Sustainability and Competition Law in Austria

Abstract

Sustainability and environmental protection are the pressing questions of our time. Austrian competition law keeps pace with these issues and addresses them under the light of both antitrust and unfair competition law. Suitably, the amendment of the Austrian Cartel Act in 2021 took account of environmentally sustainable and carbon-neutral economies within its exemption provision, which led to a remarkable novelty in antitrust law. Beyond that, Austrian case law delt with environmental advertising in the light of unfair competition law and established a strict standard for the assessment of advertisements containing catchwords such as "organic" or "climate neutral".

1 Introduction

Sustainability and environmental protection are the pressing questions of our time. Austrian competition law keeps pace with these issues and addresses them under the light of both antitrust and unfair competition law.¹ Suitably, the amendment of the Austrian Cartel Act in 2021 took account of environmentally sustainable and carbon-neutral economies within its exemption provision. This led to a remarkable novelty in antitrust law. In particular, the legislator extended the view of consumer welfare as the Austrian exemption provision assesses the fair share for consumers in a future-oriented manner. In contrast to EU law, out-of-market efficiencies now fulfil the pass-on criterion under Austrian antitrust law.

2 Sustainability and Antitrust Law

“Consumers are also allowed a fair share of the resulting benefit, if the benefit derived from improving the production or distribution of goods or promoting technical or economic progress contributes significantly to an environmentally sustainable or carbon-neutral economy.”²

What appears to be the legal consideration of a “more sustainable economic approach”, has found its way into the text of the Austrian Cartel Act since an amendment of the exemption provision in 2021.³ This is the very first time for a Member State’s antitrust law to explicitly address the issue of sustainability. The Austrian antitrust law thus plays a pioneering role in exempting agreements between undertakings that are committed to sustainability or climate neutrality. Given this unique selling point, this paper focuses on the amended exemption provision.

Most recently, the discussion on the assessment of sustainability agreements under antitrust law was animated by the European Green Deal actions.⁴ Commissioner Vestager also picked up on these developments several times, hinting at a certain openness to the topic.⁵ In addition, both national competition authorities and business representatives called for regulations to provide clarity on the compatibility of such arrangements with competition law.⁶ The paper provides information on how sustainability agreements can be permitted in the light of the amendment of the Austrian Cartel Act. Furthermore, it relates the Austrian regulation to EU antitrust law as the latter is decisive for an appropriate assessment of the topic of interest. This is due to the primacy of application of EU law as well as its model effect for national antitrust laws. Beyond that, the Austrian Supreme Cartel Court has stated that the prohibition of anti-competitive agreements (Section 1 Cartel Act) and the corresponding exemption provision (Section 2 Cartel Act) are to be interpreted in the light of Article 101 TFEU.⁷

The effect of the climate crisis is increasingly felt in today’s everyday life. Some therefore go so far as to speak of a “moral imperative” to counteract this global development with all possible means, antitrust law included.⁸ However, we must acknowledge that an overly broad view of antitrust law is restricted.⁹ After all, cost externalisation, information asymmetries or consumer cognitive biases often cause substantial market failures.¹⁰ Sustainability agreements offer an opportunity to overcome this problem. To fall under the definition of sustainable agreements, agreements between undertakings must not exclusively aim at profit maximisation but above all make a contribution to sustainable development.¹¹ Such agreements are based on a modern and broad concept of sustainability, which, in addition to environmental protection, also includes, e.g., animal welfare or the pursuit of better social living conditions.¹² By their very nature, sustainability agreements that pursue such interests are based on welfare and solidarity considerations and make these their primary objective.¹³

In principle, Article 101 para. 1 TFEU prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices that may affect trade between Member States and that have as their object or effect the prevention, restriction or distortion of competition within the internal market. Section 1 Cartel Act contains a corresponding prohibition. However, if such corporate conduct fulfils the conditions laid down in Article 101 para. 3 TFEU (respectively Section 2 para. 1 Cartel Act), it can be exempted from the ban on cartels. In addition, a specific exception can be found in Article 210a of the Regulation establishing a common organisation of the markets in agricultural products.¹⁴ According to this, practices restricting competition that relate to agricultural products are permitted if they aim to apply a sustainability standard higher than that mandated by Union or national law.

The advantage of fast and unbureaucratic implementation of sustainability goals, which corporate agreements undoubtedly have over legislative measures, is offset by the concern that competition law could be misused for greenwashing purposes.¹⁵ The fear is that companies will green-light agreements that in fact restrict competition to evade antitrust law. In favor of the exemption, it is frequently argued that first-mover disadvantages can be overcome by synergy effects.¹⁶ Yet this argument is not convincing as the sustainability awareness of today’s consumers is already advanced. Nowadays, consumers reward innovative corporate concepts that promote a sustainable economy. This is why it is rather correct to assume a first-mover advantage than a first-mover disadvantage in the given context.¹⁷

These considerations already show that the antitrust framework for the exemption of sustainability agreements is not clear and is therefore characterised by substantial uncertainties. In addition, undertakings must evaluate on a self-assessment basis whether their agreements fall under the legal exception of Article 101 para. 3 TFEU (Section 2 para. 1 Cartel Act). The lack of case law or specific guidelines contributes to further legal uncertainty. Against this background, undertakings are risk averse in promoting sustainability through agreements, which promotes inefficiency with respect to the legal exception of cartel prohibition.¹⁸ In the following, the conditions that allow for an exemption of sustainability agreements are analysed in light of the amended Austrian antitrust law with reference to the relevant EU provisions on the basis of the four renowned criteria for exempting corporate agreements.

3 Exemption Under Section 2 Para. 1 Cartel Act (Article 101 Para. 3 TFEU)

Section 2 para. 1 Cartel Act as well as Article 101 para. 3 TFEU offer a possibility for promoting sustainability through agreements between undertakings. To be exempt from the prohibition of restrictive agreements, an agreement must meet four cumulative criteria: there must be (i) a contribution to improving the production or distribution of goods or to promoting technical or economic progress while (ii) allowing consumers a fair share of the resulting benefit, without (iii) imposing restrictions that are not indispensable to the attainment of these objectives on the undertakings concerned and (iv) affording such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

The exemption test is therefore based on an economic approach.¹⁹ The economic aim is to allow a restriction of competition only if cheaper or better products are offered to consumers, compensating the latter for the adverse effects of the restrictions of competition.²⁰ In other words, an agreement must always increase consumer welfare and must not be at the expense of consumers to be efficient with respect to cost allocation and thus exemptible. The amendment of the Cartel Act led to a remarkable change regarding the exemption of cartels in Austria. In particular, the view of consumer welfare is significantly broadened as out-of-market efficiencies now take precedence over the pass-on criterion. In general, the legislative materials classify sustainability as a cross-cutting issue but do not see competition law as the primary key to solving the climate crisis. This is why the provision’s central intention is to provide legal certainty. Sustainability and environmental protection aspects are thus firmly anchored in the renewed Cartel Act.²¹

4 Efficiencies

The first criterion requires an improvement in the production or distribution of goods or the promotion of technical or economic progress. Thus, efficiencies must necessarily be at hand in order to permit sustainability agreements. The accurate narrow view of the provision permits only the consideration of improvements in economic efficiency.²² Non-economic benefits alone cannot justify an exemption.²³ These normative premises apply to both EU and Austrian antitrust laws.

Despite the amendment, the Austrian exemption provision continues to be based on the economic system predetermined by Article 101 para. 3 TFEU. In particular, it does not establish a new, independent sectoral exemption.²⁴ According to the examples given by the legislative materials, environmental sustainability is understood to include climate protection (use of renewable energy, reduction of greenhouse gas emissions), sustainable use and the protection of water resources (protection of the environment from the adverse effects of wastewater discharge), transition to a circular economy (promotion of the reparability and recyclability of products, increased use of secondary raw materials) and protection and restoration of biodiversity and ecosystems (sustainable forest management). The concept of climate neutrality is in itself covered by this definition but was, however, specifically included in the wording due to the particular importance of this aspect.²⁵

The legislative materials state that agreements for an ecologically sustainable economy do not necessarily fall under the prohibition of cartels, e.g. if standardisation agreements are open and non-exclusive and their participation remains voluntary.²⁶ However, if an agreement falls within the scope of Section 1 Cartel Act, the first exemption criterion it has to meet is the existence of economic efficiencies.²⁷ According to the legislator, such efficiencies are given if, as a result of the agreement, the production method or the distribution is CO₂ saving or if ecologically more sustainable or less CO₂-emitting products or services are created. Examples include the use of exhaust gas or wastewater filters in production (improving the production of goods), joint distribution to reduce transport costs (improving the distribution of goods) or the production of cars that emit less CO₂ (promoting technical progress). On the surface, this refers to resource-saving practices, which also constitute objective economic advantages under EU law in the sense of the first exemption requirement.²⁸ If, on the other hand, economic progress is being promoted by the agreement, this is usually reflected in cost savings or a qualitative improvement in the case of sustainability-related innovations.

As set out by the legislative materials, the first condition is fulfilled by the contribution to sustainability only if it is associated with efficiencies as described. However, the new regulation denies exemptions to hardcore cartels such as price fixing or market division, even in the case of positive sustainability effects. Following the case law on Article 101 para. 3 TFEU, under Austrian law, there must also be appreciable, objective advantages to sustainability so as to compensate for the disadvantages that such an agreement entails for competition. The Austrian legislator considers positive effects on sustainability, the environment or climate for the public to be in proportion to the disadvantages of the competitive agreement on the relevant market. Thus, such effects correspond to the notion of advantages set out by EU case law.²⁹

Under these considerations, the established EU assessment schema with its four exemption criteria is maintained under Austrian law. That applies in particular with regard to the efficiency requirement.³⁰ This is due to the fact that non-competition interests meet the first criterion under Section 2 para. 1 Cartel Act insofar as they are linked to objective economic advantages.³¹ The examples cited by the Austrian legislator underline this fact as all such examples promote sustainability. In addition, there is always an improvement in the production or distribution of goods or in technical or economic progress. However, no accurate statement can be extracted from the legislative materials that mere sustainability benefits would replace economic efficiencies at the level of the first criterion. The legislator’s intention remains unclear in this respect. This leads to the conclusion that Section 2 para. 1 Cartel Act continues to require economic efficiencies as a first prerequisite. Thus, the legislator has not changed the assessment system in this context. A contribution to an ecologically sustainable or climate-neutral economy still increases efficiency only if it leads to economic benefits.

5 Fair Share for Consumers

Pursuant to Section 2 para. 1 Cartel Act, consumers are now allowed a fair share of the resulting benefit of an agreement if the benefit derived from improving the production or distribution of goods or promoting technical or economic progress contributes significantly to an environmentally sustainable or carbon-neutral economy. The Austrian legislator takes a broad view of the second criterion, according to which consumers must be allowed a fair share of the resulting benefit. The legislative materials state that the effects of an ecologically sustainable or climate-neutral economy always benefit the public as a whole, even if this may only be the case with a time lag for future generations. In the view of the legislator, this is justified because the consumer group concerned in each case represents a part of the public and therefore benefits from such an environmentally sustainable or carbon-neutral economy.³²

This is an essential difference to EU law. Pursuant to Article 101 para. 3 TFEU, the benefits of an agreement must compensate for the disadvantages of the consumer groups specifically affected.³³ In contrast, welfare increases are now recognised under Section 2 para. 1 Cartel Act, even if the advantages of an agreement do not directly benefit the same group of affected consumers. The same stands for benefits that only accrue in the future. Out-of-market efficiencies that are exclusively associated with welfare increases for future generations are thus taken into account when examining the fair share for consumers in Austria. At the same time, the need for rapid action on climate and environmental protection is met. In this way, the Cartel Act allows for a broader view of consumer compensation compared to primary EU law.

Sustainability aspects beyond ecologically sustainable or climate-neutral benefits are not explicitly covered by the wording of Section 2 para. 1 Cartel Act. However, the conclusion that, e.g., better social working conditions or increased animal welfare cannot be taken into account at all would not be accurate.³⁴ In conjunction with a corresponding economic advantage at the level of the first criterion described above, they can be included in the exemption test and, in qualitative economic terms, also increase consumer welfare. However, the disadvantages of the consumers specifically affected must in that case still be compensated for. This does not detract from the consideration of such sustainability advantages as long as they lead to a better product for the affected consumer group, even if the product becomes more expensive.

If the benefits of a sustainability agreement occur at a later point in time, they must be discounted in the course of their assessment. This requires the use of an appropriate discount rate for the purpose of quantification.³⁵ The legislator’s position is noteworthy in this respect, especially since the quantification of sustainable efficiencies is seen as one of the greatest challenges in the given context. The legislative materials assume that, at least for the time being, not every contribution to environmental sustainability can be represented in exact figures. This is also not necessary in all cases to be able to carry out an appropriate balancing of interests between the restriction of competition and ecological sustainability. The assessment cannot rely on purely quantitative aspects. If the effects of the restriction of competition are expected to be only slightly detrimental whereas the contribution to an environmentally sustainable or carbon-neutral economy is evidently positive, it is - according to the legislator - possible to dispense with quantifying the environmental benefit.³⁶ The wording of Section 2 para. 1 Cartel Act allows for such an understanding as the contribution to an environmentally sustainable or carbon-neutral economy must be “substantial” to provide a fair share for consumers. Within the framework of a required objective assessment ex ante, a predominant probability of providing a fair share to the consumers is necessary. The benefits to be passed on and the time of their occurrence must also be specified.³⁷

6 Indispensability of the Restrictions

In order to be exempted, the restriction of competition must be indispensable, i.e. it must not be (economically) feasible to achieve the agreement’s sustainability goals through less restrictive manners. The legislative materials refer in this context to an agreement regarding compressed and less waste-generating packaging. Such packaging would in the view of the legislator not be able to prevail over conventional packaging on the market without the agreement.³⁸ This example underlines the fact that in the sustainability context, new products are regularly brought to the market. They may not be able to withstand competitive pressure if a single company manufactures, distributes or introduces them to the market. Yet this inability is a case not of first-mover disadvantage but of classic market failure. Due to information asymmetries, consumers lack relevant knowledge regarding product packaging and might thus wrongly infer a smaller content from a smaller package.³⁹ If the companies were to provide – economically efficient – sufficient information about the environmentally friendly packaging technology and made it clear that this has no effect on content quantity, the supposed competitive disadvantage would turn into a first-mover advantage.

Of course, one might think of cases in which sustainability agreements provide advantages over individual entrepreneurial initiatives. In principle, it should be noted in the proportionality test that such agreements are usually only indispensable for achieving objectives in a start-up-like phase and may become inadmissible over time. This is particularly the case with new legislative measures that raise the general level of protection in environmental and sustainability issues.⁴⁰ In these cases, the benefits of an agreement can only exceed the indispensability threshold if they go beyond the minimum level of protection standards mandated by law.⁴¹ In this respect, the assessment of indispensability represents a strict greenwashing test in the sustainability context.

7 No Elimination of Competition

The contribution of antitrust law to the development of a sustainable economy becomes particularly effective when as many companies as possible participate in private-sector measures. However, the admissibility of an agreement must not allow companies to eliminate competition for a substantial part of the market. The legislative materials use an agreement between transport companies to switch to more ecologically sustainable fuel in the future as an example for this criterion.⁴² While price-fixing agreements with regard to tickets would not be justified, the obligation to use a certain fuel only, but not to agree on ticket prices or to adhere to exclusive routes, constitutes no hardcore restriction. Competition cannot be eliminated by such agreements, so that the market structure is preserved and sufficient room remains for potential competition. Against this background, an individual exemption is legitimate if the above-mentioned criteria are fulfilled.

8 Evaluation of the Amended Austrian Cartel Act

The Austrian National Competition Authority (NCA) has published Draft Guidelines on the Application of Section 2 para. 1 Cartel Act on Sustainability Agreements. These “Sustainability Guidelines” provide a specific assessment schema for the exemption of sustainable agreements between undertakings. It determines five criteria, which an agreement has to fulfil in order to fall under the sustainability exception. The agreement therefore must (i) lead to efficiencies that (ii) contribute to an environmentally sustainable or carbon-neutral economy, while (iii) such contribution is significant and the agreement does not (iv) impose on the undertakings concerned restrictions that are not indispensable to the attainment of these objectives as well as it does not (v) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.⁴³

Despite its Sustainability Guidelines, the Austrian NCA is quite critical of the amendment of Section 2 para. 1 Cartel Act. In its statement on the (at the time) proposed competition law, it points to free competition as a guarantor of innovation and emphasises that empirical studies have regularly found that sustainability cartels result, in fact, in low investments in sustainability. Moreover, antitrust law could serve the undertakings as a tool to evade the implementation of more comprehensive environmental protection measures. Therefore, the NCA doubts the usefulness of a legal exception to the ban on cartels to achieve sustainability goals. Instead, it argues for the prioritised prosecution of environmentally harmful agreements.⁴⁴ Such agreements were already examined under EU law.⁴⁵

This critical view is offset by the urgent need for effective and targeted action in environmental and sustainability matters. Moreover, the amended Cartel Act continues to require economic efficiencies as the first criterion for an exemption. As a result, Section 2 para. 1 Cartel Act rightly retains the economic system of resource allocation predetermined by Article 101 para. 3 TFEU, including its four exemption criteria. The Austrian regulation primarily differs from EU law with respect to the assessment of the fair share for consumers. Pursuant to the amended provision, a contribution to an ecologically sustainable or climate-neutral economy no longer has to occur on the specific market where competition is restricted. This legislative decision aims to meet the needs of the current generation without compromising the ability of future generations.⁴⁶ This forward-looking understanding of the pass-on condition is utterly welcome.

According to the opinion expressed here, the renewed provision does not open a gateway for recognising non-competition interests without linking them to economic advantages. While sustainability agreements by competitors were already permissible under the former legal situation if these conditions were strictly met, the amendment now contains a clear commitment by the legislator to the compatibility of sustainability and antitrust law. Apart from the expanded view of consumer welfare, there are ultimately no significant legal changes. Rather, the amendment plays an important role in clarifying the law and strengthening legal certainty. Due to the primacy of EU competition law, some do not expect a more frequent application of Austrian antitrust law in the future. The broadly inter-State clause fits this view.⁴⁷ However, this view ignores the fact that environmentally sustainable initiatives often occur on a regional level and do not necessarily affect trade between Member States.⁴⁸ Thus, an assessment of sustainability agreements under national law is not unlikely and welcome.

Ultimately, sustainability agreements regularly run the risk of violating competition law due to the narrow view of the legal exemption criteria. Therefore, they can only make a limited contribution to sustainable economic development and to the solution to the climate crisis because of the risk aversion of undertakings in this context. Legislative measures are, on the other hand, much better suited to achieving these goals and are of utmost importance, given the urgency of the issue. This is also confirmed by microeconomic studies,⁴⁹ according to which there are indeed cases in which entrepreneurial cooperation initially leads to positive results. However, as shown above, these constellations rarely occur, which is why legislative measures on sustainability issues are more efficient. One of the main economic reasons is that companies basically have no incentive to invest in sustainability unless the law induces them to do so.

As a result, the amendment of the Cartel Act makes it clear that – regarded only from a competition law point of view – no change in law or treaty is necessary for antitrust law to contribute to sustainable economic development and climate change mitigation. Nevertheless, a clarification of the current law along the lines of the Austrian model is the best way to overcome undertakings’ risk aversion towards sustainable agreements. On the EU level, this refers to a renewal of the Commission’s block exemption regulations and guidelines.⁵⁰ In this context, the new version of the Cartel Act can serve as an impetus for a modernisation of the Union-wide application practice of antitrust law.

9 Environmental Advertising and Unfair Competition Law

The fact that climate and environmental protection is of utmost importance for the majority of the population is no longer a secret and has become a more important goal than ever since the increasing climate change. Nonetheless, it is equally evident that climate and environmental protection does not stop at the advertising industry, and consumers are therefore confronted with a variety of environment-related advertisements in their everyday shopping, whether it is the plastic bottle that supposedly consists of 50% recycled plastic from the sea,⁵¹ the “all-natural” jam⁵² or the organic bread⁵³ from the local bakery. Such advertising slogans have a certain attraction and can ultimately lead to making a decision to purchase depending on the supposed positive aspects of the product for the environment. Where these environmental claims are actually true, no particular problems arise as it is in the nature of competition to emphasise positive aspects of one’s own product and thus achieve corresponding competitive advantages. The same applies to (truthful) references to the environmental commitment of a company, which could subsequently improve its reputation compared to competitors.

However, environmental advertising is certainly a problem when the information does not correspond to reality or is deliberately formulated in a very vague and ambiguous way to imply supposed environmental compatibility.⁵⁴ In times of ecological transition and increasing public awareness of the need for climate protection, this so-called greenwashing is booming and is therefore reason enough to be featured in this paper. The strongest weapon against this form of advertising in Austria has always been the Unfair Competition Act (UWG),⁵⁵ which will be examined in more detail below based on a selection of relevant cases.

10 Applicability of the UWG to Environmental Advertising

In order to discuss any particularities with regard to environmental advertising, it must first be clarified under which conditions the UWG applies at all. The general requirement for the application of the Unfair Competition Act is acting in the course of trade. According to the case law of the Austrian Supreme Court (OGH),⁵⁶ this is to be understood as any independent activity aimed at making a profit, insofar as it goes beyond purely private or official activities. Thus, a broad understanding is appropriate, which in particular not only is based on the intention to make a profit but also includes charitable activities. Furthermore, it is not only those who promote their own competition who are acting in the course of trade but also those who engage in conduct that is objectively suited to promote or hinder competition by others.⁵⁷ Thus, for example, a municipality may also be acting in the course of trade if it wishes to promote the use of solar energy and, for this purpose, recommends a certain provider of solar energy systems in an announcement, which, of course, favours the provider’s advancement.⁵⁸ Furthermore, according to case law, a person who is paid by an entrepreneur for advertising activities or who, even if free of charge, exclusively emphasises the advantages of certain products in a euphoric manner typical of advertising is acting in the course of trade.⁵⁹ According to the German case law, which is comparable with regard to the legal situation, it is sufficient to set a hyperlink in order to be within the advertising sphere of the respective entrepreneur, which is particularly relevant for all forms of native advertising.⁶⁰

Nevertheless, the objectives pursued by the act are irrelevant as the subjective element of acting for the purpose of competition was eliminated in the course of the 2007 amendment to the UWG, and therefore the intention to promote competition associated with it may no longer be taken into account.⁶¹ Instead, the UWG follows a functional understanding, which demands an interpretation exclusively on the ground of the protective purposes⁶² of the UWG (protection of competitors, consumer protection and the interest of the general public in undistorted competition).⁶³ Non-competitive interests are therefore excluded, which for the environmental advertising relevant here means that the effect on environmental interests alone is not sufficient for the applicability of the UWG but that there must also be a corresponding market connection of the action.⁶⁴ The same applies in principle to the case of an animal protection association that points out animal suffering associated with battery hen farming and calls on people to buy free-range eggs instead.⁶⁵ Here in particular, however, the fundamental rights dimension must also be taken into account as there is an obvious conflict with freedom of expression (Article 10 ECHR), which also protects exaggerated and controversial statements. ⁶⁶ The OGH therefore excluded the call in question from the scope of application of the UWG.⁶⁷ Although the appeal may have an indirect effect on competition, the result of the OGH is nevertheless convincing as the freedom of expression imposes a systematic barrier that does not conflict with a functional interpretation.⁶⁸ Conversely, the woven fur manufacturer who refers to animal suffering caused by real fur at a trade fair is very much subject to the UWG⁶⁹ because he uses the statement as an advertising medium for the sale of his own products, and commercial communication enjoys less protection with regard to freedom of expression.⁷⁰ Especially in the typical forms of environmental advertising, i.e. advertising one’s own reputation or product, this is usually unproblematic, which is why the applicability of the UWG can regularly be affirmed.⁷¹

11 Prohibition of Misleading Statements (Section 2 UWG)

The key provision for assessing the legitimacy of environment-related advertising within the UWG is Section 2, which regulates misleading business practices. According to this, it is unfair to use business practices that either contain incorrect information or are otherwise suitable to deceive market participants about certain characteristics of a product in such a way that they are induced to make a business decision that they would not have made otherwise.⁷² In addition, the annex to the UWG, the so-called black list, contains a number of business practices that are unfair in any case, even without the addition of further circumstances. In certain cases, for instance when considerable pressure is exerted on consumers,⁷³ it would also be conceivable to apply Section 1a UWG to environment-related advertising or to consider an unfair advantage by breach of law (Section 1 UWG) if a business practice violates legal norms, like those for the protection of the environment, since this typically results in a distortion of competition.⁷⁴ However, the vast majority of the cases dealt with in case law are treated from the point of view of the prohibition of misleading statements, which is why the further explanations will also focus on this. Following the categories established by Rüffler,⁷⁵ a distinction will especially be made between product-related and company-related environmental advertising.

12 Product-Related Advertising

A typical form of environmental advertising is product-related advertising, i.e. highlighting the supposedly environmentally friendly aspects of a product.⁷⁶ Practically, one encounters a whole range of buzzwords, all of which serve to draw the consumer’s interest in the product in question. Products are often only very generally described as “organic”, “green” or “naturally pure”, while sometimes reference is made to the fact that the ingredients or the production process is particularly environmentally friendly, for example if recycled materials are used or the product is even climate neutral. All these buzzwords have two things in common. Firstly, they distinguish the respective product from those that cannot provide such positive characteristics, which can regularly be a decisive factor for the purchase, and secondly, according to case law, a very strict standard must be applied to the vast majority of the catchwords in order to use them lawfully for advertising purposes as they are particularly likely to misleading.⁷⁷

In this respect, consumers’s expectations are of central importance as they ultimately provide information as to whether an action is misleading or not in an individual case. According to the case law of the OGH, this is defined by the averagely informed and averagely understanding consumer of the target group, applying a degree of attention adapted to the specific circumstances.⁷⁸ On the one hand, this can lead to the fact that certain knowledge can be assumed, for example if an advertisement is addressed to a specialised audience, but on the other hand, it can also lead to the fact that very precise information about the actual facts must be provided in order not to mislead the average consumer addressed. From the advertiser’s point of view, this is aggravated by the fact that in the case of an ambiguous interpretation of the advertisement, he must accept the interpretation that is least favourable to him.⁷⁹ Finally, it must also be considered that according to Section 39 of the UWG, it is possible to mislead not only with words but with images as well, for example an environmental symbol or a graphic representation that gives the impression that the product is particularly valuable with regard to environmental protection.⁸⁰

The OGH initially takes a strict view of advertising with buzzwords such as organic or natural.⁸¹ The average consumer confronted with these catchwords regularly expects products advertised in this way to be completely free of chemicals, i.e. in particular not to contain any chemically treated additives such as modified starch or synthetic vitamins.⁸² Especially the catchword organic is ambiguous and ultimately to be interpreted in the sense of absolute environmental compatibility.⁸³ This means that the product, with regard to its production, its composition as well as its disposal, would have exclusively positive characteristics with regard to the environment. It may be argued that the average consumer might well distinguish between the product itself and its manufacture or disposal and that it is therefore necessary to differentiate according to the respective phases or, even further, that environmental compatibility in general should only be understood in relative terms, meaning in comparison to other products.⁸⁴ Especially given the increasing awareness of consumers for environmental protection issues, the strict standard in the sense of absolute environmental compatibility as applied by the OGH for the catchword “organic” is nevertheless convincing. It is therefore all the more important for the advertiser to use such catchwords either only if they actually apply to the product in full or to make it sufficiently clear that only a certain part of the product is meant. Conversely, however, it would indeed be going too far to affirm that a product is misleading even if the pollutants contained in the product result from ubiquitous environmental pollution. In this sense, the ECJ also ruled that it was not misleading to advertise a jam as naturally pure if it actually contained pollutants from general environmental influences.⁸⁵ The average consumer would expect the product to be as naturally pure as possible, which exculpates ubiquitous environmental influences from the outset. This is also convincing as otherwise one would have to assume a thoroughly uninformed consumer as it is obvious that even strawberries grown organically and picked by hand are exposed to general environmental influences on a daily basis, even if these are not pleasant.⁸⁶

Just as strictly, the OGH recently judged the advertising of a drinking bottle with the claim that it was made of 50% recycled plastic waste from the sea.⁸⁷ Although the defendant was able to prove that the drinking bottle was indeed made of more than 50% recycled plastic waste, this waste was collected not from the sea but from beaches. Admittedly, this may seem very strict at first glance and also raises the question of whether the element of relevance necessary for misleading is actually to be affirmed.⁸⁸ The latter asks whether the statement is also capable of influencing the consumer to make a decision that he would not have made otherwise.⁸⁹ In this respect, it can be argued that the average consumer focuses not so much on the origin of the plastic but rather on the accuracy of the claim that the drinking bottle actually consists of a certain percentage of recycled plastic.⁹⁰ However, if one takes into account that plastic from the sea is much more difficult to collect than plastic from beaches and that the recycling process of sea plastic is more complicated, then the reasoning of the OGH is ultimately convincing.⁹¹ Furthermore, the OLG Stuttgart has to be agreed with, which states with regard to the same case that the average consumer would also consider the direct threat to the animal world and the danger of plastic entering the food cycle in the case of genuine sea plastic.⁹² Conversely, however, the OGH does not apply an absolute understanding of environmental compatibility, unlike in the case of the catchword “organic”. Therefore, as far as a product is actually recycled but energy is consumed in the process of recycling, the advertiser does not have to point this out separately. The average consumer would be aware of the fact that recycling requires the use of energy, and it would also make advertising with recycling processes almost impossible if one had to explain all conceivable effects on the environment.⁹³

Lately, advertisements with the catchword climate neutral are also gaining in popularity. Rarely, however, are these products produced in a climate-neutral way, but they typically involve compensation payments for the CO₂ emissions caused during production. It is doubtful whether the average consumer, when a product is advertised as climate neutral, actually thinks of compensation payments and not rather of the production of the product without greenhouse gas emissions. While compensation payments may already be commonplace for flights, this is not the case for most other products. Therefore, the case law of the OGH is strict in the case of advertisement of a stamp as climate neutral, stating that without an explanatory reference to the compensation payment, it cannot be assumed that the average consumer is familiar with this concept in all cases.⁹⁴

13 Advertising with Environmental Certificates

Since a misleading statement can be realised not only by a literal statement but, according to Section 39 UWG, also by a graphic illustration, the question also arises as to how to deal with advertising with environmental certificates.⁹⁵ First of all, reference has to be made to Nr 2 and Nr 4 of the Annex to the UWG, which contain a mandatory restriction on the use of quality labels or similar without authorisation (Nr 2)⁹⁶ or the claim of authorisation by a public or private body, although the requirements for such authorisation do not apply in reality (Nr 4).⁹⁷ In addition, the general prohibition of misleading statements under Section 2 UWG is also applicable. With regard to advertising with environmental certificates, a distinction must be made between advertising with public eco-labels (in Austria, especially the “Hundertwasserzeichen”) and private eco-labels.⁹⁸

Public eco-labels usually give the viewer the impression of objectivity to a greater extent as they are awarded by public authorities. Again, therefore, the reference to such an environmental certificate is only permissible if the conditions necessary for acquiring the certificate are fulfilled and continue to be fulfilled at the time of use.⁹⁹ According to the German case law, a general reference to a tested environmental compatibility without further explanation is also inadmissible, since it is neither apparent to the consumer who carried out the test nor according to which criteria it was carried out.¹⁰⁰ Another issue of debate is whether a person who has received an eco-label in an admissible manner must also provide additional information in his advertising about the concrete environmental advantages that result from it in order not to run the risk of misleading the average consumer who associates the respective eco-label with even higher requirements than those actually required.¹⁰¹ However, the better arguments are in favour of denying such an obligation.¹⁰² In contrast to advertising with buzzwords such as organic, the average consumer will either already be familiar with certain eco-labels or be able to obtain further information about them without much effort. Nevertheless, where the advertiser is otherwise misleading through the use of an eco-label, for example by giving the impression of a unique position that does not actually apply, a corresponding explanation will have to be demanded.¹⁰³

Regarding private eco-labels, the question must be assessed in a different manner. The authority typically associated with public eco-labels, and also the publicity of guidelines for awarding them, is not given to the same extent.¹⁰⁴ It is therefore all the more important to clarify which specific environmental benefits are associated with the product or the eco-label. Furthermore, if the private eco-label is designed in such a way that it resembles a public eco-label or that it gives the impression that it has been awarded by an independent third party rather than by the advertiser itself, this circumstance can also be misleading, with Section 2 UWG and Section 9 UWG providing a suitable legal basis for a claim.¹⁰⁵

14 Corporate-Related Advertising

Other than the product-related environmental advertising discussed above, company-related environmental advertising promotes the environmentally positive characteristics of a company separately from its products in order to promote a corresponding reputation.¹⁰⁶ There are plenty of potential ways of doing this, whether it be an internal waste avoidance system, a switch to renewable energy sources for heating the company’s buildings, or the appointment of environmental managers to raise awareness among employees.¹⁰⁷ Typically, however, one encounters company-related environmental advertising wherever companies either sponsor environmental organisations or make this sponsorship dependent on the purchase of a product. If, for example, a company advertises that for every product purchased a certain percentage of the sales price will be donated to a well-known environmental protection organisation or that the planting of a tree will be financed, then this marketing strategy falls into the scope of company-related environmental advertising.

By this company-related environmental advertising, the social awareness of the consumer is regularly addressed, on the one hand, in order to link the image of the company with certain positive characteristics and, on the other hand, to influence the decision to buy in favour of one’s own company by means of the purposely emotional advertising. It is therefore hardly surprising that the case law assessed the first company-related environmental advertising efforts as immoral emotional advertising according to Section 1 UWG.¹⁰⁸ Accordingly, while mere image advertising was regularly considered permissible, linking this image advertising with the purchase of a product was typically judged to be an immoral business practice. This case law is now outdated, especially since the consumer model has changed and the standard of immorality has been replaced by that of unfairness. It is therefore reasonable to consider permissible not only image advertising but also the linking of emotional environmental advertising with the purchase of a product.¹⁰⁹ What remains, however, are the same restrictions that have already been set for product-related environmental advertising. Company-related environmental advertising must therefore also be judged in particular by the standard of the prohibition of misleading statements in Section 2 UWG and is unfair if it does not correspond to the actual facts. Especially, advertising with very general buzzwords such as environmentally friendly will therefore have to be judged just as strictly as advertising a product with the buzzword organic since the latter is to be understood just as ambiguously.¹¹⁰

On the other hand, it is equally outdated to assume unfairness simply because a free additional service, namely the promised environmental commitment of the company, is added to the purchase of a main service.¹¹¹ Although Section 9a UWG, which used to be relevant for these cases, contained a prohibition of such additional benefits, it has been repealed in the course of the fully harmonising effect of the UCP Directive.¹¹² Insofar as company-related environmental advertising therefore corresponds to the real facts and is not otherwise likely to mislead, there is no room for any restrictions based on appealing to feelings.

15 Advertising with Self-Evident Facts

While incorrect information is regularly misleading and thus unfair, it may seem surprising at first glance that correct information can also be misleading in individual cases. If an entrepreneur advertises his products or his image with information that is self-evident anyway but gives the consumer the impression that it is a special characteristic, this also constitutes a misleading business practice.¹¹³ Such is the case if legally prescribed general conditions are emphasised as a special advantage.¹¹⁴ If, for example, an entrepreneur advertises a 2-year warranty period for his products and emphasises this warranty period in an eye-catching manner, this represents not a special benefit of his product but only the warranty period regulated in Section 933 para 1 ABGB,¹¹⁵ which must not be shortened in consumer transactions. The same applies if it is advertised that a company complies with certain ecological standards, although compliance with these standards is a legal requirement for the operation of the company anyway, or if products are advertised as vegan, whereas they are always vegan already due to natural conditions.¹¹⁶ In all these cases, there is a risk of generating the impression in the consumer’s perception that the product or the company has special characteristics that comparable other suppliers cannot offer. However, two aspects must be taken into account. Firstly, unlawful advertising with self-evident facts must be distinguished from permissible exaggerated advertising. An advertisement stating that a bicycle does not require fossil fuels in order to move forward or that an insect protection net is insecticide-free is therefore not problematic because in both cases, the average consumer recognises that it is a self-evident fact, and the advertiser is merely using it as a humorous marketing tool.¹¹⁷ Secondly, the presentation in the individual case is decisive. Of course, an advertiser is free to refer to attributes that are self-evident, but the line has to be drawn where this reference is emphasised in such a way that the impression is given that it is a special characteristic of the product.¹¹⁸ Furthermore, the recent Commission draft¹¹⁹ regarding empowering consumers for the green transition through better protection against unfair practices and better information also refers to this. Among other provisions, this draft includes an additional per se prohibition of commercial practices that present requirements that apply by law to all products in the relevant product category as a special attribute of the trader’s offer.¹²⁰

16 Conclusion

Overall, with respect to antitrust law, the Austrian legislator took sustainability issues into account by amending the Austrian Cartel Act in 2021. The Austrian legislator made clear that antitrust law and sustainability are compatible and incorporated the notion of environmentally sustainable or carbon-neutral economy in the wording of the new exemption provision. This change primarily aimed at providing more legal certainty and thus reducing risk aversion of undertakings to participate in sustainability agreements. However, the new regulation does not deviate from the economic approach predetermined by Article 101 para. 3 TFEU. This applies especially to the four exemption criteria, except for the fair share for consumers. In contrast to EU competition law, out-of-market efficiencies can now be considered to fulfil the latter criterion by increasing consumer welfare under Austrian antitrust law, which is the main focus of interest for antitrust lawyers within the scope of the Austrian amendment.

Regarding unfair competition law, in general, a strict standard can be identified which Austrian case law applies to environmental advertising. Both product-related advertising and company-related environmental advertising are regularly subject to the requirements of the UWG as a business practice. Caution is advised in particular when using very general catchwords such as “organic” or “natural”. The OGH in this respect considers the average consumer to have an absolute understanding of environmental compatibility, meaning that the product does not in any way cause negative effects on the environment. The use of such terms is therefore not advisable if they do not in fact fully correspond to reality. The same applies to the use of public or private eco-labels as these regularly evoke certain expectations in the average consumer. In light of the EU’s efforts to harmonise environmental advertising, it remains to be seen how the legal situation will develop in the future and whether the already very strict case law will have to be adapted.