The balance of environmental, social and governance (ESG) goals is becoming increasingly important in the agenda of companies, in Brazil and abroad. The number of ESG initiatives that require some degree of commercial strategy alignment or cooperation with competitors in order to achieve sustainability gains is also growing. These are situations that would classically raise concerns about collusive behaviour, concerted practices or the exchange of sensitive information.
For competition authorities, the issue is also on the agenda. The Administrative Council for Economic Defense (Cade) has recently discussed, in the scope of a merger filing, aspects to be considered when assessing agreements amongst competitors aiming at generating gains in environmental, social or governance sustainability.
This debate is more advanced in the European Union, where competition authorities of several countries have already been discussing, for some years, the competitive implications of issues related to ESG initiatives.
The European Commission has recently adopted guidelines allowing cooperation between competitors in initiatives of this nature, provided that certain conditions are met – including that the collective benefits arising from the ESG agreements outweigh the harms associated with the restraint of competition arising from such agreements.
The European Commission’s approach is aligned to some extent with that of the competition authorities in Austria and the Netherlands, where antitrust immunity for sustainability agreements has already been established based on an assessment of the positive sustainability effects and negative effects of the agreements on competition.
In the Netherlands, the positive effects were deemed to outweigh the negative effects in a case involving an agreement amongst certain beverage manufacturers and supermarket chains to stop using plastic handles in beverage multipacks, as well as in a case involving garden centers curtailing suppliers who use illegal pesticides.
In the United States, however, the stance on the subject has been more conservative. The Federal antitrust authorities have been indicating that there will be no special treatment for ESG initiatives that could be in violation of the antitrust law. This tends to discourage coordinated sustainability initiatives and has already led several insurers to depart from a United Nations-convened alliance created to encourage carbon emission reduction (the so-called Net-Zero Insurance Alliance).
CADE's Tribunal discussed ESG collaborations for the first time in June, when reviewing a merger filing involving the establishment of a joint-venture by agricultural commodities trading companies with global operations. The companies intend to create a platform to facilitate the standardization and management of sustainability measurement data at different stages of the food and agricultural supply chain.
Some of the Commissioners stressed that Cade's role is to protect competition. For them, by incorporating issues as environmental, social or governance sustainability gains in the analysis of the effects of transactions under their review, Cade could be overstepping its competence. Others argued that, although the ESG agenda is relevant, it should not influence the agency's technical and objective analysis. Other Commissioners, however, adopted an approach closer to that of some European competition authorities, pointing out that it is important for Cade to establish directives or guidelines for cases involving some sort of business cooperation mechanism among competitors for ESG initiatives.
The different approaches adopted abroad and the still incipient debate at Cade lead to legal uncertainty. Considering potential competitive risks when structuring ESG initiatives is, therefore, critical. Companies need to be even more careful and perform a detailed assessment to identify risks and adopt measures to mitigate them.