Colluding to Go Green: Global Antitrust Institute Comments on the Austrian Federal Competition Authority’s Draft Guidelines to Exempt 'Sustainability Agreements'

Abstract

The Austrian Federal Competition Authority (AFCA) invited comment on its draft guidelines for exempting “sustainability agreements” from condemnation under Austrian competition law. That law recently changed, allowing a specific exemption for otherwise anticompetitive horizontal agreements that yield efficiencies which substantially promote a sustainable or climate-neutral economy. This comment discusses some issues the AFCA should address in determining whether to grant such an exemption. First, it is difficult to assess claims of very distant out-of-market efficiencies, ones that are only tenuously related to the relevant market, accruing to “the general public” rather than to consumers in the market where the anticompetitive effects of a horizontal agreement arise, or to closely related or adjacent markets. Claimed gains in sustainability or climate neutrality are difficult for a competition authority to verify or quantify, absent expertise in environmental effects. Moreover, determining whether such claimed environmental gains are agreement-specific, such that the horizontal agreement is "indispensable" to realizing the claimed gains, should be carefully considered. In particular, the AFCA should account for the unilateral incentive effects of tax policy, such as the Austrian Parliament's recent passage of a carbon tax, in determining whether claimed environmental gains from a collusive sustainability agreement are indispensable to achieving those gains. A pollution tax induces unilateral incentives to shift energy sources or to innovate to avoid the tax, without the additional inducement of collusive pricing. A broad-based tax is likely to be the more efficient way to internalize externalities conceived in the "European Green Deal" than is a collusive agreement whose anticompetitive effects in a relevant market are akin to an excise tax imposed narrowly on consumers in that market, yielding potentially large deadweight losses. Adding an anticompetitive price increase on top of a pollution tax could introduce something analogous to a "double-marginalization" problem to the market, resulting in incremental pollution abatement that could be excessive.

Keywords: horizontal agreement, competition policy, efficiencies, sustainability, greenwashing, carbon tax, European Green Deal, Austrian Federal Competition Authority

JEL Classification: D0, D43, D61, D78, H21, H23, K21, K42, L24, L41, L51, O32, O38, Q38, Q51, Q55, Q58