Strengthening Sustainable Development Through EU Competition Law: A Legal and Economic Analysis of The Revised EU Guidelines on Horizontal Co-operation Agreements

Abstract

This thesis aims to examine whether Chapter 9 covering “Sustainability Agreements” in the revised EU Horizontal Guidelines and their application under Article 101(3) TFEU is effective to achieve its objectives. A structured analysis across economic, legal, and integrated perspectives is utilized for a complete evaluation. The economic analysis examines how sustainability agreements in compliance with the revised EU Horizontal Guidelines affect the state of competition and market participants’ decision-making. It revealed that such agreements initially harm competition, resulting in deadweight loss reflecting various market failures and inefficient resource allocation, which diminishes both consumer and producer surplus. Key issues identified market prices failing to reflect actual production costs, such as negative externalities, and market participants' self-interest combined with uncertainty about competitors’ actions, reducing the incentive to engage in sustainability agreements. The legal analysis examines the significance of the revised EU Horizontal Guidelines for individual exemption of sustainability agreements under Article 101(3) TFEU. It reveals that the effectiveness of the newly introduced “soft safe harbour” set forth in the revised EU Horizontal Guidelines is limited by vague conditions and its non-binding nature. Regarding the conditions for individual exemption under Article 101(3) TFEU, especially the condition of consumer’s fair share is restrictive while there is a lack of guidance on how non-economic advantages are quantified and measured. Based on the legal analysis, the revised EU Horizontal Guidelines will not significantly alter the practice of the EU Commission of exempting sustainability agreements under Article 101(3) TFEU. The integrated analysis examines how an efficient legal framework can be ensured through the inclusion of sustainability agreements. It reveals that sustainability agreements helps address the market failure identified in the economic analysis. To reduce the burden of full compensation to consumers, introducing a new sub-category of sustainability agreements labeled “environmental-damage agreements” could be beneficial to market participants and increase the incentive to enter into sustainability agreements. Moreover, quantifiable, and measurable parameters could be introduced in the form of “environmental prices” to assist market participants in assessing whether a sustainability agreement would qualify for individual exemption. Based on the above the thesis concludes that the introduction of Chapter 9 in the revised EU Horizontal Guidelines and the application under Article 101(3) TFEU are not effectively crafted to meet and realize their intended purpose.