Sustainability and Competition Global Practice Guide |
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Germany |
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(Europe)
Firm
Noerr
Contributors
Fabian Badtke |
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| Are ESG measures/sustainability agreements included in your jurisdictional competition regime? | No. The German competition regime (Act against Restraints of Competition, ARC) does not include any specific regulations concerning ESG measures or sustainability agreements. |
| If ESG measures/sustainability agreements are not included in your jurisdictional competition regime, do you foresee any new regulations coming into place in 2022? | Unlikely – at least for 2022. The current federal government's coalition agreement foresees, among other things, taking up the topic of sustainability from a competitive point of view. Thus, new competition regulations are currently being developed but will most likely not come into place in 2022. The Federal Ministry for Economic Affairs and Climate Action has published its competition policy agenda until 2025 which, inter alia, also considers sustainability aspects with the defined goal of increasing legal certainty for sustainability in antitrust law. (cf. Federal Ministry for Economic Affairs and Climate Action, The competition policy […] agenda up to 2025, 21.02.2022, p. 3 – https://www.bmwk.de/Redaktion/EN/Downloads/competition-policy-agenda-up-to-2025.pdf?__blob=publicationFile&v=2). However, some ESG regulations, in particular the German Act on Corporate Due Diligence in Supply Chains, entering into force on January 1, 2023, could have an impact on the jurisdictional competition regime even if it is not a specific competition regulation (cf. Question 8). |
| Has your Authority issued any guidance on the role, if any, of ESG in the competition law analysis applied to mergers or other conduct? | The Federal Cartel Office ("FCO") has issued some guidance on the role of ESG regarding competitor collaborations. In examining sustainability initiatives, the FCO considers the following aspects: (I) How great are the restrictions of competition caused, e.g., by aligning cost components? (II) How does this affect the sales prices? (III) Is access to the cooperation non-discriminatory? (IV) Were the sustainability criteria developed in an open process? (V) Is there sufficient transparency for consumers (in the case of labeling)? The FCO clearly states that cooperation between competitors has to genuinely improve sustainability and must not only aim to increase the margins of a few companies. For instance, the FCO had no competition concerns about the food retail sector’s voluntary commitment to set common standards for wages in the banana sector. Also, the FCO has provided guidance to the animal welfare initiative “Initiative Tierwohl” (actually already since 2014) and in the past years has particularly encouraged improvements regarding product labeling. Going forward, the FCO is calling for the inclusion of more competition elements in that regard. (cf. FCO, Annual Report 2020/21, 23.06.2021, p. 46 – https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Jahresbericht/Jahresbericht_2020-2021.pdf?__blob=publicationFile&v=2). |
| Has your jurisdiction issued guidance regarding competitor collaborations or participating in industry working groups, and if so, do they specifically address ESG? | No. Insofar as the FCO has addressed in its guidelines the topic of competitor collaborations or participating in industry working groups, these guidelines do not specifically address the question of ESG measures. However, there exists an FCO background paper from a virtual meeting of the Antitrust Law Working Group (of October 1, 2020) on the topic of “Open Markets and Sustainable Economies - Public Interest Goals as a Challenge for Antitrust Practice”, from which important aspects or views of the FCO can be taken. |
| Can parties seek specific guidance from authorities on proposed ESG initiatives? | Yes. The FCO offers advice and even recommends that parties proactively contact the authority in such cases, to parties regarding (sustainability) cooperation and provides guidance, especially on how to ensure that sustainability strategies are embedded in competition law. The guidance is offered inter alia through a review process (e.g. examination regarding “Living wages in the banana sector” and the animal welfare initiative “Initiative Tierwohl” in January 2022, cf. Questions 3, and 8). (cf. FCO, Press Release, 18.01.2022 – https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2022/18_01_2022_Nachhaltigkeit.pdf?__blob=publicationFile&v=3). |
| How, if at all, does your jurisdiction quantify or calculate the ESG effects? | Apart from the guidance given on sustainability initiatives (cf. Question 3), no further standards have been set regarding the quantification or calculation of ESG effects. In its background paper (see Question 4), the FCO points out numerous practical and normative problems with the quantification of sustainability goals and states that their solution or handling is always a political decision in the end. |
| What does your legal authority currently permit even if your agency is not yet active on this topic? | The FCO currently permits companies to pursue ESG goals, inter alia, through competitor collaborations and agreements. To allow these collaborations and agreements despite the lack of specific regulation in the ARC, the authority has taken these sustainability aspects into account when exercising its discretionary powers and has – in certain cases – refrained from opening an investigation into these collaborations and agreements, and thus agreed that the parties proceed with the intended cooperation; it is made clear that this assessment can also change and in this respect, it must be continuously checked whether the cooperation is still permissible (cf. the mentioned cases in question 3 and 8). |
| Are there precedents that involved ESG/sustainability matters in your country? If so please provide a short description. | Yes. There are some precedents for sustainability initiatives that have been reviewed by the FCO. Two recent examples are “Living wages in the banana sector” and “Initiative Tierwohl” which have been approved by the FCO. On the other hand, a financing concept for a market-compliant and fair distribution of risks and burdens of the agricultural transformation processes for milk producers has not been approved due to competition concerns (price fixing). (I) Living wages in the banana sector On behalf of the Federal Ministry for Economic Cooperation and Development, the German Society for International Cooperation ("GIZ") and German retailers intended to introduce pilot measures to promote living wages in the banana sector. For this purpose and against the backdrop of the Act on Corporate Due Diligence in Supply Chains sector cooperation in the food retail industry is to agree on voluntary common standards and strategic goals along the private-label banana supply chain. The core objective is to jointly introduce responsible procurement practices and develop processes to monitor transparent wages. At the same time, the participating companies are planning to gradually increase the sales volume of bananas that are produced and procured in line with living-wages criteria. In this context, no information on procurement prices, other costs, production volumes or margins is exchanged, nor are compulsory minimum prices or surcharges introduced at any point of the supply chain. In light of the above, the FCO has come to the conclusion that there are no competition concerns regarding the voluntary commitment of food retailers to common standards on wages in the banana sector. (II) The animal welfare initiative “Initiative Tierwohl” “Initiative Tierwohl” is a project based on an agreement between the agricultural, meat production and food retail sectors and wishes to reward livestock owners for improving the conditions in which animals are kept. The initiative is mainly financed by the four largest food retailers EDEKA, REWE, Aldi and the Schwarz Group. A key component of the initiative is paying participating livestock owners a standard premium (referred to as “animal welfare payment”) via the participating slaughterhouses. The price premium for pork is EUR 5.28 per pig; the premium for poultry ranges from EUR 0.0285 to EUR 0.04 per kilogram, depending on the type of poultry. So far, the initiative only covers the production of poultry meat and pork. The initiative plans to introduce this model for cattle fattening, beginning in 2022, which will also affect the dairy sector. The FCO has provided guidance to the initiative since 2014 and in the past years has particularly encouraged improvements regarding product labeling, thus making it easier for consumers to identify the meat on offer that actually comes from a participating farm with improved standards, and has over the years recommended several adjustments to the financing model to be in line with competition regulation. (III) Financing concept for a market-compliant and fair distribution of risks and burdens of the agricultural transformation processes for milk producers Representatives of the German milk producers have contacted the FCO and presented a coordinated financing concept in favor of the raw milk producers. According to the milk producers, this was necessary because milk prices were not adequate and did not cover costs. The FCO considered the concept to be an inadmissible price agreement. The financing model presented essentially revolves around the agreement of price surcharges, which are to be passed on through the supply chain to the “supermarket milk rack” – and thus the consumer. While public welfare objectives such as sustainability are legally acknowledged, the economic interest in a higher income level cannot by itself justify an exemption of such an agreement, especially since sustainability aspects played no role in the financing model. However, the milk producers have the possibility to present a sustainability concept that does not resort to price fixing at the expense of consumers. (cf. FCO, Press Release, 18.01.2022 – https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2022/18_01_2022_Nachhaltigkeit.pdf?__blob=publicationFile&v=3 and FCO, Report re B2-87/21, 8 March 2022, https://www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/Fallberichte/Kartellverbot/2022/B2-87-21.pdf?__blob=publicationFile&v=2). |
| Is there specific antitrust regulation in your jurisdiction to be aware of which might give rise to private or class action ESG litigation? | No. Apart from the general option to privately enforce any competition infringement pursuant to sec. 33 et seq. ARC there is no specific antitrust regulation that might give rise to private or class action ESG litigation in Germany (cf. Question 1). More recently, however, some claimants in Germany are seeking to bundle claims via assignments and pursue them in a bundled manner using “claim vehicles”. |
Sustainability and Competition Global Practice Guide
No. The German competition regime (Act against Restraints of Competition, ARC) does not include any specific regulations concerning ESG measures or sustainability agreements.
Unlikely – at least for 2022.
The current federal government's coalition agreement foresees, among other things, taking up the topic of sustainability from a competitive point of view. Thus, new competition regulations are currently being developed but will most likely not come into place in 2022. The Federal Ministry for Economic Affairs and Climate Action has published its competition policy agenda until 2025 which, inter alia, also considers sustainability aspects with the defined goal of increasing legal certainty for sustainability in antitrust law. (cf. Federal Ministry for Economic Affairs and Climate Action, The competition policy […] agenda up to 2025, 21.02.2022, p. 3 – https://www.bmwk.de/Redaktion/EN/Downloads/competition-policy-agenda-up-to-2025.pdf?__blob=publicationFile&v=2).
However, some ESG regulations, in particular the German Act on Corporate Due Diligence in Supply Chains, entering into force on January 1, 2023, could have an impact on the jurisdictional competition regime even if it is not a specific competition regulation (cf. Question 8).
The Federal Cartel Office ("FCO") has issued some guidance on the role of ESG regarding competitor collaborations.
In examining sustainability initiatives, the FCO considers the following aspects:
(I) How great are the restrictions of competition caused, e.g., by aligning cost components?
(II) How does this affect the sales prices?
(III) Is access to the cooperation non-discriminatory?
(IV) Were the sustainability criteria developed in an open process?
(V) Is there sufficient transparency for consumers (in the case of labeling)?
The FCO clearly states that cooperation between competitors has to genuinely improve sustainability and must not only aim to increase the margins of a few companies. For instance, the FCO had no competition concerns about the food retail sector’s voluntary commitment to set common standards for wages in the banana sector. Also, the FCO has provided guidance to the animal welfare initiative “Initiative Tierwohl” (actually already since 2014) and in the past years has particularly encouraged improvements regarding product labeling. Going forward, the FCO is calling for the inclusion of more competition elements in that regard.
(cf. FCO, Annual Report 2020/21, 23.06.2021, p. 46 – https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Jahresbericht/Jahresbericht_2020-2021.pdf?__blob=publicationFile&v=2).
No. Insofar as the FCO has addressed in its guidelines the topic of competitor collaborations or participating in industry working groups, these guidelines do not specifically address the question of ESG measures.
However, there exists an FCO background paper from a virtual meeting of the Antitrust Law Working Group (of October 1, 2020) on the topic of “Open Markets and Sustainable Economies - Public Interest Goals as a Challenge for Antitrust Practice”, from which important aspects or views of the FCO can be taken.
Yes. The FCO offers advice and even recommends that parties proactively contact the authority in such cases, to parties regarding (sustainability) cooperation and provides guidance, especially on how to ensure that sustainability strategies are embedded in competition law. The guidance is offered inter alia through a review process (e.g. examination regarding “Living wages in the banana sector” and the animal welfare initiative “Initiative Tierwohl” in January 2022, cf. Questions 3, and 8).
(cf. FCO, Press Release, 18.01.2022 – https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2022/18_01_2022_Nachhaltigkeit.pdf?__blob=publicationFile&v=3).
Apart from the guidance given on sustainability initiatives (cf. Question 3), no further standards have been set regarding the quantification or calculation of ESG effects.
In its background paper (see Question 4), the FCO points out numerous practical and normative problems with the quantification of sustainability goals and states that their solution or handling is always a political decision in the end.
The FCO currently permits companies to pursue ESG goals, inter alia, through competitor collaborations and agreements.
To allow these collaborations and agreements despite the lack of specific regulation in the ARC, the authority has taken these sustainability aspects into account when exercising its discretionary powers and has – in certain cases – refrained from opening an investigation into these collaborations and agreements, and thus agreed that the parties proceed with the intended cooperation; it is made clear that this assessment can also change and in this respect, it must be continuously checked whether the cooperation is still permissible (cf. the mentioned cases in question 3 and 8).
Yes. There are some precedents for sustainability initiatives that have been reviewed by the FCO. Two recent examples are “Living wages in the banana sector” and “Initiative Tierwohl” which have been approved by the FCO. On the other hand, a financing concept for a market-compliant and fair distribution of risks and burdens of the agricultural transformation processes for milk producers has not been approved due to competition concerns (price fixing).
(I) Living wages in the banana sector
On behalf of the Federal Ministry for Economic Cooperation and Development, the German Society for International Cooperation ("GIZ") and German retailers intended to introduce pilot measures to promote living wages in the banana sector.
For this purpose and against the backdrop of the Act on Corporate Due Diligence in Supply Chains sector cooperation in the food retail industry is to agree on voluntary common standards and strategic goals along the private-label banana supply chain. The core objective is to jointly introduce responsible procurement practices and develop processes to monitor transparent wages. At the same time, the participating companies are planning to gradually increase the sales volume of bananas that are produced and procured in line with living-wages criteria.
In this context, no information on procurement prices, other costs, production volumes or margins is exchanged, nor are compulsory minimum prices or surcharges introduced at any point of the supply chain.
In light of the above, the FCO has come to the conclusion that there are no competition concerns regarding the voluntary commitment of food retailers to common standards on wages in the banana sector.
(II) The animal welfare initiative “Initiative Tierwohl”
“Initiative Tierwohl” is a project based on an agreement between the agricultural, meat production and food retail sectors and wishes to reward livestock owners for improving the conditions in which animals are kept. The initiative is mainly financed by the four largest food retailers EDEKA, REWE, Aldi and the Schwarz Group. A key component of the initiative is paying participating livestock owners a standard premium (referred to as “animal welfare payment”) via the participating slaughterhouses. The price premium for pork is EUR 5.28 per pig; the premium for poultry ranges from EUR 0.0285 to EUR 0.04 per kilogram, depending on the type of poultry. So far, the initiative only covers the production of poultry meat and pork.
The initiative plans to introduce this model for cattle fattening, beginning in 2022, which will also affect the dairy sector.
The FCO has provided guidance to the initiative since 2014 and in the past years has particularly encouraged improvements regarding product labeling, thus making it easier for consumers to identify the meat on offer that actually comes from a participating farm with improved standards, and has over the years recommended several adjustments to the financing model to be in line with competition regulation.
(III) Financing concept for a market-compliant and fair distribution of risks and burdens of the agricultural transformation processes for milk producers
Representatives of the German milk producers have contacted the FCO and presented a coordinated financing concept in favor of the raw milk producers. According to the milk producers, this was necessary because milk prices were not adequate and did not cover costs. The FCO considered the concept to be an inadmissible price agreement.
The financing model presented essentially revolves around the agreement of price surcharges, which are to be passed on through the supply chain to the “supermarket milk rack” – and thus the consumer. While public welfare objectives such as sustainability are legally acknowledged, the economic interest in a higher income level cannot by itself justify an exemption of such an agreement, especially since sustainability aspects played no role in the financing model.
However, the milk producers have the possibility to present a sustainability concept that does not resort to price fixing at the expense of consumers.
(cf. FCO, Press Release, 18.01.2022 – https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2022/18_01_2022_Nachhaltigkeit.pdf?__blob=publicationFile&v=3 and FCO, Report re B2-87/21, 8 March 2022, https://www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/Fallberichte/Kartellverbot/2022/B2-87-21.pdf?__blob=publicationFile&v=2).
No. Apart from the general option to privately enforce any competition infringement pursuant to sec. 33 et seq. ARC there is no specific antitrust regulation that might give rise to private or class action ESG litigation in Germany (cf. Question 1).
More recently, however, some claimants in Germany are seeking to bundle claims via assignments and pursue them in a bundled manner using “claim vehicles”.