1 Sustainability in the French Competition Law Framework

1.1 A Concept Akin to Environmental Protection

The word “sustainability” is absent from the legislative and regulatory provisions composing the French competition law. Therefore, it is not possible to say what this concept exactly means legally speaking.

Sustainability has a broader meaning than environmental protection. It refers to an objective of development that meets the needs of the present without compromising the ability of future generations to meet their own needs.Footnote 1 Environmental protection is obviously at the core of sustainability. However, it is one aspect, among others, of sustainability. In this regard, Article 11 TFEU refers to environmental protection as a means to promote sustainable development. This conveys the idea that the latter is one means, among others, to achieve sustainability.

That being said, when reflecting on the interactions between competition law and sustainability, it would seem relevant to focus on the environmental dimension of that concept. Indeed, the interaction between competition law and environmental protection is on the agenda of a number of competition authorities throughout the EU, let alone the EU Commission’s reflexion on how competition policy may support the EU’s Green Deal,Footnote 2 which purpose is to make Europe the first climate-neutral continent by 2050.

1.2 Sustainability in French Competition Law

While the concepts of sustainability and environmental protection are not enshrined in the French competition law rules, they play a role in competition law enforcement in France.

Firstly, it is now well established that the environmental quality or performance of a good or service is a parameter on which undertakings may compete.Footnote 3 This means that any conduct that may hinder competition on that aspect of competition is liable to fall under the prohibition.

Secondly, Article L. 420-4 of the French Code of Commerce (FCC) contains, similarly to the third paragraph of Article 101 of TFEU, exemption criteria applicable to agreements or concerted practices that restrict competition. “Economic progress” is one of these criteria. Yet according to the French Competition Authority (FCA), environmental protection is a form of economic progress, which may be the basis for an exemption, provided that the other exemption criteria are met.Footnote 4

In the field of merger control, economic progress is also a factor liable to outweigh the harm to competition caused by a concentration. It is enshrined in Article L. 430-6 of the FCC. The FCA has, for instance, relied, inter alia, on the fact that a merger helped the parties to abandon technologies damaging to the environment in order to give its green light to a merger.Footnote 5

Economic progress is a broad concept, and one could anticipate that it gives great leeway to the FCA to include environmental considerations in its competitive assessment. However, it is governed by a principle of proportionality, which the FCA implements in a cautious manner.

The FCA will typically assess whether an environmental goal exists and, if so, whether it is not already pursued by the applicable regulation.Footnote 6 It also makes sure that the environmental benefits may not be achieved by means that are less restrictive of competition.Footnote 7 With regard to anti-competitive agreements or concerted practices, it must also be demonstrated that a fair share of the benefits invoked are passed on to consumers and that the agreement or concerted practice does not eliminate competition. According to the president of the FCA, the FCA is prepared to work at better assessing the passing on of environmental benefits to consumers.Footnote 8

1.3 The Future of Sustainability in French Competition Law Enforcement

The FCA, like any other organisation, is keen to play a role in the fight against global warming. Given the necessity to use any means possible to achieve that goal, it is tempting to claim that the FCA could and should give more weight to environmental protection in the way it enforces competition law rules. This, however, deserves a more detailed assessment.

In the current legal context, giving more weight to environmental protection may be achieved essentially in two different ways.

First, the FCA may decide to be more severe with anti-competitive practices or concentrations that are harmful to the environment. With regard to anti-competitive practices, this would mean, in practice, that the FCA would apply a specific aggravating factor to practices having a negative impact on the environment or affecting a competitive differentiator linked to environmental protection (e.g. the environmental performances of a given product). As will be described below in this report, such an approach may already be found in the FCA’s decisional practice. It is not difficult to implement in practice, given the margin of appreciation that the FCA enjoys as regards the setting of the fine in antitrust matters.

With regard to concentrations, giving more weight to environmental protection would mean that the FCA would be prepared to prohibit concentrations or submit them to remedies on the basis that they threaten to harm the environment, leaving aside other issues strictly related to market functioning. This would be much more difficult to implement in practice. The actual impact of concentrations on the environment is still unknown, and the tools do not really exist to measure it. This means that in the event that the FCA would intend to block concentrations on the basis that they harm the environment, it would struggle to actually measure, if not identify, that harm.

Second, and by contrast, the FCA may decide to be more lenient with concentrations or anti-competitive practices bringing about environmental efficiencies. In this paragraph, we assume that these efficiencies would not be of the type that benefits the consumers because if they benefit the consumers, there is no reason that the FCA does not already factor them in its competitive assessment.

Being more lenient with “eco-friendly” conducts or concentrations would probably imply that restrictions of competition not acceptable under the FCA’s current approach would be accepted because they would be justified by considerations pertaining to environmental protection. Such a policy would face two hurdles. First, it would oblige the FCA to identify and measure the environmental efficiencies at hand. Yet, as already said, the relevant conceptual tools are still missing. Second, this would obviously lead the FCA to depart from the proportionality principle that governs its enforcement powers. The balance made between restrictions of competition and efficiencies would indeed have to factor in a new parameter, namely the benefits for the environment.

The FCA does not seem ready for this. Its doctrine is summarised in a document published in May 2020 and authored by an informal group of eight independent regulation authorities (including the FCA) regarding the regulatory challenges posed by the Paris Agreements and the climate emergency.Footnote 9 This document, which is not an instrument of soft law but rather a roadmap, expresses the regulator’s commitment to help undertakings adapt to the changes caused by global warming. The document describes the challenges faced by the economic sectors to which a regulation applies. On that basis, the regulators point out the necessity to articulate the enforcement of their powers with the objectives of the Paris Agreement (i.e. a reduction of greenhouse gas emissions to achieve a climate-neutral world by mid-century). Yet this document makes it clear that the mandate given to the FCA is to protect competition, not to protect the environment. This is another way of saying that the FCA may not use powers that it does not have, like including considerations that are not strictly related to market functioning in its competition law assessments.

This is difficult to object to. Indeed, the issue of whether the FCA’s powers should be extended to include an environmental dimension boils down to questioning the role of a competition authority. The issue is whether such an authority should go beyond ensuring the optimal functioning of markets. This is a matter of public policy rather than a competition law issue.

That being said, it would seem possible, without giving more weight to environmental protection in the FCA’s decisional practice, to improve or facilitate the inclusion of environmental considerations in it.

One may for instance consider the development of an analytical framework helping and better translate environmental efficiencies (or positive externalities) which are not immediately market-related, into consumer benefit or harm liable to be factored in a competitive assessment.

2 Sustainability in the French Competition Law Decisional Practice and Case Law

While French competition law leaves little or no room for environmental protection in the enforcement of competition rules, the decisional practice of the FCA and case law give some room for sustainability in competition law enforcement.

The consideration of sustainability in decision-making practice and case law can be approached from several angles.

First, it can be considered that competition law is at the service of sustainability by sanctioning behaviour that is either not very or not at all virtuous from an environmental point of view. We can then speak of “sustainability as a sword” because the protection of the environment becomes, through competition rules, a weapon against less virtuous companies.

Second, it may be considered that in cases where there is a conflict between competition rules and the protection of sustainability, i.e. where anti-competitive behaviour or a merger that restricts competition is favourable to sustainability, exemptions from competition law should be granted to promote environmental protection. In this case, we can speak of “sustainable development as a shield” since the protection of the environment becomes a means of avoiding sanctions from competition authorities.

Third, we can also consider cases where illegal anti-competitive conduct occurred in the context of sustainability initiatives. In this case, we can speak of “sustainability as a trap” in that companies have engaged in anti-competitive behaviour by seeking to protect the environment.

The developments that follow will aim to determine to what extent French decision-making practice and competition case law used sustainability “as a sword” (Sect. 6.2.1) or “as a shield” (Sect. 6.2.2) or where sustainability has become a trap for undertakings willing to improve the sustainability of their operation through multilateral or unilateral initiatives that have proven to be anti-competitive (Sect. 6.2.3).

2.1 Sustainability “as a Sword”

2.1.1 Sustainability “as a Sword” in Antitrust

As said in Sect. 6.1.2. above, it is now well established that the environmental quality or performance of a good or service is a parameter on which undertakings may compete so that any conduct liable to hinder competition on that aspect of competition is liable to fall under the prohibition of anti-competitive conduct. In this case, we can consider that sustainability acts “as a sword”. We can also consider that sustainability acts “as a sword” when the damage to it is taken into account as an element of gravity or aggravation in the calculation of the sanction.

The FCA has already had the opportunity, on several occasions, to sue and condemn anti-competitive agreements found to be harmful to the environment.

First, as regards anti-competitive agreements, in 2017, the FCA imposed fines of a total of €302 million on three leading manufacturers of PVC and linoleum flooring in France and a trade association.Footnote 10 The collusion classically involved many aspects of the companies’ commercial policy, including prices, and exchanges of sensitive commercial information within the trade association.

Moreover, the agreement consisted in the signature of a non-competition agreement regarding communication on the environmental performances of their products: this agreement aimed to eliminate all “competitive marketing initiatives on the environmental characteristics” and “to avoid any sterile polemic relating to this or that product and to adopt a coherent marketing approach” in order to avoid any “dangerous green marketing” (free translation). For instance, a flooring distributor was refused permission to communicate with its customers on the emission rate of volatile organic chemicals per product.

These elements were taken into account at the stage of the calculation of the sanction as an element of gravity of the practice:

This practice prevented the implementation of competition based on environmental performance, while the value of products on this point constitutes, in the sector concerned, one of the essential criteria for the choice of buyers. This agreement may also have discouraged companies from improving the technical performance of their products and from investing in innovative processes aimed at improving their environmental performance, in particular with regard to the emission of volatile organic chemicals, which are considered likely to have an impact on human health. Thus the practice in question is, by its very nature, particularly serious (free translation).Footnote 11

Furthermore, the FCA’s investigation services recently (late 2021) issued a Statement of Objections to companies that are accused of having agreed not to disclose the presence of bisphenol A (BPA) in certain food contact materials.Footnote 12 The companies involved are manufacturers of cans and other packaging that may contain BPA, food manufacturers, retailers and trade associations. These companies would have agreed not to market BPA-free products and/or advertise these new products before the entry into force of the French law banning BPA in coatings inside food packaging due to alleged adverse effects on human health. The cartel would thus have aimed at not gaining a competitive advantage from the BPA ban.

Second, as regards dominance, the FCA also prosecutes behaviours that are detrimental to sustainability. Thus, in 2014, the FCA accepted Nespresso’s commitments to unlock the market for capsules compatible with its coffee machines.Footnote 13 Nespresso was accused of having tried to drive competing capsule manufacturers out of the market through successive modifications to Nespresso machines. That had the effect of making capsules from competing manufacturers incompatible with the new models. Nespresso was also accused of disseminating information encouraging consumers to use only Nespresso-branded capsules and of developing communication in the press and in its stores encouraging consumers to use only Nespresso-branded capsules. While the FCA’s decision does not explicitly mention environmental issues related to the practice, it paved the way for the development by competitors of more sustainable capsules, such as biodegradable ones.

2.1.2 Sustainability “as a Sword” in Merger Control

With regard to merger control, sustainability may act “as a sword” where the FCA would prohibit mergers or submit them to remedies on the basis that they threaten to harm the environment, leaving aside issues strictly related to market functioning.

To our knowledge, there is no case in which the FCA has taken into account the impact of a merger on sustainability in order to prohibit it or make it subject to commitments. Neither does it appear that the reduction of competition on innovation in favour of more sustainable products has been explicitly put forward.

However, sustainability can also be seen as a sword in merger control when green products are considered a separate market from the same product category but “non-green”. Indeed, in doing so, the FCA indirectly supports sustainability by ensuring that a sufficient level of competition remains in these green markets and by guaranteeing continued innovation in them. Conversely, mixing green and “non-green” products may result in mitigating the strengthening of a dominant position in green products, which would then not be treated in the assessment of the merger.

It should be pointed out that the market definition is not actually used to fit sustainability objectives. That effect is only incidental because the delimitation of the markets within the meaning of competition law turns out to protect environmental interests. This paradigm is also to be found in the area of anti-competitive practices: also in this case, the environment is often protected not in itself but because it constitutes a parameter of competition.

On this aspect, it can be said that sustainability became a sword in the decision-making practice of the FCA, which released decisions where green products were taken into account.

For instance, in 2021, the FCA conducted an analysis with regard to the acquisition of 100 Bio c’Bon stores (a French organic food distribution network) by Carrefour (a very important French food and non-food distribution network).Footnote 14 In order to assess the impact on the competition environment, the FCA assessed the substitutability of demand between organic and conventional products, recognising the existence of a specific market for organic products:

At the Authority’s request, and in cooperation with the Authority, the notifying party has carried out a survey of consumers of organic products. The analysis of the responses to the survey shows, inter alia, that in the event of a 10% price increase for all organic products, a very large majority of consumers would continue to consume organic products. The survey therefore shows that the substitutability, in the eyes of consumers, between organic and conventional products is limited (free translation).Footnote 15

The delimitation of this market for the distribution of organic food products has made it possible to identify risks of harm to competition in these markets in ten catchment areas due to very high market shares. To resolve the competition problems identified, Carrefour undertook to sell eight shops to competitors.

This decision is an example of how sustainability can become a sword by acknowledging the existence of specific markets for green products: by acknowledging the existence of an organic product market, the FCA has been able to protect competition in this specific market and, therefore, indirectly the protection of the environment and people’s health.

2.2 Sustainability “as a Shield”

As discussed in Sect. 6.1.2 above, French law provides for provisions similar to those in EU law allowing for the exemption of certain anti-competitive practices that meet several cumulative conditions aimed at establishing a positive economic outcome of anti-competitive practices.

Indeed, like Article 101(3) TFEU, Article L. 420-1 of the FCC provides that the provisions of Article L. 420-1 of the FCC, which prohibits anti-competitive agreements, do not apply to practices for which it can be demonstrated that they have the effect of ensuring economic progress and that they allow users a fair share of the resulting benefit without giving the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products in question.

The exemption provided for in Article L. 420-4 of the FCC differs from the one contained in Article 101(3) TFEU since Article 101(3) TFEU applies only to anti-competitive agreements, whereas Article L. 420-4 of the FCC also applies to abuses of dominant positions, which are sanctioned under French law by Article L. 420-2 of the FCC.

Although, in theory, the protection of the environment is not expressly included among the criteria that may justify an anti-competitive practice under French law, the FCA nevertheless recognised very early that, with regard to the exemption of anti-competitive agreements, the protection of the environment constituted a form of “economic progress” referred to in the above-mentioned articles.

First, in an opinion of 28 March 1973 on the competition in the markets for the collection and regeneration of used oils,Footnote 16 the FCA considered that the prevention of environmental pollution may be a part of the notion of “economic progress”; however, it refused in this case to exempt anti-competitive practices as it considered that these practices meet objectives unrelated to this concern. Furthermore, in an opinion of 6 December 1994 on a draft decree regulating the elimination of used oils,Footnote 17 the FCA stated that the objective to prevent pollution related to used oils could not lead to the organisation of a sector involving a risk of serious harm to competition.

Second, in a decision of 3 May 1988 relating to practices observed on the salt market,Footnote 18 the FCA granted an exemption to an association of salt producers on the basis that this association of undertakings aimed, inter alia, at the preservation of the environment.

Third, in an opinion of 14 December 1999 on the organisation and financing of the used battery disposal sector,Footnote 19 the FCA stated that environmental protection is a form of “economic progress” referred to in Article L.420-4 (then Article 10 of the Order of 1 December 1986) and Article 101§3 TFEU (then Article 85§3 of the Treaty on European Communities). In this respect, the French Competition Authority affirmed that anti-competitive practices favourable to the environment could benefit from an exemption if all other conditions set in these articles were met. However, the FCA stated that, in most cases, environmental protection is only one of the aspects of economic progress taken into account.

It can be noted, however, that most of these FCA decisions are quite old, and there are no recent examples in the FCA’s decision-making practice of anti-competitive agreements being exempted because of their favourable effect on sustainability. Furthermore, there is no FCA decision to date exempting abuses of dominance on this basis.

As regards mergers, in an opinion of 17 May 1994 concerning the proposed creation of a joint subsidiary of the companies Metaleurop and Heubach & Lindgens,Footnote 20 the FCA accepted that the proposed merger could be authorised if, in particular, it contributed to economic progress by allowing the abandonment of the most polluting techniques.

However, in an opinion of 9 May 1995 on the acquisition of Compagnie Européenne d’Accumulateurs (CEAC) by Exeide,Footnote 21 the FCA issued an unfavourable opinion on the merger on the ground that the economic progress invoked, in particular better environmental protection, consisted of environmental protection, solely compliance with the applicable law.

2.3 Sustainability “as a Trap”

It can easily be imagined that genuine sustainability initiatives serve as a springboard for other anti-competitive behaviour and that the FCA may consider it as a motive or pretext for engaging in anti-competitive behaviour rather than genuine sustainability initiatives.

To date, we are not aware of any decision by the FCA concerning a sustainable development or environmental protection initiative that has led to anti-competitive behaviour.

There is no doubt that in the years to come, decisions of this kind will emerge, particularly with regard to the positions taken by the Competition Authority in this area.

Indeed, the Competition Authority has recently indicated that various behaviours are under scrutiny: “These are behaviours which, under the guise of commitments to environmental or sustainable development objectives, serve to create and conceal an agreement or an abuse, by implementing prohibited practices, such as price fixing, production limitation, market allocation or the eviction of existing or potential competitors.”Footnote 22

As an example, we can cite the aforementioned decisionFootnote 23 regarding practices implemented in the hard-wearing floor covering sector, which was set up by the FCA as one of the first emblematic decisions in this area, even though it cannot be considered to be particularly reflective of the sustainable development trap insofar as, although the individual environmental performance of companies was in question, it was not really a “green” initiative that was in question.