Balancing competition and sustainability for India Premium

Climate change disturbs the supply side of the market leading to a mismatch between supply and demand, which in turn impacts consumer demand and the overall economy.

Markets are the centre of the economy, evolving from the barter system to today’s digital marketplaces. The forces of supply and demand are primarily responsible for price determination and consumer preferences. Climate change disturbs the supply side of the market leading to a mismatch between supply and demand, which in turn impacts consumer demand and the overall economy.

In 2023, the Securities and Exchange Board of India introduced a framework for reporting actions towards sustainability by corporates. The revised framework for the Business Responsibility and Sustainability Report requires companies to account for their value chain’s environmental impact, enhancing transparency, combating greenwashing, and ensuring that sustainability benefits permeate through the value chain.

Globally, competition authorities have expressed doubts about competitors’ need to neutralise the potential disadvantages of being a pioneer of change, and also reach sustainability goals. Many authorities were hesitant to embrace sustainability considerations fearing that competitors were looking for an excuse to collude. However, authorities must focus on encouraging companies to pursue sustainability goals jointly and assess cooperation where enterprises can demonstrate the objective of a sustainability goal.

Japan’s Anti Monopoly Act approach towards the realisation of a ‘green society’ were guidelines brought to help private businesses navigate themselves in horizontal collaborations. These guidelines suggest that most activities seeking environmental sustainability are unlikely to restrict competition. These activities have pro-competitive effects that might result in consumer benefits.

The European Commission recently published the draft of revised guidelines on horizontal agreements which now has a specific section on sustainability agreements. This will only raise concerns if they entail serious restrictions of competition in the form of restrictions by object, or produce appreciable negative effects on competition contrary to Article 101(1). The objectives are to address climate change, reduce pollution, limit the use of natural resources, and promote resilient infrastructure and innovation.

In Singapore, the Environmental Sustainability Collaboration Guidance Note aims to provide greater clarity to businesses on how the Competition and Consumer Commission of Singapore (CCCS) will assess collaborations pursuing environmental sustainability objectives. It provides businesses with relevant information so they can safely collaborate in pursuing environmental sustainability objectives without harming competition.

In the Netherlands as well, a cartel prohibition does not apply if the competitive process is not significantly impeded or if sustainable production offers consumers benefits. The Netherlands Authority for Consumers and Markets has announced a more permissive enforcement position where it states that in certain cases adopt a broader definition of agreements that do not restrict competition and count environmental benefits to society overall.