CCCS publishes Guidance Note on Business Collaborations Pursuing Environmental Sustainability Objectives: Allen & Gledhill

12 March 2024

On 1 March 2024, the Competition and Consumer Commission of Singapore (“CCCS”) issued a Guidance Note on Business Collaborations Pursuing Environmental Sustainability Objectives (“Guidance Note”). The Guidance Note aims to provide clarity to businesses on how CCCS will assess collaborations pursuing environmental sustainability objectives, so that such collaborations may be pursued in a manner that does not harm competition.

The phrase “environmental sustainability objectives” as referred to in the Guidance Note is intended to encompass objectives related to reducing negative environmental externalities such as climate change mitigation measures, improving air and water quality, efficient use of natural resources, and biodiversity preservation.

The Guidance Notes sets out CCCS’s additional guidance on the application of section 34 of the Competition Act 2004 (“Act”) to business collaborations in the context of environmental sustainability initiatives. Section 34 of the Act prohibits agreements between businesses, decisions by associations, or concerted practices that are anti-competitive (“section 34 prohibition”), unless they are excluded or exempted. One such exclusion, among others, is the Net Economic Benefit (“NEB”) exclusion, which provides that an agreement that restricts competition appreciably would still be in compliance with the Act if certain conditions are met.

The Guidance Note seeks to help businesses in assessing their collaborations by providing guidance as follows:

Clarify what are considered as environmental sustainability objectives;
Provide examples of collaborations pursuing environmental sustainability objectives that would typically not be harmful to competition;
State the conditions under which competition concerns are less likely to arise from collaborations pursuing environmental sustainability objectives;
For collaborations where competition concerns may arise, explain how CCCS would assess whether such collaborations generate economic benefits and whether they may qualify for the NEB exclusion; and
Set out a streamlined notification process that CCCS is adopting for such collaborations should businesses wish to seek more legal certainty by notifying their agreements to CCCS.

Agreements pursuing environmental sustainability objectives

In determining whether a particular collaboration is one that is carried out in pursuit of environmental sustainability objectives and should therefore be assessed based on factors that are set out in the Guidance Note, CCCS will have regard to the crux or main activity of the collaboration. This is a fact-specific exercise that will take into account matters such as the starting point and main focus of the collaboration, and the degree of integration of the different functions required in order to pursue the stated environmental sustainability objective.

Agreements that will not or are unlikely to raise competition concerns

CCCS considers that there are collaborations that pursue environmental sustainability objectives that are unlikely to raise competition concerns or are indeed excluded from the section 34 prohibition. These include:

Agreements excluded from the section 34 prohibition such as vertical agreements, agreements to comply with written law, and agreements made in acting on behalf of the Government.
Agreements that do not affect how businesses compete with each other (e.g. does not involve price, quantity, quality, choice or innovation of goods/services supplied).
Agreements to jointly carry out activities which, objectively, none of the parties could do independently (i.e. the businesses would not have engaged in such activities but for the collaboration).

Agreements where competition concerns are less likely to arise if certain conditions are met

The Guidance Note provides specific examples of common types of business collaborations, and the conditions under which competition concerns are less likely to arise from each of these types of collaborations. These examples include:

Standards development such as industry-wide environmental standards or codes of practice, and associated “green” quality marks.
Joint industry database/resource of suppliers that have environmentally sustainable practices (e.g. in relation to their value chains, production processes or the inputs they supply) to facilitate businesses adopting green practices.
Joint production such as to achieve economies of scale and lower costs in using an environmentally sustainable but more costly production method.
Joint commercialisation such as sharing common distribution/logistics systems to reduce unnecessary pollution.
Joint research and development such as to develop a more environmentally sustainable product or technology.

Businesses may find guidance in the Guidance Note on how to potentially minimise competition concerns for each of these examples of collaborations.

Agreements where competition concerns may arise

Certain agreements pursuing environmental sustainability objectives could potentially be anti-competitive to an appreciable extent, and if so, such agreements are prohibited under the Act, unless excluded or exempted. As agreements pursuing environmental sustainability objectives can entail various forms of collaboration, including those discussed in the CCCS’s Business Collaboration Guidance Note, the assessment of such collaborations will be governed by the principles and considerations discussed in the Business Collaboration Guidance Note and the CCCS Guidelines on the Section 34 Prohibition. These include collaborations which restrict competition by object such as those with the purpose of price-fixing, bid-rigging, market-sharing or imposing output limitations; and collaborations which would be subject to an economic assessment of their effects on competition.

Seeking guidance or decision from CCCS on collaborations pursuing environmental sustainability objectives

The Guidance Note states that there is no legal requirement for businesses to notify their collaborations to CCCS, generally or specific to collaborations pursuing environmental sustainability objectives. If a business is unsure as to whether a specific collaboration pursuing environmental sustainability objectives complies with the Act, they may wish to notify the collaboration to CCCS for guidance or decision as to whether it would be likely to infringe or has infringed the section 34 prohibition respectively. It is for the businesses to self-assess and decide whether to make a notification for guidance or decision to CCCS. Businesses that are unsure as to whether their collaboration complies with the Act can alternatively seek independent legal advice.

Streamlined process for collaborations pursuing environmental sustainability objectives

CCCS is adopting a streamlined process for the assessment of agreements pursuing environmental sustainability objectives. Under the streamlined process, CCCS will undertake a two-phase approach, with a Phase 1 review expected to be completed within 30 working days for simple cases, plus an additional Phase 2 review of 120 working days for complicated cases. The notified agreement may also be cleared with commitments at any time during Phase 1 or Phase 2 (including the period in between).

Separately, CCCS is open to having pre-notification discussions (“PNDs”) with businesses, during which businesses may wish to provide proposed quantification methodologies. PNDs provide businesses intending to apply for guidance or a decision with an opportunity to discuss the content and timing of their notifications with CCCS, including what information CCCS is likely to require in order to assess their agreements. Businesses are encouraged to contact CCCS at an early opportunity to request for such PNDs.

Background

CCCS conducted a public consultation between 20 July 2023 and 4 September 2023 in relation to the proposed issuance of the Guidance Note. The respondents were generally supportive of CCCS’s initiative to issue the Guidance Note and provided suggestions for improvement. In the process of finalising the Guidance Note, CCCS reviewed the feedback received and made some additions and amendments.

Reference materials

The following materials are available on the CCCS website www.cccs.gov.sg: