Greening Competition Law?
But also — DSA, Trade, Hungary, European Political Community
Hi! This is Monday, 5 June 2023, and here’s the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and Linkedin.
The Briefing
On 1 June, the European Commission adopted revised versions of two block exemption regulations (BERs) and new guidelines on horizontal agreements, i.e. agreements between competing companies. Among other measures, the Commission is giving companies more scope to reach agreements when they pursue sustainable development objectives. In so doing, the Commission is attempting to remove a thorn in the side of companies trying to reach agreement on environmental issues.
EXPLAINER • Competition law prohibits agreements between companies as a matter of principle, thus relying on Adam Smith's intuition that "members of the same industry seldom meet for pleasure or amusement, but their conversation invariably ends in a conspiracy against the general interest or in an agreement to raise their price".
Competition law checks for proportionality between the restriction of competition of an agreement and the efficiencies it may bring. However, many types of agreement can have positive effects and are subject to exemptions, which are listed in block exemption regulations.
These exemption regulations create a safe harbour for certain agreements, such as those concerning R&D or specialisation agreements. In addition to these regulations, the Commission has guidelines on horizontal restrictions that guide the administrative practice of DG Competition, the European watchdog for the free market.
The Commission's package contains numerous technical changes: on the calculation of market shares, on agreements between joint ventures and parent companies, on marketing agreements and on the exchange of information between companies. Overall, a large number of changes have been made to bring European legislation into line with the case law developed by the European Court of Justice.
COMPETITION V CLIMATE • One change is of particular interest to observers of legal and climate issues. The Commission has introduced a new chapter devoted to "sustainability agreements" in its guidelines on horizontal restrictions.
Sustainability agreements are agreements between companies aimed at meeting sustainable development objectives. Some high-profile initiatives have been sidelined by competition law rules on cartels.
The Net Zero Insurance Alliance (NZIA) — which brings together insurers committed to the climate as part of the Glasgow Financial Alliance for Net Zero (GFANZ) — recently lost many members because of the legal risks of an anti-competitive agreement. The fact that such agreements are illegal in principle has ended up holding back the ambition of climate initiatives and irritating climate campaigners.
ON THE MOVE • After four years of evaluation, the Commission has just created a safety net to ensure that competition law does not act as too great a brake on sustainability agreements between companies, by adopting a broad definition of the sustainable development objectives that companies are likely to pursue.
However, the new rules are far from a blank cheque — there will always be a check on the proportionality between the restriction of competition and the sustainability objective pursued.
The new rules will apply from 1 July 2023. In the UK, the Competition & Markets Authority (CMA) is working on a proposal similar to that of the European Commission.
In Case You Missed It
DSA • Thierry Breton, European Commissioner for the Internal Market, is planning to travel to California in two weeks to carry out 'stress tests' on major digital platforms such as Google, Twitter and Meta.
The purpose of the trip will be to assess their preparedness for the new content rules laid down in the Digital Services Act.
These checks are not binding, but are intended to ensure compliance with the regulations, which come into force in August — any breach of the DSA which will result in substantial fines (up to 6% of worldwide turnover).
During his visit, T. Breton also intends to talk to Sam Altman, CEO of OpenAI, about the EU's efforts to establish an AI Pact, which will take the form of a set of voluntary principles that companies must adopt. This will be done in anticipation of the adoption of the AI Act — this time binding — which will aim to address the potential risks associated with artificial intelligence.
PALM OIL • On Wednesday 31 May, according to the FT, Indonesia and Malaysia said they wanted to put the brakes on their negotiations on a potential free trade agreement with the European Union (EU) until they obtain better conditions for their small palm oil producers. These two countries together account for 83% of the world's palm oil production, with the EU being their third largest export market.
Fadillah Yusof, Deputy Prime Minister of Malaysia, denounced the "punitive" nature of the ban on imports of products derived from deforestation, in particular palm oil and its derivatives, which recently came into force in the EU. Airlangga Hartarto, Indonesia's Coordinating Minister for Economic Affairs, added that this European regulation on deforestation favours "large companies and multinationals", which are best placed to cope with the administrative costs involved in adapting to European law.
For its part, the EU replied that the regulation did not constitute discrimination and was compatible with the rules of the World Trade Organisation (WTO), since European producers are also affected.
HUNGARIAN PRESIDENCY • From July to December 2024, Budapest will hold the rotating presidency of the Council of the European Union. However, the European Parliament has adopted a resolution calling into question Hungary's ability to hold this position with a large majority.
As a reminder, the Presidency of the Council of the EU is a rotating presidency that changes every six months.
The European Parliament “questions how Hungary will be able to credibly fulfil this task in 2024, in view of its non-compliance with EU law and the values enshrined in Article 2 TEU”, and calls on the Council to take adequate measures.
EPC • The second summit of the European Political Community (EPC) was held on the 1st of June in Moldova, a country which Russia continues seeing as a part of its own sphere of influence. Excluding Russia and Belarus, forty-seven European Heads of States and the leaders of EU institutions discussed joint actions for peace and security, with a focus on the Russian invasion of Ukraine, among other issues such as energy resilience, connectivity, and climate change.
The Commission’s President, Ursula von Der Leyen, announced a new plan to bring the Western Balkans closer to the EU. The plan foresees greater investments from the EU in supporting structural reforms, economic integration, and greater connectivity with the European single market. This initiative comes at a time of revived tensions in the region.
The normalisation of relations between Armenia and Azerbaijan have been discussed in a closed format between their respective presidents, together with the leaders of France, Germany, and the European Council. “This meeting was a good preparation for the next meeting that will take place in Brussels on 21 July” declared Charles Michel in his conclusive remarks.
This second summit is interpreted as a sign of growing success for the EPC, seen as a forum where cooperation between EU and non-EU countries can be fostered in a faster and more flexible way. A third EPC summit should be held on 5 October 2023 in Spain, with the UK taking over in Spring 2024.
What we’ve been reading
Back in February, Adam Thierer marshalled evidence that the GDPR has had a stifling effect on innovation in Europe, ensuring that the future of technology will remain American and Asian.
In the LRB, Neal Ascherson reviews Christopher Clark’s Revolutionary Spring: Fighting for a New World 1848-1849.
This week’s newsletter is brought to you by Marwan Ben Moussa, Gaëtan du Peloux, Gautier Parthon de Von, Augustin Bourleaud and Maxence de La Rochère. See you next Monday!