to avoid straying into anti-competitive areas, including "attempts".

3. Sustainability benefits accepted by the ACCC are broad. If an authorisation is necessary for a sustainability collaboration, businesses can mention a range of benefits which include:[9]

decreasing greenhouse gas emissions
increasing the level of recycling
safe disposal of potentially harmful end-of-life products
diversion of waste from landfill
increasing generation of, or transition to, renewable energy
biodiversity conservation
reducing plastics use

However, these benefits must result from, or be caused by, the sustainability collaboration.

4. Substantiate sustainability benefits. Explain why the collaboration is necessary to achieve the sustainability goals, either at all, or to achieve them at a higher rate and sooner. The ACCC assesses the strength of claimed benefits by looking at whether the benefits would occur, at the same pace and volume, without the sustainability collaboration. Businesses should ensure the benefits are specific and have a real chance of occurring.[10]

Example: A soft plastic recycling taskforce was set up by three major supermarkets. The ACCC recognised that business collaboration was likely to lead to greater efficiencies, lower costs and greater volumes of recycling compared to an individual supermarket without the taskforce.[11]

Example: A regional waste collection service was established by several local councils. Arguments by the councils that the service would reduce greenhouse gases and lead to an uptake in green technology was rejected by the ACCC, as private sector providers could achieve similar public benefits without the service.[12]

5. Quantifying environmental benefits and detriments is encouraged but not mandatory. As part of an authorisation application, the Guide encourages parties to quantify public benefits and detriments especially if it is supported with explanations of its reasoning and assumptions.[13] The Guide suggests this may include estimates of a reduction in greenhouse gas emissions or the cost from the incorrect disposal of products.[14] In practice, the ACCC acknowledges quantification is not always possible, in which case it will qualitatively assess the weight that should be given.[15]

Example: Several liquefied natural gas (LNG) producers applied to arrange scheduled maintenance and shutdowns. While the ACCC was unable to quantify the effects of increased LNG production, it acknowledged the importance of LNG production to state economies and the net-zero energy transition. This illustrates the ACCC will, as appropriate, take a qualitative and holistic approach to claims which cannot be quantified.[16]

6. Incorporate safeguards to minimise competition law risks. Businesses that apply for authorisation should mitigate any lessening of competition or other public detriment from the sustainability collaboration. This improves the chances that the ACCC grants authorisation and reduces the risk that the ACCC will impose conditions.[17] Examples of safeguards may include:[18]

restricting information sharing to what is necessary for the collaboration
participation in the collaboration is voluntary
the collaboration does not remove incentives for participants to achieve better sustainability outcomes
transparency such as meeting minutes[19] and progress reports[20]

7. Streamlined authorisations are an option. Authorisations can take 6 months (or more) to complete.[21] The Guide introduces a streamlined procedure for assessing authorisations which do not contain significant detriments and deal with an industry that the ACCC has previous experience with. In such instances, there is only one (instead of two) rounds of consultation.[22] Examples where the streamlined procedure may apply include:[23]

Joint renewable energy buying groups
Industry stewardship schemes which impose a levy for the recycling or safe disposal of products
Joint tenders by local councils to underwrite investment in new waste disposal or recycling facilities

This should be distinguished from an interim authorisation, which is not a new feature and is typically only granted for urgent collaborations under limited circumstances.

Conclusion

The Guide sends a signal that the ACCC is “available and willing” to discuss sustainability collaborations with businesses.[24] Over time, we expect there to be an increase in the types and number of businesses which enter into sustainability collaborations. In the meantime, the Guide is a useful restatement of the existing law which will assist businesses in understanding the ACCC’s criteria for a successful authorisation.

Low Risk	High Risk	Example uses 2
Businesses are not competitors (in the sale or acquisition of goods or services). Example: a clothing retailer, an electronics chain and a fast food franchise agree to jointly fund independent research about reducing the environmental impact from brick and mortar stores.	Businesses are prevented from competing effectively Example: building manufacturers jointly select which inputs they will use in order to make their businesses more sustainable. This may affect competition for the supply of building materials and amount to an agreement to restrict acquisition of the input.
Businesses make decisions independently. Example: a business independently decides to sign up to non-binding industry targets to reduce emissions and independently decides how they will meet such targets.	It is more difficult for new businesses to start competing, or makes it hard for existing businesses to expand. Example: clothing retailers agreeing to refuse dealing with suppliers that do not use standardised recycling processes. This may make it more difficult for suppliers which do not have standardised recycling processes to expand their business, or it may raise the costs of entry for new suppliers to enter the market.
Does not involve the sharing of commercially sensitive information. Example: 2 businesses discuss a recent public announcement by one of them that it will transition to more environmentally sustainable inputs. After the discussion, the other business decides to explore whether it can shift to a more environmentally friendly input. The businesses make independent decisions and don’t exchange commercially sensitive information.	It involves the sharing of commercially sensitive information. Example: businesses that are part of an industry stewardship scheme imposing an industry levy aimed at the safe disposal of end-of-life products exchange pricing information and agree on the amount that they will pass onto customers.
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