Green competition law and pre-competitive collaboration on human rights
Fiona David
Competition law is not where human rights advocates usually go when looking to drive change at scale. But if trends from Europe toward "green competition" laws are anything to go by, we should be having a closer look.
Join any industry roundtable on sustainability topics in Australia today, and you will likely be given a reminder about Australia's Competition and Consumer Act 2010 and the need to avoid anti-competitive conduct while collaborating on sustainability.
Competition laws serve a critical purpose, encouraging business to innovate and find ways to work more efficiently, driving lower prices, choice and higher quality products. The Australian Competition and Consumer Commission (ACCC) describes the purpose as follows:
"The Competition and Consumer Act 2010 sets rules for business behaviour so that all businesses can compete on their merits."
While these laws are critical, there are some issues that sit well beyond the scope of competition. Safety is the classic. Following the publication of Ralph Nader's seminal Unsafe at any speed bestselling book in 1965, the consumer lobby made it clear they did not want to buy a car that was cheap but inherently unsafe.
Increasingly, respect for human rights in the conduct of business falls into this "pre-competitive" category.
Why is this issue particularly relevant today? Consider the many Australian businesses racing to procure critical minerals and materials for the net zero transition. We know the need to decarbonise is urgent. Perhaps less well known are some of the human rights risks hidden in related supply chains.
The recent Global Slavery Index highlights some of the human rights issues related to critical minerals, noting:
"From 2019 to 2021, the Business and Human Rights Centre tracked almost 200 allegations of human rights abuses related to the mining of cobalt, copper, lithium, manganese, nickel, and zinc — all essential minerals for renewable energy products.20 Abuses included unpaid wages, underpaid wages, exploitative hiring and firing practices, child labour, and discrimination based on gender, sexuality, race, caste, or religion.21 Widespread experiences of forced labour also occur in cobalt mining in the Democratic Republic of the Congo (DRC).22"
The Index also noted that:
"Solar panels are within the top five at-risk [of modern slavery] products for 11 G20 countries: Argentina, Australia, Brazil, France, Germany, India, Japan, Mexico, South Africa, South Korea, and Türkiye."
The conundrum for responsible businesses is how can they balance the need to move at speed to renewable energy, while respecting human rights. These issues are being experienced industry wide, making it inefficient to leave it to individual businesses to solve one case at a time. Like other pre-competitive issues, there is a strong case for collective action.
Can Australian business collaborate to find ways to collectively respond to modern slavery risk today? At present, there are processes whereby businesses can seek authorisation from the ACCC to collaborate with competitors, such as the setting of industry standards and codes, that would otherwise breach competition law. The ACCC can authorise conduct, which has to be sought in advance, if it is satisfied the likely "public benefit" from the conduct outweighs the likely public detriment. But what is the public benefit in this case? Does it include human rights?
The term "public interest" is not defined in the Competition and Consumer Act. However, as Sims and Woodbridge note, the Australian Competition Tribunal has in the past, described the "public interest" as:
"[A]nything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress. Plainly the assessment of efficiency and progress must be from the perspective of society as a whole: the best use of society’s resources. We bear in mind that (in the language of economics today) efficiency is a concept that is usually taken to encompass “progress”; and that commonly efficiency is said to encompass allocative efficiency, production efficiency and dynamic efficiency."
There is a clear case to be made that combating modern slavery risk is in Australia's "public interest". Australia has legal obligations under various treaties to prevent slavery and forced labour. These are given effect through Australia's criminal laws and the Modern Slavery Act (2018). The Government guidance to business on implementing the Modern Slavery Act makes it clear that these obligations are rooted in the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, both of which frame leverage in collaborative terms.
The ACCC has previously found in favour of collaboration that serves the public benefit of protecting the labour rights of another group vulnerable to exploitation, homeworkers. A search of the ACCC register confirms that at least one industry group, representing the telecommunications industry, has made an application to the ACCC specific to collaboration on modern slavery risk but the application was withdrawn.
Big business has the deep pockets to test the appetite of the ACCC to see if collaboration of this nature falls within the "public interest" exemption to competition laws. Equally, the government could assist the situation, by being clearer on policy intent and what constitutes acceptable collaboration.
Compare for example, the situation in Australia to the European Union. The European Commission in July amended competition law to exempt “horizontal cooperation agreements” that address "sustainability" objectives. Of course in the European context, sustainable development encompasses “activities that support economic, environmental and social (including labour and human rights) development."
As the Commission guidance notes, while competition law contributes to sustainable development, there are also market failures that can be addressed by collective action. This can involve public policy or sector specific regulation – but also cooperation agreements. The new arrangements make it much clearer and easier for businesses to identify the types of business to business collaboration that are acceptable (beyond competition law) and those that are not. The guidance includes several examples such as the following:
- cooperation that aims solely to ensure compliance with fundamental social rights or prohibitions (eg: the use of child labour, the logging of certain types of tropical wood or the use of certain pollutants);
- cooperation that doesn't relate to the economic activity of the organisations involved, but their internal corporate conduct (eg: procurement).
In Australia, it seems likely that the ACCC would grant exemptions to businesses, where these are sought, to authorise collaboration between competitors in the service of human rights. But this takes money and time, a scarce resource in the race to net zero. Arguably, the opportunity for collaboration of this nature would be easier if it was clearer that genuine pre-competitive conduct on sustainability and human rights was a carve out from competition laws.
In the absence of clarity, I think there is value here in Australia at looking at the European "green competition" model, for the pre-competitive space it opens up on sustainability writ large, including human rights.
Agree? Disagree? Have a different perspective, I'd love to hear from you.
Resources
The European Commission Guidelines are here.
Read more about the new European competition approach here.
Documentation on the Telco Together application to the ACCC is here.
Sims, R., & Woodbridge, G. (2020). Public Interest in Antitrust Enforcement: An Australian Perspective. The Antitrust Bulletin, 65(2), 282–296 here.
ACCC Determination on Homeworkers, here.
