In April 2025, the European Commission fined 15 major automakers for colluding in the form of a ‘green cartel’ about recycling certain products. This again calls into question the idea of green agreements, which represent an important intersection of Competition Law and Sustainable Development, and the balanced approach regulators have to take to reconcile these two important areas of public interest. The 2015 session of the United Nations General Assembly, which adopted the 2030 Agenda for Sustainable Development, outlined how regulatory changes regarding competition law can contribute to achieving the Sustainable Development Goals. Many national and regional competition regulators realised the need to shift more towards an incentive-based approach, which not only helps achieve sustainability goals but also enables prudent regulation that incentivises commercial practices to further these green objectives. This is where the origin of green cartels began as a regulatory measure.
Many regulators have introduced various guidelines to tackle the balancing approach required to manage these two subjects of public importance. However, this trend is something that neither India’s Competition Act, 2002, nor India’s anti-trust regulator, the Competition Commission of India (‘CCI’), has investigated or incorporated into its regulation of such conduct. India has declared an ambitious target to achieve net carbon neutrality by 2070 and wants to cut carbon emissions to 45% of its 2005 level by 2030. It has advanced in terms of promoting green incentives through the promotion of measures such as the inclusion of the Carbon Credit Trading Scheme in 2022, and production-linked incentive schemes being extended to the renewable energy sector. However, it has been slow on the competition regulation front. In fact, the Competition Commission of India, during the 2023 BRICS Conference, had laid out a roadmap on how it would like to also play a role in achieving these sustainable development goals. Through this piece, the authors will argue why allowing green cartels would be the first such measure Competition Commission of India could consider. The first section would give an overview of the international best practices across various jurisdictions that have evolved regarding the recognition and regulation of green cartels. The second section would explore the Indian regulatory landscape regarding the same. The third section would look at the gaps and make suggestions on how this idea of green cartels can be incorporated into the Indian regulatory landscape.
Understanding the 101 Green Cartel Regulations: Lessons From Different Foreign Regulators Across The Globe
The first model that can be looked into is the 2023 Guidelines that the European Union (EU) issued regarding Horizontal Co-operative Agreements, which relates to Article 101 of the Treaty on the Functioning of the European Union (TFEU). This reform was part of the larger Green Deal that the EU was bringing into force. A special chapter was added regarding agreements that can arise between competing entities that deal with sustainable development goals. The subject matter of agreements about sustainability was broad-based but limited to the 17 Sustainable Development Goals. Under Paragraph 9.1, the special chapter makes it clear that any agreement that restricts competition cannot be penalised for cartelization merely because it pursues a sustainable goal that is being achieved. The regulator will have to take into account a balancing approach so that such agreements do not affect other commercial parameters like price, quantity, customer choice or innovation through an assessment under Article 101(1) of TFEU. The Guidelines also introduce a soft safe harbour provision wherein even if a sustainability agreement between competing entities affects normal parameters which are used to assess the anti-competitive nature of that agreement, provided that the effect on competition in that market is de minimis, especially to sustainability standardisation agreements. Even if the soft safe harbour test cannot be satisfied, Paragraph 9.4 of the Guidelines allows for exemption from the cartelization penalty provided that such sustainable agreements are indispensable in achieving that sustainable goal and consumers benefit from it fairly and through improved efficiency. Paragraph 9.2 of the 2023 Guidelines clearly excludes agreements that deal with aspects like compliance with environmental standards as per international conventions or treaties, agreements dealing with internal company conduct that has no effect on the entity’s market activity, and agreements that deal with the compilation of databases and environmental campaigns. Thus, the EU, rather than a carrot and stick approach, takes a qualified, narrowly tailored balance approach applying different yardsticks depending on the nature of the agreement involved, which is an ex-post measure. In the EU Context, it would be relevant to look specifically at some green agreements various manufacturers’ associations came up with, too. Some notable instances of such agreements include the International Air Transport Association’s decision, which made competing airlines coordinate research and development for sustainable aviation fuel and the European Automobile Manufacturers Association’s decision to set common standards for electric vehicles to reduce greenhouse gas emissions.
The second model is the British model, which has a more generalist approach, and takes the colour of an ex-ante method of regulation. The Competition and Markets Authority (‘CMA’), Britain’s central anti-trust regulator, issued the Sustainability Draft Guidance Note in 2023 as part of the larger green-washing investigations other regulators were carrying on. This mechanism’s subject matter is slightly different from the EU Guidelines, as it covers environment sustainability agreements (‘ESAs’) with climate change agreements explicitly forming a subset under this Note. Moreover, unlike the EU, where the regulator is required to take an assessment only after the deal itself is concluded to do the weighing and balancing test as laid down in Article 101(1) or Article 101(3), the CMA calls parties to come forward to disclose these environmental potential sustainability agreements beforehand. If the Agreement is disclosed and approved by the CMA, the competing entities will not face any enforcement action. The Draft Guidance also makes a difference between ESAs, which could cause market distortions on the basis of the objectives it tries to pursue. Like the EU Guidelines, ESAs such as internal commercial codes of conduct, methodologies to calculate emissions and levels of pollution and standardisation agreements are exempt from any legal action despite possible market distortions they can have. On the other hand, ESAs, which are prohibited, include fixing the prices of green products and limiting technological development merely to evade green standards.
Other countries’ models, which can be explored, include the model of Japan, where a three-fold administrative-law-like regulation is laid down. According to the Japanese Fair Trade Commission, a green cartel resulting from a sustainability agreement is permitted provided that the measure sought to be achieved is legitimate, the measure itself is reasonable and is the least restrictive with no better alternatives, and the test of weighing and balancing the pro-competitive and anti-competitive effects of the measure is fulfilled. However, the Japanese Fair-Trade Commission further qualifies this under Part I Section 2 as not allowing those acts (even if they are in furtherance of a green objective) that restrain aspects like price, entry of new enterprises in a sector and creation of any market roadblocks to existing players. This clearly shows the balancing approach that the Fair Trade Commission takes between sustainable goals and competition principles.
The last model that regulators have taken includes a utilitarian one wherein if the ESA’s sustainability benefits overall are more than the anti-competitive effects, then no enforcement measure is warranted. These models can be observed in cases like the Dutch Guidelines published by the ACM in 2020. A similar approach has been taken by the Australian Competition and Consumer Commission in the Tyre Stewardship Scheme, where the Commission granted authorisation of competing producers to enter into recycling agreements as the sustainability benefits outweigh any anti-competitive effects that could arise. Even the Commerce Commission of New Zealand had taken a similar approach in the famous Refrigerant License Trust Board (RLTB) case, wherein the Commission approved an agreement of refrigerant wholesalers to sell only to trained refrigerant retailers so as to reduce emissions, which would otherwise exacerbate ozone emissions.
Some interesting perspectives emerge from the OECD, too. According to OECD’s Paper on Environmental Considerations on Competition Enforcement, a green collaborative agreement is any agreement that has been formed for achieving specific environmental objectives, which otherwise would be considered anti-competitive. Some notable instances of such agreements include the International Air Transport Association’s decision, which made competing airlines coordinate research and development for sustainable aviation fuel and the European Automobile Manufacturers Association’s decision to set common standards for electric vehicles to reduce greenhouse gas emissions.
The Indian Legal and Policy Landscape
The Competition Act, 2002 (the ‘Act’) aims to establish a modern effects-based regime but remains structurally resistant to collaborative environmental agreements and ends up classifying them as prohibited cartel conduct. Section 3(1) prohibits an agreement between enterprises or persons with respect to production, supply, distribution, or pricing of goods and services that causes an “appreciable adverse effect on competition (‘AAEC’) within India.
This section particularly targets horizontal agreements, i.e., collusion between competitors at the same level of the supply chain. In cases of horizontal agreements, the law places a mandatory presumption of AAEC, thus shifting the entire burden of proof on the enterprises to establish that, despite the restraint being caused by their agreement, there is no AAEC caused, or their agreement falls under the narrow efficiency classification under Section 19(3).
This inherently creates a problem for green collaborations because even genuine collaborations like agreements to shift to a costly but greener raw material instead of a polluting raw material, or agreements to jointly reduce carbon output of the industry, often require some restrictions to be placed on input choices and production capacity. As per the scheme of the Act, these input/output restrictions trigger the AAEC presumption, and the agreement is treated as a near-per-se violation. The enterprises cannot take shelter under Section 19(3), which balances competitive harm with efficiencies, as these agreements are in furtherance of a non-market social benefit, i.e., reduced pollution, rather than a traditional efficiency reason like cost reduction or market expansion. Thus, the enterprises face a disproportionately high burden of proof, which contradicts the balancing required by a true rule of reason approach, the very principle upon which Indian competition law rests.
In Builders Association of India vs Cement Manufacturers’ Association & Ors (‘Cement Case’)., the Competition Commission of India (CCI), while finding cement manufacturers guilty of collusion regarding price, production and supply of cement, observed that the manufacturers had failed to prove any “efficiency gains or improvements in production, distribution, or services” resulting from their agreement. Thus establishing that efficiency defence under Section 19(3) is to be interpreted strictly and it must only translate to quantifiable, immediate improvements in market performance
In the Original Equipment Manufacturers (OEMs) in the Automobile Sector Case, concerning the restriction on the sale of spare parts, the court observed that any possible restriction on the sale of a comparatively cheaper counterpart would amount to an anti-competitive practice. This logic, however, raises a doctrinal problem when it comes to green cartels, as the restriction in furtherance of an environmental goal might require producers to operate with comparatively expensive counterparts despite the presence of cheaper, albeit polluting, counterparts.
Part II can be accessed here.
Vaibhav Pratap Singh is a fifth-year student at National Law University, Jodhpur and Krishna Ravishankar is a graduate of National Law University, Jodhpur.
