In December 2024, the Australian Competition and Consumer Commission (ACCC) published its long-awaited sustainability guidance – the final guide on sustainability collaborations for businesses (the Guide). The release of the Guide follows the consultation draft published in July 2024. We explained the draft version’s focus on authorisation and seven key takeaways in this article.
The Guide signals to businesses that competition law is not a ‘barrier’ for sustainability collaborations which benefit the public.[1] It also reinforces the ACCC’s 2024/25 enforcement priority to address competition concerns in relation to environmental claims and sustainability. In this update, we identify 5 new learnings for businesses intending to collaborate to achieve sustainability outcomes.
A recap
The Guide focusses on the authorisation of sustainability collaborations. Authorisation is a voluntary process for businesses to seek an exemption from the ACCC to remove the risk of legal action for breaches of the Competition and Consumer Act 2010 (Cth). Authorisation allows the ACCC to consider the net public benefits of the collaboration and whether this outweighs any possible public detriment. We explained in our earlier article that:
- the ACCC accepts a broad range of sustainability benefits;
- substantiating each benefit is important;
- quantifying benefits and detriments is encouraged but not mandatory;
- incorporating safeguards, such as implementing restrictions on information sharing between competitors or likely competitors, can minimise competition law risks; and
- a streamlined process is available for authorisations that (i) involve an industry that the ACCC has experience with; (ii) are consistent with past ACCC determinations; and (iii) involve no significant detriments.
The Guide also clarifies that businesses can have preliminary discussions about sustainability collaborations without ACCC approval:
If there is a risk that the collaboration may involve cartel conduct or other anti-competitive practices, any agreement must be clearly conditional on it being authorised before coming into force and the parties should not share commercially sensitive information with each other until authorisation is in place.[2]
5 New Learnings
1. Is your sustainability collaboration low risk?
The Guide identifies new factors and examples since the draft version that businesses can use to self-assess whether their sustainability collaboration is low or high risk. Low risk collaborations may not need to go through authorisation or may qualify for other exemptions. This will need to be considered on a case-by-case basis. Businesses can consider the following updated factors when making this assessment:
| LOW RISK | HIGH RISK |
| Businesses are not competitors (in the sale or acquisition of goods or services).
Example: a clothing retailer, an electronics chain and a fast-food franchise agree to jointly fund independent research about reducing the environmental impact from brick and mortar stores. |
Businesses are prevented from competing effectively.
Businesses should seek legal advice on collaborations that may involve:
Example: building manufacturers jointly select which inputs they will use in order to make their businesses more sustainable. This may affect competition for the supply of building materials and amount to an agreement to restrict acquisition of the input. Example: a group of building contractors agree to only bid for tenders which require sustainability criteria and they will offer the same set of sustainability commitments in tender bids. This may restrict competition for the supply of building services and amount to an agreement to rig bids in a tender process. |
| Businesses make decisions independently.
Example: businesses can share certain supply chain activities provided this is voluntary, independent decisions continue to be made in relation to each of the participating businesses and the businesses do not use the increased visibility to coordinate conduct. For example, when set up correctly, businesses could agree to share warehousing space, or to split loads using the same transport company, to reduce the environmental footprint. Example: a business independently decides to sign up to non-binding industry targets to reduce emissions and independently decides whether and how it will meet such targets, continues to independently set its own prices ,and independently determines who it will and will not deal with or what it will or will not invest in. |
It is more difficult for new businesses to start competing, or makes it hard for existing businesses to expand.
Example: clothing retailers agreeing to refuse dealing with suppliers that do not use standardised recycling processes. This may make it more difficult for suppliers which do not have standardised recycling processes to expand their business, or it may raise the costs of entry for new suppliers to enter the market. |
| Does not involve the sharing of commercially sensitive information.
The Guide confirms that businesses can generally share information that is:
Example: 2 businesses discuss a recent public announcement by one of them that it will transition to more environmentally sustainable inputs. After the discussion, the other business decides to explore whether it can shift to a more environmentally friendly input. The businesses make independent decisions and don’t exchange commercially sensitive information. Example: businesses independently choose to:
|
It involves the sharing of commercially sensitive information.
Businesses should not share information relating to:
Example: businesses that are part of an industry stewardship scheme imposing an industry levy aimed at the safe disposal of end-of-life products exchange pricing information and agree on the amount that they will pass onto customers. Example: businesses share information about the price they are prepared to pay for a new sustainable input and the terms on which they will acquire the input from that supplier.
|
| Businesses are free to innovate, buy from or sell to whom they choose. | Example: Large agricultural businesses issue a guidance note to suppliers about best practices for calculating greenhouse gas emissions, but also reach an agreement that they will stop dealing with a supplier if they do not adopt the guidance note. This may prevent suppliers who do not adopt the guidance note from competing effectively with suppliers who do. |
| Businesses that do not have significant market presence, such as small businesses or low market shares.
This factor is additional to the draft guidance. |
2. Protocols governing sustainability collaborations are “good practice” and help to mitigate risk
Protocols set out the purpose for the collaborative activity, and the scope and limits of the activities that are jointly undertaken. They can help avoid breaching competition law. The Guide provides an example of a ‘low risk’ protocol which stipulates that businesses:
- may individually or jointly conduct audits of their suppliers for modern slavery risks;
- may notify each other of suppliers that might be engaging in modern slavery practices;
- make independent decisions in relation to the information shared;
- only share information that is necessary to address modern slavery risks;
- do not convey how they will use information obtained from the audits;
- do not collaborate on decision-making;
- participate in the collaboration voluntarily; and
- do not coordinate beyond the objective of reducing modern slavery risks.
The Guide confirms that this collaboration is unlikely to raise competition concerns ‘provided the industry participants are not reaching any agreement about whether they will or will not purchase from particular suppliers and are not coordinating their conduct beyond what is necessary to achieve the objective of reducing the modern slavery risk’.[3]
3. The ACCC accepts a broad range of sustainability benefits
If a business pursues authorisation, the ACCC has clarified that the business can raise a range of benefits in addition to environmental ones, including initiatives that:[4]
- improve human rights;
- combat modern slavery
- positively impact First Nations Australians;
- save transaction costs;
- achieve economic efficiencies, such as economies of scale, scope and/or density; and/or
- increase compliance with laws such as employment obligations; or international agreements where Australia is a party.
However, businesses must be able to substantiate the sustainability benefits that will occur as a result of the collaboration.
4. The ACCC is ‘open’ to new class exemptions for sustainability collaborations
Class exemptions allow eligible businesses (within the ‘class’) to engage in the specified conduct without risk of breaching the competition law.[5] Currently, there is only one class exemption in force, covering small business collective bargaining (discussed below).
The Guide clarifies that the ACCC would consider new class exemptions for collaborations that are ‘clear and compelling’ and ‘supported by evidence’.[6] While class exemptions are ultimately approved by Parliament and take time, the potential for their use in sustainability initiatives is broad. For example, possible candidates for new class exemptions may include:
- joint renewable energy buying groups;
- industry stewardship schemes that impose a levy for the recycling or safe disposal of products; or
- joint procurement by local government to underwrite investment in new waste disposal or recycling schemes
5. Consider whether the existing small business exemption applies or a new notification is appropriate
The Guide outlines two alternative pathways to authorisation that businesses can consider:
- Existing small business collective bargaining class exemption. This exemption allows small businesses and independent contractors with turnover of less than $10 million in the previous financial year to collectively bargain (i.e., work as a group to negotiate with suppliers or customers about the supply or acquisition of goods or services). Businesses self-assess their eligibility for the exemption and submit a one-page form to the ACCC.
Small businesses covered by the exemption can share information that is reasonably necessary to collectively bargain within the terms of the exemption, but they should not go beyond this.[7] For example, small businesses covered by the class exemption might seek to:
- collaborate to negotiate with a supplier to source more environmentally sustainable products;
- jointly procure renewable energy to power their operations on more favourable terms than had they sourced the renewable energy independently; or
- collectively tender to acquire low emission freight services to transport their products.
The small businesses can share information necessary to collectively bargain within the terms of the exemption (e.g., for (c), they might share information on logistics to maximise transport efficiencies and achieve the environmental outcome), but should not share commercially sensitive information unnecessary to collectively bargain.
The existing small business class exemption does not apply to collective boycotts. Accordingly, for example, small businesses cannot rely on the existing exemption to reach agreements about which suppliers and customers they will not deal with.
- Collective bargaining or collective boycott notification. As an alternative to authorisations, businesses may considering filing new collective bargaining/boycott notifications – these are generally only available to businesses in a group if they each expect to transact less than $3 million over 12 months with the businesses they are dealing with.
A successful collective bargaining notification might allow businesses to negotiate with a customer or supplier about terms, conditions and/or prices.[8]
Both of these avenues offer legal protection significantly quicker than authorisation. The existing small business class exemption applies immediately, while collective bargaining/boycott notifications can take 14 to 60 days to apply (provided the ACCC does not object to the notification). Because collective bargaining and boycotts are high risk, we recommend seeking legal advice, including in relation to the potential application of the small business class exemption.
Conclusion
The Guide is a useful reiteration of the existing law on authorisations, class exemptions and notifications. The examples in the Guide and the Quick Guide are particularly helpful. The ACCC’s acknowledgement of a broad range of sustainability benefits in authorisations and the potential for new categories of class exemptions are welcome developments for businesses and the environment. The Guide reinforces the ACCC’s position that it is “available and willing” to engage with businesses on potential sustainability collaborations.[9]
[1] ACCC releases final guide on sustainability collaborations.
[2] ACCC Sustainability collaborations and Australian competition law – A guide for business at p.18 (the Guide).
[3] Guide at p.12.
[4] Guide at [89] and [95] and p.24.
[5] ACCC Collective bargaining class exemption guidelines at p.3
[6] Guide at [28].
[7] Guide at [67].
[8] Guide at [27].
[9] Guide at [32].
