The ACCC has issued a draft guide for business regarding the application of Australian competition law to sustainability collaborations. This follows many overseas antitrust regulators that have issued guidance materials tackling the application of competition law to sustainability initiatives. The ACCC's draft guide follows leading regulators by drawing out examples of low-risk and higher-risk sustainability initiatives, with a particular Australian overlay regarding the availability of the ACCC's authorisation process as a mechanism that companies can use to obtain statutory immunity.

In this alert we briefly outline:

• The intersection between competition law and sustainability and why it matters;
• The draft ACCC guide – what it says and how it differs from guidance in other jurisdictions; and
• What's next and why companies may increasingly encounter competition issues in pursuing sustainability initiatives.

Sustainability collaborations and competition law – what is all the fuss about?

The application of competition law to collaborative sustainability initiatives is not a new issue. Antitrust regulators in many jurisdictions have been grappling for some time with the question of what role (if any) competition law has to play in relation to our response to climate change and biodiversity loss. Competition law is obviously not the solution to this global challenge. However, there is recognition that it must contribute by not standing in the way of collective action.

We have written about this issue in an earlier article: Is competition law a roadblock to sustainability initiatives? For those who are particularly passionate, please see our long-form article Loosening the handbrake: Competition law and sustainability initiatives (2023) 31 AJCCL 187. In short, customers, shareholders, policy makers and the community are applying increasing pressure on companies to reduce their carbon footprint and deliver outcomes that are good for the environment. In many cases, companies will have the ability and incentive to do so alone – including to differentiate themselves from their competitors. However, there will be instances (particularly where deeper cuts are being sought to drive toward net zero), where businesses will need to collaborate and take action together in order to achieve meaningful outcomes.

There has been an awareness that companies are understandably hardwired to avoid working in partnership with their competitors (something competition regulators and lawyers have encouraged). The concern is that this may inadvertently be having a chilling effect on sustainability initiatives when companies need to be exploring all potential opportunities.

Overseas regulators have taken a variety of steps in response, ranging from general guidance materials, informal project specific guidance and sustainability 'sandboxes', through to formal guidelines and regulatory safe harbour mechanisms. The ACCC's guide is a further response that adds to the global antitrust spotlight on collaborative sustainability initiatives.

Sustainability collaborations and Australian competition law – a closer look

The ACCC's draft guide provides helpful guidance to business by following a well-trodden path. The draft guide:

• Recognises that climate change and biodiversity loss represent a special category of threat to the environment and the economy that requires action. It also acknowledges situations in which it may not make sense for a company to act alone – e.g. because it can't achieve a sufficient outcome on its own, or there is a free rider risk.
• Provides some high level examples of sustainability initiatives that are likely to create a cartel conduct risk (e.g. product transition arrangements), as well as examples of low-risk sustainability collaborations. This includes joint research, selected information sharing, and broad non-binding industry-wide emissions reductions targets.

Unsurprisingly, the ACCC leans heavily on its formal authorisation process, which enables the ACCC to permit conduct that may otherwise breach the Act where there is a net public benefit (i.e. the benefits of the collaboration outweigh the detriment). The authorisation process offers significant benefits to companies including full statutory immunity where authorisation is granted. It has also been used on numerous occasions where environmental benefits have been raised:

• Product stewardship schemes (e.g. projects to manage the lifecycle and disposal of products such as batteries).
• Joint purchasing or supply arrangements.

The ACCC champions the authorisation process, including comparing the certainty that it offers against overseas regulators that have only been able to provide guidance about how they intend to exercise their enforcement powers. The ACCC also calls out its ability to provide interim authorisation relatively quickly, and its expertise in relation to certain sustainability-related agreements where it may be able to adopt a streamlined process.

Businesses nevertheless need to be mindful that the authorisation process is not perfect. It can take time, it is public, and there is limited scope for flexibility or adjustments (parties need to be clear about exactly what they are seeking to have authorised). While it offers certainty, there are also features of the process that may be off putting to businesses.

ACCC sustainability guidance - what comes next?

The ACCC is consulting on its draft guide and is welcoming comments until 26 July 2024. As the nation works toward net zero and target deeper cuts to emissions, we expect that companies will need to look further afield to achieve change. This may require moving beyond initiatives that deliver benefits while also differentiating from competitors, to collaborative activities that drive industry-wide change. If that is the case, regulatory guidance will play an increasingly important role.

The intersection between competition law and sustainability is rapidly evolving and we are increasingly working with clients to test for, and manage, risk regarding industry-led sustainability initiatives. Get in touch with our experts if you have questions about the draft guide, or collaborations you are considering that may deliver environmental outcomes.