The Commerce Commission of New Zealand (NZCC) has issued Collaboration and Sustainability Guidelines in recognition that many businesses are considering initiatives to respond to climate change and nature loss. When businesses collaborate it can affect competition, but not all types of collaboration will harm competition or breach the law. The Guidelines set out the factors that the regulator will consider when looking at competitor collaboration when that collaboration has sustainability objectives.

Collaboration and Sustainability Guidelines: A closer look

The Guidelines seek to encourage helpful forms of collective action between competing entities by summarising the key concepts contained in the Commerce Act 1986 (Commerce Act) and setting out how businesses can mitigate competition law risk in their course of collaboration. With reference to the key concepts that underpin the Commerce Act, the Guidelines are intended to help businesses self-assess their collaborative activities and understand how to overcome any antitrust law obstacles that may arise in pursuit of sustainability initiatives.

The Commission encourages lawful collaboration between businesses to help them achieve sustainability objectives.

Such encouragement is welcome and the intention of the Guidelines is laudable, but unfortunately they provide little by way of practical help. There are a couple of problems:

• Competition law and analysis of competition effects is often complex. Effective legal compliance in most businesses in contrast, depends on simplicity, some 'bright lines' about what can be done and what cannot. The Guidelines talk about things which are 'less likely' and 'more likely' to be issues. They give some inclusive 'examples' of 'some factors' which 'may' be 'relevant' to deciding whether collaboration is 'likely' to be a problem. The regulator is not taking any risks to encourage collaboration!
• The Guidelines suggest a menu of questions to be considered by businesses contemplating collaboration for sustainability purposes, any of which answered affirmatively lead to the suggestion to take legal advice. This is sound, but the first question asks whether collaboration involves actual or potential competitors – that will almost always be the case in any kind of industry initiative.

We have previously discussed the application of competition law to sustainability initiatives in Australia in Is competition law a roadblock to sustainability initiatives? More recently, MinterEllison partners, Haydn Flack and Paul Schoff covered the topic in Loosening the Handbrake: Competition Law and Sustainability Initiatives (2023) 31 AJCCL 187), arguing the ACCC could provide proactive guidance to better educate business about the status of sustainability arrangements under Australian competition law. The risk of chilling pro-sustainable collaboration is real. For example, a recent survey by Linklaters found out of more than 500 sustainability professionals in US, UK and Europe, 60% are put off collaborating on ESG issues due to fear of breaking competition laws. The chilling effect has likely been exacerbated by recent activity in the US by some Republicans in Congress to resist corporate ESG efforts being based on the threat of antitrust action.

In Australia, the chilling risk has been recognised in a speech by the ACCC Chair on 6 December 2023:

There are many types of sustainability collaborations that will not raise competition concerns. It is critical that these legitimate collaborations are not hampered by a fear of competition law risk or confusion about how competition law operates. If legitimate collaborations are not proceeding, this would mean that private sector resources – which often represent the majority of capital and expertise – are being unnecessarily prevented from contributing to society's transition. This delays environmental progress and increases the burden on governments and taxpayers.

The Chair has acknowledged that a key role for the ACCC in relation to sustainability, 'importantly, is ensuring that our competition and consumer law is not operating as an unnecessary barrier to businesses pursuing legitimate sustainability objectives'.

Guidelines to help thaw the chilling risk in Australia

Guidelines offering clear practical guidance and ideally some well marked safe harbours - in Australia would represent a step forward and we expect the ACCC may follow the lead of other international regulators and release some form of proactive guidance in 2024. In addition, in our view, it should consider closely whether there are other forms of 'encouragement' which could be provided to facilitate valuable collaboration on sustainability initiatives which do not raise material competition issues. In particular, a streamlined and ideally confidential process to allow potential collaborations to be cleared by the ACCC could be explored. For example, in New Zealand there is an exception to the cartel prohibition for collaborative activities analogous to the joint venture exception in Australia. In New Zealand, unlike Australia, there is a statutory process to give parties reassurance by way of 'clearance' for collaborative activity that risks being classed as a cartel. The Commerce Act sets out a 30 working day statutory timeframe in which it must either give or decline to give clearance. The fact that it is a public (not confidential) process seems to have depressed demand for it – only one such application appears on the public register.

A streamlined clearance process?

A well-designed confidential process is worth exploring, perhaps analogous to the ACCC's existing informal merger clearance process. This process allows confidential triage and pre-assessment to occur relatively quickly, or a more formal process allowing notification to stand unless objected to by the Commission, as is the case for some collective bargaining. Such an approach would not only provide comfort to participants, but it would allow the ACCC to see the types of collaborative activities being undertaken, similar to the regulatory / sustainability 'sandbox' initiatives pursued in other jurisdictions. That approach may assist the ACCC in developing improved guidance materials over time and enable it to consider if there is scope for an appropriately targeted 'class exemption' that would give a standing exemption for certain arrangements. Providing permitted guardrails with effective guidance, or a clearance process for businesses will give much needed certainty to encourage greater efforts in sustainability collaboration.

If you would like to discuss these developments, please do not hesitate to contact us.