India stands at a critical juncture in balancing economic growth with sustainable development. As the world grapples with the climate crisis, our country has shown remarkable commitment through initiatives like the Green Credit Programme and the National Action Plan on Climate Change, both part of its ambitious climate goals.
However, a significant hurdle that continues to impede private sector participation in sustainability efforts is the rigidity and strictness of competition law.
Current provisions under the Competition Act, 2002, particularly Section 3, fail to account for sustainability/green agreements that allow enterprises to collaborate for the greater social good. Traditionally, competition law has been reluctant to support cooperation agreements between potential or existing competitors, presuming such collaborations as illegal due to concerns about reducing competition in the market. This legal framework discourages and sanctions horizontal cooperation between businesses, even when such partnerships could yield substantial environmental benefits.
For instance, agreements to reduce CO2 emissions or introduce eco- friendly products/technology should not be penalised as anti-competitive but rather encouraged as vital contributions to India’s sustainable future. Moreover, the 2023 amendment to the Competition Act has not addressed this gap, leaving enterprises reluctant to innovate collectively on sustainability issues.
While international jurisdictions such as the European Union have adopted a more expansive interpretation of competition law to incorporate and advance environmental objectives, India’s legal system overlooks the integration of social and environmental considerations. For instance, the European Green Deal and the 2023 Revised Horizontal Guidelines, which provide an updated interpretation of Article 101(3) of the Treaty on the Functioning of the European Union, offer legal grounds for exempting sustainability agreements from competition law scrutiny. These forward-thinking policies incentivise businesses to adopt sustainable practices that benefit both society and the environment. It is time for India to follow suit and revise its legal framework to allow businesses to act in alignment with its climate targets.
Small and medium-sized enterprises (SMEs), in particular, stand to benefit from such reforms. Exempting sustainability agreements from competition law restrictions would allow smaller businesses to collaborate with larger enterprises on eco-friendly initiatives without being squeezed out by competitive pressures or fearing sanctions for anti-competitive behaviour. By participating in such collaborations, smaller enterprises can benefit from economies of scale, such as shared resources, reduced costs for green technologies, and access to larger distribution networks, which would otherwise be beyond their reach if they were to operate independently.
A policy framework that explicitly exempts sustainability agreements from the purview of anti-competitive practices would not only drive environmental protection, but also enhance consumer welfare in the long run. The Competition Commission of India (CCI) can explore a case-by-case approach, wherein collaborations aimed at reducing environmental harm are assessed through the lens of both consumer and societal welfare, in line with the Directive Principles of State Policy of the Constitution of India, which mandate the protection and improvement of the environment.
Furthermore, there is a need for clearer guidelines and informal advisory channels within the CCI to facilitate businesses in navigating the complexities of sustainability and competition law.
In conclusion, as India seeks to align with global sustainability objectives, the competition law framework must evolve to accommodate the unique challenges posed by the climate crisis. Legal reform that integrates environmental and social considerations into competition policy will enable businesses to collaborate for the greater good, helping India achieve its ambitious sustainability goals while maintaining economic growth. This dual focus on competition and sustainability can position India as a leader in the global movement towards a greener, more equitable future.
Hartej Singh Kochher and Shubham Shukla are Assistant Professors of Law at Vinayaka Mission's Law School, Chennai.