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Introduction
Distinguished colleagues, it is a great pleasure to meet with all of you today at the 8th Meeting of High-Level Representatives of Asia Pacific Competition Authorities, convened by the Organisation for Economic Cooperation and Development.
I would like to begin by thanking our OECD hosts for organising this annual event, which the Australian Competition and Consumer Commission has regularly and enthusiastically participated in and benefited from over the years. Opportunities like these to meet and exchange experiences with international peers in person are a key part of being an adaptive, innovative competition authority that is in touch with international trends. While we each steward competition law implementation in different legal, institutional and cultural settings, exchanging knowledge and experience on common challenges and opportunities in this way strengthens our individual and collective performance.
It is an honour to open this important session on competition policy and environmental considerations. Sixty per cent of the world’s population calls the Asia Pacific home – around 4.7 billion people. Progress on economic development in this region has been outstandingly strong. Data from the United Nations Economic and Social Commission for Asia and the Pacific (or “UNESCAP” yoon-ess-cap) shows that in just a few generations, per capita GDP has risen nearly eighty-fold. On the whole people of the Asia Pacific are living longer, healthier, more prosperous lives.
This growth has also resulted in greenhouse gas emissions causing climate change, loss of biodiversity and other environmental impacts. Scientists and policy makers globally agree that these issues pose a significant threat. And the Asia Pacific is particularly vulnerable to their environmental and economic impacts.
It is clear there is a need for urgent action on environmental sustainability. While we are not environmental regulators, competition authorities around the globe have a role to play in promoting market-driven responses that support allocative, productive and dynamic efficiency in the green transition. Well-functioning markets, stimulated by the cut and thrust of vigorous competition, can offer a strong incentive for our economies and society's to rise to the triple threats of planetary heating, biodiversity loss, and air, water and land pollution, while maintaining and growing productivity and economic development.
I will now turn to how we are considering these matters Australia.
Markets transitioning to environmental sustainability - the Australian context
Australia’s international and domestic commitments for action on the environment are strengthening and diversifying. Australia is party to the Paris Agreement on Climate Change, and in September 2022 the Australian Parliament enacted the Climate Change Act, increasing the ambition of our emissions reduction targets and bringing them into domestic law. Australia is also party to the Kunming-Montreal Global Biodiversity Framework, adopted in December 2022, since when the Australian Parliament has been vigorously debating the Nature Repair Market Bill 2023. Australia is party to the negotiations for a Global Treaty on Plastics and in November 2022 joined the High Ambition Coalition to End Plastic Pollution. And Australia’s environment ministers have set a target for a circular economy – including through the harnessing of markets - by 2030.
The Australian Government is looking for ways to promote the achievement of environmental outcomes via markets. Last month, Australia’s Treasurer confirmed the net-zero transformation among priorities in the Treasurer’s respective Statements of Expectations for the Productivity Commission – the Australian government’s pre-eminent independent research and advisory body on social and economic matters - and the Australian Securities and Investment Commission.
And in the domain of competition law and policy, this August our Treasurer announced the first competition review in a decade. Among the initial issues to be considered is the net zero transformation.
All of this is important context for the ACCC.
This year the ACCC has nominated environmental sustainability among our top compliance and enforcement priorities. This is consistent with Australia’s legal commitments and policy objectives, and heightened market and community focus on environmental sustainability.
Implementing the ACCC’s sustainability priority
As a competition and consumer agency, we see ourselves as playing some key roles in relation to sustainability:
First, ensuring that consumers aren’t being misled when they decide to make purchases based on sustainability claims. Consumers can play an important role in helping us achieve net zero by supporting businesses with the lowest environmental impact. Green consumer demand drives market innovation and competition, as businesses have an incentive to invest to attract the green consumer dollar.
It is therefore critical that green claims are credible, accurate and can be understood by the ordinary consumer. This ensures that competitors who have made investments to deliver sustainability benefits aren’t put at a disadvantage by rivals making equivalent claims that are disingenuous. Greenwashing misleads consumers and manipulates fair competition, distorting incentives for business to invest.
Secondly, addressing product safety risks from the changes in Australia’s economy, to support consumer confidence in the green transition.
Thirdly, ensuring that new markets for sustainable products and services develop in competitive ways and that transitioning markets aren’t subject to anti-competitive consolidation without benefit.
As the transition to a more sustainable economy occurs, new markets are emerging. Obvious examples are electric vehicles and associated charging infrastructure, markets associated with the hydrogen economy, and markets designed to increase circularity and promote the protection of biodiversity.
The ACCC has a role in advocating for effective market design and in supporting market development. This will ensure that emerging markets are set up from the outset to function with integrity and in a pro-competitive, pro-consumer manner.
We are also watching closely to check that other emerging markets do not develop in ways that lead to anti-competitive levels of concentration, and checking for indications of illegal collusion as the economic transition unfolds.
In existing markets, we are also monitoring any reduction in the number of firms as industries go through periods of significant change. Assessment of mergers in key transitioning industries, and a thorough understanding of market dynamics resulting from sustainability drivers, will be critical.
And finally, and importantly, ensuring that our competition and consumer law is not operating as an unnecessary barrier to businesses pursuing legitimate sustainability objectives.
Performing these roles will require the ACCC to develop new expertise, improve internal coordination and external engagement. We have stood up a Sustainability Taskforce to focus on the sustainability issues across all our functions.
To inform our approach to these roles, the Taskforce is engaging with or closely studying the work of our regional and global counterparts. In the Asia Pacific, examples from which we have learned or are interested to learn from include:
In November 2022, Thailand provided excellent leadership in our region when it convened, with co-sponsorship from economies including the Philippines and Chinese Taipei, a brilliantly curated APEC workshop and background note on competition policy and sustainable development.
This year, the Japan Fair Trade Commission has published detailed guidance for competition and the pursuit of a green society in Japan, as well as market studies into EV charging infrastructure as well as recycled PET bottles.
In October this year, speaking at the BRICS Competition Conference in New Delhi, Competition Commission of India (CCI) Chair Ravneet Kaur said that the CCI is looking at how to integrate sustainability goals into the Indian competition law framework.
Article 24 of the 2022 Chinese Anti-Monopoly Law provides for an exemption where the parties can demonstrate that a cooperation agreement aims at achieving energy conservation, environmental protection, disaster relief or other public interests, provided that such agreement does not seriously restrict competition and that it ultimately results in benefits to consumers. China’s merger control provisions also allow for public interest considerations to be weighed.
The ACCC is eager to engage more with our Asia Pacific colleagues to learn about how environmental considerations may be impacting compliance and enforcement posture and merger reviews, and what guidance or other measures are being considered. We will continue our efforts for this in 2024.
How the ACCC is responding where there is a substantiated need for market coordination in pursuit of sustainability
The question as to whether competition law is acting as a ‘barrier’ to industry action on environmental issues’ is receiving increasing international attention. Competition regulators around the world are considering positions on how coordination and collaboration between competitors aimed at achieving positive environmental outcomes should be treated in the context of cartel laws or laws on anti-competitive agreements.
Several overseas regulators, including the UK Competition and Markets Authority and European Commission, have released guidance to give firms more clarity about when agreements to achieve environmental outcomes may be exempt from competition law. Some regulators, including the Japan Fair Trade Commission, European Commission, Netherlands ACM and Hellenic Competition Commission, will also engage informally with parties to discuss ideas for collaboration.
There is a fine line between ensuring compliance with competition laws and removing unnecessary barriers to sustainability initiatives that a misapprehension of competition law risk can cause. We at the ACCC are very alive to the risk of sustainability agreements between competitors being used as a green veneer covering anticompetitive conduct. But we also recognise that collaboration can drive sustainability benefits by removing the first mover risk and potentially delivering more efficient solutions with larger-scale impact.
This issue is recognised in ASEAN’s Regional Guidelines on Competition Policy and Law. ASEAN’s guidelines suggest that in some cases market participants may need to find industry wide solutions, including solutions that can only be achieved through the sharing of commercially sensitive information or changes to market behaviour.
Targeted inquiries by our Sustainability Taskforce are revealing that competition and sustainability is very much a live issue in Australian markets with which we need to engage responsively. Our Taskforce has also seen from its international engagement that competition authorities abroad are regularly being approached in relation to collaborations aimed at achieving sustainability goals.
There are many types of sustainability collaborations that will not raise competition concerns. It is critical that these legitimate collaborations are not hampered by a fear of competition law risk or confusion about how competition law operates. If legitimate collaborations are not proceeding, this would mean that private sector resources – which often represent the majority of capital and expertise – are being unnecessarily prevented from contributing to society's transition. This delays environmental progress and increases the burden on governments and taxpayers.
Other types of agreements may raise risk. Where cooperation or collaboration amongst firms risks raising competition concerns, the ACCC’s authorisation regime allows us to consider and weigh up public benefits including environmental benefits when assessing whether overall the conduct will result in a net public benefit, notwithstanding it may have some public detriment – typically a reduction in competition.
In October the ACCC authorised a merger on the basis that environmental public benefits would outweigh the detriment that the merger’s anticompetitive effects would cause. In this merger, the buyer was a consortium lead by Brookfield, a large private equity firm and the target was Origin Energy, an Australian energy generator retailer. In applying for authorisation, Brookfield submitted that it would invest $20-30 billion in renewable energy to decarbonise the Origin business, which is currently Australia’s fourth largest emitter of greenhouse gasses in terms of its direct emissions.
The ACCC decided to authorise the transaction, in what was a very finely balanced decision.
On the first limb of our authorisation test, we were not satisfied that the proposed acquisition would not be likely to substantially lessen competition. However, in weighing the likely public benefits and likely detriments, we considered that the acquisition will likely result in an accelerated roll out of renewable energy generation, leading to a more rapid reduction in Australia’s greenhouse gas emissions.
We were satisfied that the acquisition would reduce emissions, and we considered that this was a significant public benefit, given the need for Australia to contribute to the global challenge of climate change.
This is why, after a detailed review, we were satisfied that the proposed acquisition was likely to result in public benefits that would outweigh public detriments.
Environmental benefits are commonly raised in the context of non-merger collaborations. Between 2016 to 2021, about a quarter of the applications for authorisation we received involved an assessment of claimed environment benefits. We expect this may increase further, in line with commercial pressures on business to reduce environmental impact.
Some environmental issues in non-merger authorisations the ACCC has previously granted include joint buying groups collectively tendering for renewable energy, joint tendering for recycling services and industry stewardship schemes where a levy is imposed to support proper disposal of environmentally harmful products.
The ACCC’s authorisation regime does not require the environmental benefit to flow back to the specifically impacted consumers and we do not have to quantify the benefit as such. However, establishing that the benefit is likely is essential, and the extent to which you can quantify the benefit is an important part of our assessment of how much weight we will give it when weighing it up against public detriments.
Responsive compliance and enforcement for environmental sustainability
We consider effectively implemented consumer law is integral for ‘green merits’-based competition to drive markets to greater environmental sustainability. Following detailed analysis and consultation, this month the ACCC is publishing our consumer law Environmental Claims Guidance. This sets out what we consider to be good practice when making environmental claims about products and services as well as making businesses aware of their obligations.
While this guidance is consumer law focused, ensuring claims about environmental benefits are clear and accurate doesn’t just help the individual consumer making purchasing choices. It also means the right incentives are in place for business to compete fairly and be able to differentiate themselves based on genuine investment in environmental benefits.
We hope this guidance will help reduce both the risks of greenhushing, where businesses aren’t sure what’s needed to make accurate claims and so decide against promoting their environmental benefits at all, and greenwashing – where businesses make unsubstantiated or inaccurate environmental claims. Ultimately, we want businesses to be able to compete fairly for the green dollar, making truthful and accurate environmental claims so consumers can exercise their informed choice.
Currently we are also considering what guidance is needed in relation to green collaborations. And whether our current authorisations are an adequate mechanism in the context of more proponents needing to consult the ACCC on proposed green collaborations.
Conclusion
Today I have introduced why environmental sustainability is a priority for the ACCC. I have introduced that our key objectives are to ensure that:
- consumers can make informed choices when they want to buy sustainable products, and the products are safe
- government and private sector sustainability initiatives operate in a pro-competitive way
- and competition law doesn’t chill legitimate cooperation to achieve environmental objectives.
I have outlined our current work programme on sustainability, including the standing up of our Sustainability Taskforce, and how our authorisations process is helping us considering environmental benefits in stewarding competition in markets. And I foreshadowed some anticipated action, including new guidance or processes to better equip our agency in this important area.
To conclude, I would like to reflect again on the importance of our continued cooperation on competition and environmental sustainability.
Beyond exchanging good practices and experience to help us do our work more efficiently and effectively, given that businesses’ sustainability agreements will often be transnational in effect, where possible it will be helpful if we can aim for legal consistency across jurisdictions. The OECD Competition Committee’s work in this area has been very helpful to the ACCC, and it will be good to see further cooperation such as through the International Competition Network, Japan’s East Asia Top Level Officials Meeting on Competition Law and Policy, the OECD Korea Policy Centre, and APEC. Closer to home for the ACCC, our ASEAN – Australia and New Zealand Free Trade Area cooperation program CLIP will be an important channel for strengthening regional cooperation.
Thank you.