The Centre for Competition Law and Policy (CCLP) under the aegis of ILSR, GLA University organised a guest lecture on 'Sustainability and Competition Law' on March 26, 2022. The speaker for the event was Ms. Lucinda Cunnigham. Lucinda is a Barrister called to the English Bar (Lincoln's Inn, 2019). She is currently working as a Référendaire at the UK’s Competition and Appeal Tribunal (the "CAT"). Lucinda has experience in competition, regulatory, public, environmental and human rights law, having completed pupillage at chambers in London and in-house at the UK's Financial Conduct Authority. Lucinda is a member of the UK's Competition Law Association and is currently co-authoring a report to the International League of Competition Law on sustainability and competition law.
Prior to this, Lucinda read the BCL at Lady Margaret Hall, University of Oxford. Lucinda has held various roles in UK Government including, at the Law Commission of England and Wales (part of the Ministry of Justice) as a Research Assistant to a Law Commissioner, and for a number of years at the UK's Payment Systems Regulator, the world's first economic regulator of payment systems assisting their General Counsel to develop competition policy.
The outcome report of the event is as follows:
Speaker: Ms. Lucinda Cunningham
Moderator: Ms. Nidhi Singh
Prof. Dr. Avinash -
Sustainability gives competition law a new perspective – a newer dimension to Competition Law. Historically, the law was designed to deal with the problems of the time at which it was formulated across jurisdictions- America, European Union. The fundamental objective goal of Competition law though remains flexible to the time, which today leans towards sustainability in the market due to the shift from shareholder to stakeholder approach. Especially, in India, the debate on the same needs to be discussed as opposed to the current discussion on the efficiency of Competition Law.
Ms. Lucinda:
Competition law moves with societal change and demands of everyone- globally and nationally. Thus, is evolving across jurisdictions. The question remains that how sustainability and competition law fits in into the definition of consumer welfare and efficiency of market. Climate change greatest threat to humanity and how everyone get work together and come up together to find a pragmatic approach towards the climate crisis is the challenge.- which leaves the question as to whether competition law itself can be the solution to the crisis?
The seminar aimed to cover the problem, the attribute as to how competition law comes in in the context of sustainability and the recent developments in EU and the UK competition Law.
The problem is the climate crisis - A climate emergency, sea level rising, glaciers melting, increased temperature, unprecedented loss and extinction of species and 7 million people killed due to air pollution worldwide among others. The UN has highlighted that it is a threat to universal survival and only 10 years left to prevent irreparable loss to the human race
On this backdrop, the seminar sought to understand the notion of ‘Sustainability’. Sustainability and sustainable development are often used inter-changeably. The most common definition is the UN 1987 which aims at international cooperation across governments. It refers to meeting the needs of the present without comprising the need of the future and stands on 3 pillars – environmental, economic and social sustainability and all of them make up sustainability.
Environment – preserving environment for humans and natural resources and impact of business on natural capital
Economics- understanding that human need to enjoy i.e lives which provide them social, economic and technical progress to have prosperous lives. Business needs to be economically efficient
Social – human impact of decisions – ensuring that people have access to basic things of life- food, clean water and air, life free from disease so that they can continue to live and learn Hence the depletion of renewable resources packaging waste and other damage to the environment should be reduced as today, shareholders are thinking about actively exercising stewardship.
Balancing all of these 3 pillars – means economic growth is still possible and is supported by these goals in a sustainable manner. UN’s involvement aids in integrating these 3 pillars into sustainable development goals- 17 goals. They do not provide the pathway of achieving those goals and nor do they impose any consequence for not achieving these goals – thus no responsibility on corporations.
There has been a real shift in sustainability over the few years- especially from the 1960s i.e environment movement after war to today that environment considerations are important to a goal of reducing environmental impact. In the 1980s was about sustainability though undefined. In the last couple of years- business are being carbon neutral, the Paris agreement –restoring the impacts and creating a circular economy and understanding the limitation of the earth vis-a-vis the resources and moving towards regenerative positive impacts on the environment. Thus, there has been a move from environment to social-economic and health issues and ESG regime.
In lieu of sustainability and economics, Mr. Lucina stated that in a capitalist society business should make the most efficient product though there is a clear overlap between the two efficiency i.e optimal usage of natural resources as business houses leave out social costs i.e. externalities especially in classical economy. To promote everyone’s well- being social welfare should be maximised but social costs should be reduced as otherwise the market will produce low cost goods but with large scale negative externalities which in turn exasperate social inequalities, source cheaper labour cost etc. While Efficiency, refers to sustainability being productive and dynamic in nature to achieve optimal level of usage of natural resources. Consumer Welfare, on the other hand, relates to the value that consumer’s perceive out of the product.
In 2011 World Bank, it was estimated that around 44 trillion USD is the benefit that can be achieved from natural resources like wetlands and forests. Further, the price of carbon emissions can also be quantified. Thereby the commodification of sustainability can aid in the process of it being efficient. Thus, the answer to mitigating social costs lies in public policy and not regulation as it is slow to pass and has gaps and this is where competition law comes in.
Competition Law acts both as a sword and as a shield in reference to sustainability. As the former it prevents unsustainable practices such as degradation of the environment while as the latter, it can become an enforcement measure as against the environment interests of the society. Though, targeted enforcement can be negative for enforcement. Businesses can be shielded from competition enforcement on the basis of doing something good and getting a positive outcome.
It can be undertaken in three forms – Cooperative Agreements, Abuse of Dominance and Mergers and Acquisitions.
Cooperative agreements such as joint purchase agreements, sharing of work space. Though not every activity contributes to sustainability and automatically comes under competition law albeit it can do so indirectly factor into the competition policy. Competition can cause business houses to use cheap resources and cheap products thus reduce sustainability as a process in itself.
Abuse of dominance- special responsibility in EU that it there position does not impair competition- so as a sword it can be used to challenge big market players or a as shield to, protect companies that has a bin fide intent to protect environment – can also limit third parties to create sustainable environment products leading to inefficiency within the business houses and marketplace – here competition law can be used as tool to encourage business to move towards more sustainable process and sevices
Competition law can be used as defense against a dominant company – were it decides to charge high prices to accommodate the high cost to produce sustainable products – saving electricity and landfills which can be quantifies and creating efficiency in charging a higher price as it incorporates the social cost . Charge customers differently – promote differential pricing for sustainable products as a justification for such pricing to promote innovation and research
Mergers and acquisitions – defense where two companies in a market having a high market share can be justified on the basis that there are sustainability benefits that can be beneficial for society and competition policy can put into such a policy to promote it. E.g. EU already seeks to promote green innovation – so it can be used to ensure that the merger does not produce less green products and achieve greener outcomes
Thus, competition law does apply to sustainable agreements such as environment agreements unless it does not place any individual obligation on parties or parties only commit loosely to contributing to a sector-wide environmental target or if the agreement stipulates environmental performance with no effect on production.
An agreement to phase out unsustainable products results in higher prices for consumer and thus likely to restrict competition and reduce consumer preferences unless it comes under the exemption.
Lastly, in regards to the recent development in Competition Law and Sustainability in the EU, Ms. Lucina referred to the EU commission Draft Horizontal guidelines which carter to sustainability within the competition regime in light of green deals. The UK’s Competition and Market Authority also made efforts to support the transition to sustainability by a law carbon economy for the year 2021-2022 and has established a sustainability taskforce as well