Fears of cartel action stymie eco-alliances

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Supermarkets are deliberately holding back on collaborative eco-projects for fear of being accused of cartel forming or price fixing - and hauled into court and fined.

Retailers wanted to work together and were coming under increasing pressure from green campaigners to do so, but the threat of OFT action and heavy financial penalties was putting them off, claimed Julian Walker-Palin, head of corporate sustainability at Asda.

“We could learn a lot from each other, but can’t talk directly because of competition law issues,” he said.

The dearth of projects could be traced back to 2009 when retailers and suppliers attending a Defra pro-sustainability meeting agreed to collaborate on the production of energy-saving satellite TV boxes, he added.

“The lawyers suggested we had potentially created a cartel because the main players in the market had agreed to take measures that could distort it,” he said.

“They advised us to hold fire. Defra then approached the OFT for clarification. It said although the project could save energy and carbon, it couldn’t give it prior approval. That was not sufficient for lawyers in our companies to risk it.”

There was potential to go “much faster and further” with sustainability projects, he said, but overly-cautious lawyers were putting the kibosh on any where the parties were deemed to have common objectives.

“Before meetings, we read competition statements and if we think we are all focusing on one area and agreeing similar things, we have to stop the conversation,” he said. “Whether it is a real or perceived risk, it is slowing down collaboration.”

Chris Shearlock, sustainable development manager for The Co-operative Group, said he would welcome more collaboration. “There will be a new Courtauld 3 target on packaging soon,” he said. “There would be clear advantages to sharing costs and expertise on initiatives like that”.

BRC environment policy adviser Bob Gordon agreed that there were too many legal hurdles to collaboration.

“The situation does take some of the tools away from us,” he said. “There isn’t that getting together and agreeing to collectively share resources. In principle, we could move the sustainability agenda forward if the rules were different.”

But, he added, healthy competition was as important as collaboration: “Competition drives innovation. And if we are to get to a sustainable future by 2050, we need a lot of innovation.”

Readers' comments (1)

  • As a competition lawyer who has not been involved in the matters mentioned in the article, I can make two comments:

    1. The EU and UK competition law rules recognise that the eco-benefits of a given cooperation may outweigh the anti-competitive effects, thus effectively "approving" a restriction of competition in certain circumstances. For example, in one of its guidance documents the European Commission gives the example of an agreement between producers of washing machines who agree no longer to manufacture products which do not meet certain environmental standards. As 90% of the industry sign up to the initiative in the example, prices are likely to go up as a result. However, according to the Commission this is an example of standardisation which is allowed. Linked to this there is the issue of exchange of commercially sensitive information at meetings: there are a number of no-go areas (such as pricing, sales volumes, pipeline products etc), but outside these "red flag" areas the participants can normally have a frank and open discussion.

    2. In 2010 the OFT said that it was worried about companies not proceeding with certain forms of cooperation out of fear regarding the competition law consequences of cooperation. Therefore the OFT introduced a "short form opinion" procedure, designed to give parties certainty within a reasonable time period as to the competition law position. Since 2010 the OFT has issued only one such short form opinion (regarding a joint purchasing agreement between P&H and Makro). The article states that Defra "approached" the OFT regarding the satellite TV box initiative in 2009. It appears that that initiative would have been an excellent candidate for an OFT short form opinion. Equally, the discussions on the Courtauld 3 packaging targets could benefit from a short form opinion, in so far as they throw up genuine competition law questions.

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