1 00:00:00,000 --> 00:00:05,400 Sustainability and carbon neutrality have become one of the world's foremost priorities. 2 00:00:05,400 --> 00:00:11,400 As a result, companies may potentially employ sustainability agreements with their competitors, 3 00:00:11,400 --> 00:00:15,800 for example, to standardise packaging so it is more easily recycled, 4 00:00:15,800 --> 00:00:21,400 or to share information regarding suppliers that have more environmentally-friendly processes. 5 00:00:21,400 --> 00:00:26,400 However, these agreements may fall afoul of competition and antitrust laws, 6 00:00:26,400 --> 00:00:32,400 which may very well cause businesses to dial back on joint initiatives that might help to address climate change. 7 00:00:32,400 --> 00:00:36,400 In July 2023 and October 2023 respectively, 8 00:00:36,400 --> 00:00:40,400 the European Commission and the UK Competition and Markets Authority 9 00:00:40,400 --> 00:00:46,000 have released guidelines to differentiate between sustainability agreements that are anti-competitive 10 00:00:46,000 --> 00:00:48,000 and those which are permissible. 11 00:00:48,000 --> 00:00:51,600 In this episode, we will be discussing the potential intersections 12 00:00:51,600 --> 00:00:55,600 between competition law and sustainability agreements. 13 00:00:55,600 --> 00:00:59,000 Welcome to the Oxford Undergraduate Law Podcast, 14 00:00:59,000 --> 00:01:02,800 where we discuss the law and its relationship with society. 15 00:01:02,800 --> 00:01:04,000 I'm Juliette, 16 00:01:04,000 --> 00:01:06,800 and I'm Rach, and we are your podcast editors. 17 00:01:06,800 --> 00:01:12,000 We will platform academics, practitioners and experts from different backgrounds on this podcast. 18 00:01:12,000 --> 00:01:16,600 Today we are joined by Benoit Durand, a partner at RBB Economics. 19 00:01:16,600 --> 00:01:20,600 RBB Economics is a global leader in competition economics, 20 00:01:20,600 --> 00:01:27,200 which works alongside law firms to advise companies in the context of competition law investigations 21 00:01:27,200 --> 00:01:31,400 by enforcers or in the context of litigation in front of courts. 22 00:01:31,400 --> 00:01:35,000 He has a PhD in economics from Boston College, 23 00:01:35,000 --> 00:01:38,800 and has over 20 years of experience in competition economics, 24 00:01:38,800 --> 00:01:43,000 particularly in the context of competition law investigations. 25 00:01:43,000 --> 00:01:50,200 He has advised companies like Nespresso, Google, Amazon, British Airways and DuPont, among others. 26 00:01:50,200 --> 00:01:55,600 He was previously the Director of Economic Analysis at the UK's Competition Commission, 27 00:01:55,600 --> 00:02:00,200 which is now part of the UK Competition and Markets Authority in London, 28 00:02:00,200 --> 00:02:04,800 and a member of the Chief Economist Team at the Directorate-General for Competition 29 00:02:04,800 --> 00:02:07,200 at the European Commission in Brussels. 30 00:02:07,200 --> 00:02:09,800 So thank you so much for joining us today. 31 00:02:09,800 --> 00:02:13,800 First off, perhaps you could start with what are sustainability standards 32 00:02:13,800 --> 00:02:17,400 or sustainability agreements that we're concerned with in this context? 33 00:02:17,400 --> 00:02:21,800 So why are they important and what do they look like in the market? 34 00:02:21,800 --> 00:02:25,200 Well, first of all, thank you very much for having me. 35 00:02:25,200 --> 00:02:30,200 I'm delighted to speak to you and to discuss this, the concern, 36 00:02:30,200 --> 00:02:36,800 or at least discuss this very important topic, sustainability, standard and environmental sustainability, 37 00:02:36,800 --> 00:02:40,200 and how this interplays with competition law, 38 00:02:40,200 --> 00:02:46,200 because there's been a lot of talks about the relationship, let's say, between sustainability. 39 00:02:46,200 --> 00:02:52,400 Sustainability goes on the one hand and the objective of competition policy on the other hand. 40 00:02:52,400 --> 00:02:57,800 And in Europe in particular, and also the UK, since the UK is outside Europe, 41 00:02:57,800 --> 00:03:01,800 I'm going to use the term Europe as political definition. 42 00:03:01,800 --> 00:03:06,600 So the European Union, when I refer to Europe, and then the UK will be outside that. 43 00:03:06,600 --> 00:03:12,400 So both the CMA in the UK and the European Commission for the European Union 44 00:03:12,400 --> 00:03:18,600 developed some document to explain how they plan to adapt, if anything, 45 00:03:18,600 --> 00:03:23,600 competition policy to achieve sustainability objectives or environmental sustainability objectives. 46 00:03:23,600 --> 00:03:29,000 So now your question, sorry, so a bit of a long introduction to come back to your question 47 00:03:29,000 --> 00:03:32,600 and to at least cast your question in that context. 48 00:03:32,600 --> 00:03:35,600 What are sustainability standards? What are they important? 49 00:03:35,600 --> 00:03:39,800 And let me say that first, I'm not an expert in sustainability. 50 00:03:39,800 --> 00:03:42,800 I'm not an environmental economist. I'm a competition economist. 51 00:03:42,800 --> 00:03:49,200 So your audience will have to realize that what I say is probably has more authority 52 00:03:49,200 --> 00:03:55,400 when it comes to competition policy than it has when it comes to environmental objectives. 53 00:03:55,400 --> 00:04:04,400 Now, clearly there is an objective, a policy objective, a global objective to achieve, 54 00:04:04,400 --> 00:04:10,800 you know, to protect the environment. And there is the notion of sustainable development, 55 00:04:10,800 --> 00:04:14,800 which is essentially to limit damages to the environment and make sure 56 00:04:14,800 --> 00:04:19,800 sources are preserved for future generations. So that's very, very broad. 57 00:04:19,800 --> 00:04:24,200 Now, there is no clear definition what sustainability means really, 58 00:04:24,200 --> 00:04:26,000 because sustainability could mean many things. 59 00:04:26,000 --> 00:04:29,400 But if we start focusing on environmental sustainability, 60 00:04:29,400 --> 00:04:33,000 we have a bit more tangible what we are talking about. 61 00:04:33,000 --> 00:04:39,000 So in Europe, the European Union has clearly set out a very clear objective. 62 00:04:39,000 --> 00:04:43,800 And one objective, which is set out in the Green Deal, EU Green Deal, 63 00:04:43,800 --> 00:04:48,000 is that by 2050, the European Union should be carbonized. 64 00:04:48,000 --> 00:04:52,800 So there should be net zero greenhouse gas emissions. So we should be at zero, right? 65 00:04:52,800 --> 00:04:56,800 So that's pretty clear what that objective is. 66 00:04:56,800 --> 00:05:00,600 So that as a standard, we get to give it to the Commission 67 00:05:00,600 --> 00:05:07,200 and that they give us a very clear objective and a clear metric to abide by. 68 00:05:07,200 --> 00:05:10,800 But that's basically to set the scene broadly. 69 00:05:10,800 --> 00:05:15,400 Yeah. So I think we've set out why sustainability standards are important 70 00:05:15,400 --> 00:05:17,200 and I guess what the goals are. 71 00:05:17,200 --> 00:05:23,800 So what do you think then are the aims and concerns of competition law in contrast? 72 00:05:23,800 --> 00:05:28,200 OK, so I'm not a lawyer, but I have a good understanding of what the objective 73 00:05:28,200 --> 00:05:31,200 of competition law should be, at least from an economics perspective, 74 00:05:31,200 --> 00:05:34,000 which may be a different perspective. 75 00:05:34,000 --> 00:05:38,000 But at least if we start like this, broadly speaking, 76 00:05:38,000 --> 00:05:42,000 the objective of competition law is that we are working in market economies. 77 00:05:42,000 --> 00:05:46,800 OK, so if you think about, I'm going to simplify things, 78 00:05:46,800 --> 00:05:49,600 but you could think of two ways of organizing the economy. 79 00:05:49,600 --> 00:05:52,600 You can have market economy or planet economy. 80 00:05:52,600 --> 00:05:55,600 I think the planet economy is kind of dead 81 00:05:55,600 --> 00:06:00,400 and we are more in a system where the economy is organized around markets, 82 00:06:00,400 --> 00:06:04,600 even though there are policy interventions, which can actually be justified. 83 00:06:04,600 --> 00:06:10,800 Now, the objective of competition law in this context is to tame the excessive use of market power. 84 00:06:10,800 --> 00:06:14,800 What does that mean? It means firms may have market power, 85 00:06:14,800 --> 00:06:18,800 they have the ability to increase prices above cost. 86 00:06:18,800 --> 00:06:21,600 OK, and why is it not a good thing? 87 00:06:21,600 --> 00:06:25,600 It's not a good thing because it means that markets are not working very well, 88 00:06:25,600 --> 00:06:31,600 they are not resulting in an outcome where resources are located efficiently. 89 00:06:31,600 --> 00:06:35,600 We could actually produce more because some consumers would be willing to pay 90 00:06:35,600 --> 00:06:40,600 even a price that is still above the cost of the product that you could produce. 91 00:06:40,600 --> 00:06:45,600 So in many ways, market power is a manifestation of market failure. 92 00:06:45,600 --> 00:06:50,600 OK, hence it's important that whenever possible, that market power be tamed, 93 00:06:50,600 --> 00:06:55,600 so that there is more production and more consumption at lower prices, 94 00:06:55,600 --> 00:06:57,600 which is very good for economic progress. 95 00:06:57,600 --> 00:07:02,600 Now, market power in and of itself is not always bad, 96 00:07:02,600 --> 00:07:07,600 and I like to make it very clear so that the audience doesn't come out and say, 97 00:07:07,600 --> 00:07:12,600 oh, market power is terrible, we need to tame it to restrict it. 98 00:07:12,600 --> 00:07:15,600 Well, the thing is market power can be acquired by a company 99 00:07:15,600 --> 00:07:19,600 because they are just the best in the market, just to put it simply. 100 00:07:19,600 --> 00:07:24,600 If a company develops a product or services that is just more popular 101 00:07:24,600 --> 00:07:31,600 and where customers go to, then it's almost normal that it wins the market, 102 00:07:31,600 --> 00:07:34,600 or at least it's got a large market share on the market, 103 00:07:34,600 --> 00:07:42,600 and we don't want actually to prevent that kind of behavior or conduct 104 00:07:42,600 --> 00:07:46,600 because the company is invested into developing a product or services 105 00:07:46,600 --> 00:07:49,600 that actually is the winning service or winning product, 106 00:07:49,600 --> 00:07:51,600 which actually benefits society. 107 00:07:51,600 --> 00:07:53,600 So we need to be a bit careful. 108 00:07:53,600 --> 00:07:56,600 Now, they are, and this is where competition law comes, 109 00:07:56,600 --> 00:08:05,600 they are ways into which company, firms, may actually do things, 110 00:08:05,600 --> 00:08:08,600 and I'll come to be a bit more specific in a minute, 111 00:08:08,600 --> 00:08:12,600 to actually increase market power or exercise market power, 112 00:08:12,600 --> 00:08:16,600 which is not really, as the lawyers would call it, competition on the merit. 113 00:08:16,600 --> 00:08:20,600 They are not really exercising market power because they have offered a product 114 00:08:20,600 --> 00:08:23,600 that is unique or because of business acumen, 115 00:08:23,600 --> 00:08:28,600 it's more they're doing something to restrict so-called competition. 116 00:08:28,600 --> 00:08:32,600 And so in that sense, competition law has several instruments 117 00:08:32,600 --> 00:08:37,600 to limit this kind of unjustified exercise of market power. 118 00:08:37,600 --> 00:08:42,600 So first one, which is very easy to understand, is cartel agreements. 119 00:08:42,600 --> 00:08:47,600 Cartel agreements are essentially agreements between firms 120 00:08:47,600 --> 00:08:49,600 so that they restrict competition. 121 00:08:49,600 --> 00:08:53,600 They come together around the table, like we do here today in the room, 122 00:08:53,600 --> 00:08:57,600 and agree not to compete against each other, 123 00:08:57,600 --> 00:09:02,600 possibly even fixing prices so that they don't undercut each other. 124 00:09:02,600 --> 00:09:06,600 Clearly, the objective of this agreement is to actually raise prices 125 00:09:06,600 --> 00:09:09,600 and therefore increase the gap between price and cost, 126 00:09:09,600 --> 00:09:12,600 and this gives rise to an unduly use of exercise market power. 127 00:09:12,600 --> 00:09:16,600 So that's really bad for society, it's bad for the allocation of resources, 128 00:09:16,600 --> 00:09:18,600 it's bad for consumers. 129 00:09:18,600 --> 00:09:23,600 And authorities, at least in Europe and the UK, 130 00:09:23,600 --> 00:09:26,600 have, and even in the US and North America, 131 00:09:26,600 --> 00:09:29,600 they have instruments to fight cartels, 132 00:09:29,600 --> 00:09:32,600 and in Europe it's called Article 101 of the Treaty, 133 00:09:32,600 --> 00:09:38,600 which is basically setting out that some agreements are restricting competition, 134 00:09:38,600 --> 00:09:41,600 and cartel agreements are certainly one of them. 135 00:09:41,600 --> 00:09:44,600 Now, there are other types of agreements that also restrict competition 136 00:09:44,600 --> 00:09:46,600 that are not obviously restricting competition, 137 00:09:46,600 --> 00:09:49,600 but need or require nevertheless some assessment. 138 00:09:49,600 --> 00:09:53,600 So there are other types of agreements between competitors 139 00:09:53,600 --> 00:09:59,600 which may restrict competition, but which may not be a cartel. 140 00:09:59,600 --> 00:10:04,600 So the grey zone is, for example, the exchange of information. 141 00:10:04,600 --> 00:10:07,600 Exchange of information happens between competitors 142 00:10:07,600 --> 00:10:10,600 because they want to establish new standards, 143 00:10:10,600 --> 00:10:16,600 it's actually useful to provide information about how the industry operates. 144 00:10:16,600 --> 00:10:19,600 And so the type of information may actually be quite important here 145 00:10:19,600 --> 00:10:25,600 to make sure that the agreement does not turn into a cartel agreement, 146 00:10:25,600 --> 00:10:29,600 or there may be also, I always want to agreement between just a subset of competitors. 147 00:10:29,600 --> 00:10:33,600 You know, people may do joint ventures, they may do joint research programs, 148 00:10:33,600 --> 00:10:37,600 so those are also, they could restrict competition, or at least part of it. 149 00:10:37,600 --> 00:10:39,600 And then there's also vertical agreement. 150 00:10:39,600 --> 00:10:44,600 So vertical agreement will exist whenever, say, a manufacturer will tell its distributor, 151 00:10:44,600 --> 00:10:48,600 for example, you shall do things in this way and not in this way. 152 00:10:48,600 --> 00:10:55,600 But if it tells all of its distributor, it imposes on its distributor a number of measures 153 00:10:55,600 --> 00:10:59,600 such that they restrict competition between the distributors. 154 00:10:59,600 --> 00:11:03,600 That's what we call restriction of intra-brand competition. 155 00:11:03,600 --> 00:11:08,600 So I can use a jargon here, but we distinguish, and I won't go into further detail, 156 00:11:08,600 --> 00:11:13,600 but just so people understand, vertical agreement may seem as damaging competition 157 00:11:13,600 --> 00:11:17,600 when actually they restrict what we call intra-brand competition. 158 00:11:17,600 --> 00:11:23,600 So imagine a product, say, a brand of mineral water that is sold by different supermarkets, 159 00:11:23,600 --> 00:11:27,600 but the manufacturer or the producer of this water says, 160 00:11:27,600 --> 00:11:33,600 you shall sell the mineral water at this price, you know, and everybody has the same price. 161 00:11:33,600 --> 00:11:35,600 You cannot set the price below or above. 162 00:11:35,600 --> 00:11:40,600 That limits competition between the supermarkets on this water, for this water. 163 00:11:40,600 --> 00:11:43,600 So that's limited intra-brand competition. 164 00:11:43,600 --> 00:11:47,600 That doesn't mean there is no competition with other brands of mineral water. 165 00:11:47,600 --> 00:11:50,600 Now, a parenthesis, because I know you're from Singapore. 166 00:11:50,600 --> 00:11:54,600 This kind of restriction is not illegal in Singapore, but it is in Europe. 167 00:11:54,600 --> 00:12:01,600 So there are these arsenal of instruments to limit what we call restricted agreement, 168 00:12:01,600 --> 00:12:06,600 which could give rise to an increase in price and increase the gap between price and cost. 169 00:12:06,600 --> 00:12:11,600 Then there is another instrument, which is in the parlay of the European Union, 170 00:12:11,600 --> 00:12:17,600 which is called the abuse of dominant position, which is regimented by Article 102. 171 00:12:17,600 --> 00:12:24,600 And it says that companies that have acquired a dominant position may not abuse that dominant position. 172 00:12:24,600 --> 00:12:27,600 There is nothing wrong with having a dominant position. 173 00:12:27,600 --> 00:12:31,600 You can acquire a dominant position, but you cannot abuse it. 174 00:12:31,600 --> 00:12:37,600 So you can be in a situation where you are the largest supplier in the market. 175 00:12:37,600 --> 00:12:43,600 Typically, the case law says that you dominate, and I say the case law, not an economist, by the way. 176 00:12:43,600 --> 00:12:48,600 The case law says that you dominate whenever you have a market share above 50%, 177 00:12:48,600 --> 00:12:50,600 except for exceptional circumstances. 178 00:12:50,600 --> 00:12:57,600 So typically, you presume to own the dominant position every time you have a market share above 50%. 179 00:12:57,600 --> 00:13:02,600 And in that sense, there are a number of things you cannot do, 180 00:13:02,600 --> 00:13:06,600 because then it would be seen as an abuse of dominant position. 181 00:13:06,600 --> 00:13:09,600 And there are ways you can abuse your dominant position, 182 00:13:09,600 --> 00:13:17,600 is to foreclose your competitors, to basically prevent your smaller rival to compete with you. 183 00:13:17,600 --> 00:13:24,600 There are different ways of doing this, but one of them would be some sort of predatory pricing. 184 00:13:24,600 --> 00:13:27,600 I'm selling prices super low, even below my cost, 185 00:13:27,600 --> 00:13:31,600 so that I will eliminate and will drive you out of the market, 186 00:13:31,600 --> 00:13:35,600 or some sort of rebate scheme that is similar to that. 187 00:13:35,600 --> 00:13:37,600 Or there are other ways. 188 00:13:37,600 --> 00:13:44,600 So abuse of dominant position is one way in which authorities in Europe at least limit the use of market power. 189 00:13:44,600 --> 00:13:49,600 And then another very important instrument is merger control. 190 00:13:49,600 --> 00:13:54,600 So very briefly, for transactions, so firms acquire another firm, 191 00:13:54,600 --> 00:14:02,600 if the turnover of these firms is sufficiently high, they may notify the transaction to a competition authority. 192 00:14:02,600 --> 00:14:08,600 So if two corner shops merge, typically nobody cares, sorry to say, 193 00:14:08,600 --> 00:14:11,600 but the cost of an investigation is just too high. 194 00:14:11,600 --> 00:14:17,600 But if two chains of corner shops that have hundreds of stores in the country, 195 00:14:17,600 --> 00:14:20,600 then that may warrant if you want an investigation. 196 00:14:20,600 --> 00:14:24,600 So we distinguish very quickly three types of mergers. 197 00:14:24,600 --> 00:14:27,600 The first type is called horizontal mergers. 198 00:14:27,600 --> 00:14:31,600 Horizontal mergers happen when two competitors merge. 199 00:14:31,600 --> 00:14:38,600 What you can see here is that when you have a concentrated market and two important competitors merge, 200 00:14:38,600 --> 00:14:41,600 they will eliminate competition between themselves. 201 00:14:41,600 --> 00:14:46,600 Market power will be increased, and the gap between price and cost will rise, etc., etc., 202 00:14:46,600 --> 00:14:50,600 as far as for consumer and for allocative efficiency. 203 00:14:50,600 --> 00:14:52,600 So that's pretty straightforward. 204 00:14:52,600 --> 00:14:57,600 Now you have also vertical mergers, which is basically when a manufacturer and distributor merge, 205 00:14:57,600 --> 00:15:00,600 or when a manufacturer and an input supplier merge. 206 00:15:00,600 --> 00:15:04,600 And again, this could lead to some concern, but I won't go into this. 207 00:15:04,600 --> 00:15:07,600 And then there are what we call conglomerate mergers. 208 00:15:07,600 --> 00:15:14,600 Conglomerate mergers are essentially mergers between companies that do not overlap on the market, 209 00:15:14,600 --> 00:15:17,600 so they don't compete head-to-head. 210 00:15:17,600 --> 00:15:21,600 They are not also suppliers or buyers. 211 00:15:21,600 --> 00:15:26,600 They're just essentially companies that have the same pool of customers, 212 00:15:26,600 --> 00:15:28,600 but they offer different products. 213 00:15:28,600 --> 00:15:33,600 The product could be complementary or independent, but the point is that they have the same pool of customers. 214 00:15:33,600 --> 00:15:39,600 So those merger controls exist because it's a way of limiting concentration in the market, 215 00:15:39,600 --> 00:15:45,600 or at least limiting the potential increase in market power that will result from mergers. 216 00:15:45,600 --> 00:15:49,600 Now, so you can see, competition authority, at least in Europe and the UK, 217 00:15:49,600 --> 00:15:57,600 have quite a wide range of instruments to limit ways in which companies or firms may increase market power. 218 00:15:57,600 --> 00:16:03,600 I would say the very last thing I would add is in Europe we have also state aid control, 219 00:16:03,600 --> 00:16:07,600 which is interestingly also the remit of Digi competition. 220 00:16:07,600 --> 00:16:11,600 I'm going to say something maybe provocative, but I don't think this is competition policy, 221 00:16:11,600 --> 00:16:13,600 but that's because it's different. 222 00:16:13,600 --> 00:16:19,600 The objective in the sense that it's not directly about preventing the exercise of market power. 223 00:16:19,600 --> 00:16:26,600 It is about preventing a distortion of competition as a result of, say, government subsidies or aid, 224 00:16:26,600 --> 00:16:30,600 which is not saying this should not be intervention. 225 00:16:30,600 --> 00:16:36,600 They should probably be controlled for this for sure, but the objective is slightly different, I would say. 226 00:16:36,600 --> 00:16:40,600 And the way it's been administered is also a bit different. 227 00:16:40,600 --> 00:16:41,600 So there you go. 228 00:16:41,600 --> 00:16:48,600 So that's a very long introduction to what the aims and concerns of competition laws are, but at least this is it. 229 00:16:48,600 --> 00:16:53,600 So at least the audience hopefully has a clear understanding of where this is going. 230 00:16:53,600 --> 00:16:58,600 Yeah, thank you so much for the really great broad overview of competition law, 231 00:16:58,600 --> 00:17:06,600 the aims of competition law and the kind of mechanisms that the UK and the European Union use to regulate competition. 232 00:17:06,600 --> 00:17:12,600 So I guess what we'll move on to now is kind of the main meat of our podcast. 233 00:17:12,600 --> 00:17:19,600 So I guess what exactly is this key conflict that we have between sustainability standards 234 00:17:19,600 --> 00:17:22,600 or sustainability agreements even and competition law? 235 00:17:22,600 --> 00:17:30,600 So the UK has released very recently some guidance on green agreements and when they might fall or fall of competition law. 236 00:17:30,600 --> 00:17:33,600 And the European Commission has also released this guidance. 237 00:17:33,600 --> 00:17:38,600 So why exactly is there this conflict and what's this conflict about? 238 00:17:38,600 --> 00:17:42,600 OK, so this is a very important question. 239 00:17:42,600 --> 00:17:45,600 First of all, I'm going to take a step back. 240 00:17:45,600 --> 00:17:54,600 I think it's, I mean, at least in many economists' minds, you know, there's this rule, one instrument, one objective, one policy objective. 241 00:17:54,600 --> 00:18:03,600 So competition policy has a clear objective, which is what I just described for quite a lengthy way what this objective is. 242 00:18:03,600 --> 00:18:11,600 Now, sustainability as a policy has also its own objective, which let's say it's the green deal. 243 00:18:11,600 --> 00:18:14,600 Let's be carbon neutral. That's a very clear objective. 244 00:18:14,600 --> 00:18:21,600 Now, I think, first of all, like I said, and I think it's very important to clarify the debate. 245 00:18:21,600 --> 00:18:27,600 Competition policy is not an instrument for sustainability objectives. 246 00:18:27,600 --> 00:18:30,600 It just cannot be. It's not the first base solution. 247 00:18:30,600 --> 00:18:38,600 Now that I've said that and I think that some people would like it to be, but I don't think it should be. 248 00:18:38,600 --> 00:18:46,600 Now, first point is it is true that there could be conflict between sustainability objectives and the objective of competition policy. 249 00:18:46,600 --> 00:18:50,600 And I think it's important to talk about this. 250 00:18:50,600 --> 00:18:55,600 But there are also many ways in which there are no conflict. 251 00:18:55,600 --> 00:19:04,600 So I don't think we should overstate as well the fact that competition policy would be seen as an obstacle to achieving sustainability goals. 252 00:19:04,600 --> 00:19:08,600 So say having the European Union carbon neutral. 253 00:19:08,600 --> 00:19:12,600 So, I mean, just to say, for example, and I'm going to praise the commission here, 254 00:19:12,600 --> 00:19:22,600 the competition policy could actually investigate agreement between companies when those agree not to develop clean solution 255 00:19:22,600 --> 00:19:30,600 or not to go the extra miles to actually develop technologies that would help achieve the green deal. 256 00:19:30,600 --> 00:19:35,600 And there is a recent example where the commission has acted quite strongly in there. 257 00:19:35,600 --> 00:19:44,600 In 2021, the commission has found that five German carbon manufacturers, Daimler, BMW, Volkswagen in particular, 258 00:19:44,600 --> 00:19:53,600 they breached antitrust rule because they colluded, according to the commission, on technical development in the area of nitrogen oxide. 259 00:19:53,600 --> 00:19:56,600 Nitrogen oxide is basically this carbon emission. 260 00:19:56,600 --> 00:20:04,600 So it's an air pollutant and clearly it is something we would like to reduce because it's harmful to human health. 261 00:20:04,600 --> 00:20:14,600 Now, what's interesting here is that basically there were regulations, you know, and that's the high to be that the regulator comes in and says, 262 00:20:14,600 --> 00:20:16,600 we need to limit air pollutants. 263 00:20:16,600 --> 00:20:21,600 So we need to limit the emission of nitrogen oxide and needs to be limited. 264 00:20:21,600 --> 00:20:28,600 And usually, you know, if people don't, then they get fine, they get into trouble, blah, blah. 265 00:20:28,600 --> 00:20:37,600 But here, so what we're talking about, what we're talking about is that the commission found out that actually the manufacturer made sure 266 00:20:37,600 --> 00:20:41,600 that it would not go beyond what's mandated by the regulator. 267 00:20:41,600 --> 00:20:50,600 So in some way, the fact that, you know, they didn't want to reduce nitrogen oxide emission more than they could have 268 00:20:50,600 --> 00:20:57,600 and agree, it colluded for that, it's, you know, clearly it's the restriction of competition because, you know, 269 00:20:57,600 --> 00:21:00,600 one of them could have said, I'm going to do better than what you do. 270 00:21:00,600 --> 00:21:05,600 So my car manufacturer said, I want to sell a car that is even cleaner than car manufacturer B. 271 00:21:05,600 --> 00:21:14,600 So I'm going to attract more consumers because they think that consumers also use this as a factor to make purchases. 272 00:21:14,600 --> 00:21:20,600 And as a result of that, they would have probably stolen market share from the right. 273 00:21:20,600 --> 00:21:25,600 And so there is a clear, you know, restriction of competition here. 274 00:21:25,600 --> 00:21:27,600 And you can see here that this work together. 275 00:21:27,600 --> 00:21:33,600 I mean, the sustainability objective and this sense and competitions are complementary. 276 00:21:33,600 --> 00:21:36,600 So that's so that's good. It's not always bad. 277 00:21:36,600 --> 00:21:45,600 OK, now there is one moment, there is one setting or there are a couple of settings where, yes, there is an issue. 278 00:21:45,600 --> 00:21:49,600 OK, and it comes to agreement as you refer to your question. 279 00:21:49,600 --> 00:21:52,600 Let's use car manufacturers as an example. It's probably the best way to do it. 280 00:21:52,600 --> 00:21:58,600 So let's imagine that indeed a car manufacturer would, you know, would have a, 281 00:21:58,600 --> 00:22:05,600 there is a solution out there for cleaner, cleaner technology that reduce emission drastically, I'd say. 282 00:22:05,600 --> 00:22:11,600 But let's say also that that new technology is costly. It's not cheap. 283 00:22:11,600 --> 00:22:17,600 The car manufacturer, one car manufacturer adopted unilaterally its costs is going to be increased. 284 00:22:17,600 --> 00:22:20,600 And as a result, it's going to have to raise its price. 285 00:22:20,600 --> 00:22:28,600 OK, now let's imagine that actually consumer, although they love to buy clean cars, 286 00:22:28,600 --> 00:22:33,600 they don't value the clean cars as much as the cost of that new technology. 287 00:22:33,600 --> 00:22:41,600 Right. And that's, I think, is a sensible assumption because even though you and I would think that clean cars are good, 288 00:22:41,600 --> 00:22:46,600 typically, you know, the emission of our own car on our own health is not that much. 289 00:22:46,600 --> 00:22:49,600 And so we're not necessarily going to put necessarily a great value to this. 290 00:22:49,600 --> 00:22:54,600 Now, in that setting, there is competition between car manufacturers. 291 00:22:54,600 --> 00:22:58,600 No one is going to adopt the new technology because it's just too costly. 292 00:22:58,600 --> 00:23:03,600 You will be shooting yourself in the foot. And that's what we call the first mover disadvantage. 293 00:23:03,600 --> 00:23:13,600 If someone moves first with this new, costly technology, they will produce cars that are clearly better for the environment. 294 00:23:13,600 --> 00:23:18,600 But at the price tag, that is probably not appealing to consumers. 295 00:23:18,600 --> 00:23:25,600 So they would lose many customers at the end. So the incentive of car manufacturers is not to do this. 296 00:23:25,600 --> 00:23:28,600 Now, there are two solutions to this, to solve that problem, 297 00:23:28,600 --> 00:23:35,600 because we would want to have this new clean technology to be rolled out because it's better for the planet and for us. 298 00:23:35,600 --> 00:23:37,600 And I think there's very little debate about this. 299 00:23:37,600 --> 00:23:41,600 Now, you could make, you could have the first basis of regulatory intervention. 300 00:23:41,600 --> 00:23:46,600 So you raise the bar. You know, the technology is there. 301 00:23:46,600 --> 00:23:49,600 I mean, obviously, regulation needs to be practical. 302 00:23:49,600 --> 00:23:51,600 You cannot set goals that are unachievable. 303 00:23:51,600 --> 00:24:05,600 But if it is achievable, then, you know, you can set the bar so that, you know, every car by your ex will have to adopt or have, you know, emission standard like this. 304 00:24:05,600 --> 00:24:08,600 And this is what we see. The regulations operating. 305 00:24:08,600 --> 00:24:18,600 Although it's not necessarily on a global scale, but you can see, you know, cities in Europe, in some countries, they are definitely setting, you know, emission standards. 306 00:24:18,600 --> 00:24:26,600 Now, let's say there is no regulation or there is no clear regulation like this or regulation is going to be delayed. 307 00:24:26,600 --> 00:24:43,600 The only way the car manufacturer could actually implement that solution would say, OK, we need to get together around the table and agree that we all implement that new technology 308 00:24:43,600 --> 00:24:58,600 so that no one is, you know, undercutting the others and we all commit to actually by your ex have this technology rolled out and of course will be equipped with this clean technology. 309 00:24:58,600 --> 00:25:01,600 Now, you know, that sounds good, right? 310 00:25:01,600 --> 00:25:04,600 The problem is this is where competition law comes into play. 311 00:25:04,600 --> 00:25:08,600 This agreement between competitors may be seen as a restriction of competition. 312 00:25:08,600 --> 00:25:14,600 And this is where, you know, one would have problem with the competition law in a sense. 313 00:25:14,600 --> 00:25:28,600 Now, let's be clear. If this agreement between the car manufacturer to develop clean technology is not a sham to actually exchange information to set prices, then in my mind, it should be fine. 314 00:25:28,600 --> 00:25:30,600 It should be almost exempted. 315 00:25:30,600 --> 00:25:45,600 However, even the Trump administration, which is not exactly known for exactly for its environmental goal, but had opened an investigation against car manufacturer because of their commitment to higher emission standard than those required by law. 316 00:25:45,600 --> 00:26:01,600 So, yes, it is so there is some way to law, competition law, the view that if you agree, if you come together and adopt the same standard, you may be a restriction competition. 317 00:26:01,600 --> 00:26:03,600 And we may talk a little bit more about this. 318 00:26:03,600 --> 00:26:10,600 But in Europe, the idea was that if you do that, why this technology and why not the other? 319 00:26:10,600 --> 00:26:19,600 So, yes, it's a notion that you're imposing a technology on all car manufacturers and and basically foreclosing other technology. 320 00:26:19,600 --> 00:26:24,600 And that's I think it's a bit of a weird debate in my mind. 321 00:26:24,600 --> 00:26:30,600 I'm not a lawyer, but I would think that this kind of agreement should be exempted from competition law. 322 00:26:30,600 --> 00:26:41,600 I think you will avoid a conflict easily. And it's not obvious the restriction of the restriction of competition is not that obvious compared to a naked price collusion. 323 00:26:41,600 --> 00:26:44,600 It's much less obvious. So but this is where the conflict arise. 324 00:26:44,600 --> 00:26:49,600 Now, it gets even more and I'll take another five minutes here. 325 00:26:49,600 --> 00:26:52,600 It gets even more interesting when in the context of mergers. 326 00:26:52,600 --> 00:26:56,600 So you could have a merger. Imagine a merger between two competitors. 327 00:26:56,600 --> 00:27:02,600 And so if there is a merger between two competitors and if it's a concentrated market, you would expect price to increase. 328 00:27:02,600 --> 00:27:05,600 Particularly if there are various rent trees, difficult to enter. 329 00:27:05,600 --> 00:27:10,600 There is no countervailing factors that would limit that that effect on competition. 330 00:27:10,600 --> 00:27:15,600 So there is clearly a bad right. There is something that's going to impact consumers. 331 00:27:15,600 --> 00:27:23,600 Now, imagine that this one of the emerging firms is actually developing a new technology and it's produced a clean technology. 332 00:27:23,600 --> 00:27:27,600 It's developing it. And for whatever reason, it's not licensing. 333 00:27:27,600 --> 00:27:34,600 It has the IP, but it's hard to license. It's difficult to enforce the IP right. 334 00:27:34,600 --> 00:27:37,600 So let's assume that there's also a cost efficient technology. 335 00:27:37,600 --> 00:27:42,600 So that firm is going to adopt that clean technology and will sell clean a product. 336 00:27:42,600 --> 00:27:52,600 Now, one of the benefits of the merger is that one of the emerging party has this clean technology and post merger, the other emerging party is going to benefit from it. 337 00:27:52,600 --> 00:27:58,600 So in other words, the technology will be rolled out on a much larger scale. 338 00:27:58,600 --> 00:28:08,600 There will be a higher production level that is subject to this better clean technology, which let's say, let's imagine that the obvious benefit, 339 00:28:08,600 --> 00:28:15,600 or at least immediate benefit and maybe for the long term is that this will lead to a reduction in the emission of greenhouse gases. 340 00:28:15,600 --> 00:28:23,600 So that's a good thing. I think this problem is actually more difficult to solve than the agreement that I talked about earlier, 341 00:28:23,600 --> 00:28:34,600 because here we have clearly a problem in the sense that the market in which these companies are selling the merger will give rise to a price increase. 342 00:28:34,600 --> 00:28:42,600 So some consumers are going to be hot. And then at the same time, we're going to have a benefit to the environment 343 00:28:42,600 --> 00:28:49,600 because there will be a reduction in greenhouse gases that will be even higher than without the merger, 344 00:28:49,600 --> 00:29:00,600 because now the two emerging parties will have the benefit of this new technology, which for whatever reason cannot be licensed or adopted otherwise. 345 00:29:00,600 --> 00:29:11,600 Now, how do you go about this? This one, I think is tricky because you have clearly a restriction of competition in the market where the product is being sold. 346 00:29:11,600 --> 00:29:18,600 So consumers in the market are harmed, but benefit is for consumers in that market who get cleaner air, 347 00:29:18,600 --> 00:29:23,600 but also all the non-consumers, all the people outside that market benefit from. 348 00:29:23,600 --> 00:29:33,600 So when it comes to technology that is widespread, it's quite easy. I mean, if you think about fuel, people who drive, there are a lot of people who are driving. 349 00:29:33,600 --> 00:29:39,600 So you could almost equate drivers and population, not in our country, but in the United States. 350 00:29:39,600 --> 00:29:47,600 But at least you're not getting far. But you can imagine a situation where the market might be quite limited, 351 00:29:47,600 --> 00:29:53,600 and yet the benefit in gas emission is quite universal. 352 00:29:53,600 --> 00:29:59,600 So this is where there's been a lot of discussion how we deal with it, how we balance this. 353 00:29:59,600 --> 00:30:06,600 I mean, so that discussion, the merger example I'm using, I think, tells more the story than I think the agreement, 354 00:30:06,600 --> 00:30:14,600 because I think the agreement that I described, I have a harder time seeing the problem that, I mean, people make a, see the problem, I see it less. 355 00:30:14,600 --> 00:30:25,600 But anyway, but what is crystallized, and I think that's the key, is that how do you balance on the one hand the harm that someone, 356 00:30:25,600 --> 00:30:34,600 you know, the harm to competition, which would be suffered by some consumer, a limited set of consumer, and the benefit to a wider group. 357 00:30:34,600 --> 00:30:42,600 Alright, so we talked about, I guess, how we kind of balance and assess the kind of harm that's caused the consumers, 358 00:30:42,600 --> 00:30:47,600 for example, through higher prices, as well as the benefits that they get through, for example, cleaner. 359 00:30:47,600 --> 00:30:52,600 So the UK and the European Commission have both come out with guidance, 360 00:30:52,600 --> 00:30:59,600 which also touches briefly on how to assess these kinds of, like, metrics and how to balance them, etc. 361 00:30:59,600 --> 00:31:08,600 So what do you think are the key differences between the regulation of these sustainability agreements or sustainability standards in Europe, 362 00:31:08,600 --> 00:31:15,600 or as you mentioned, the mergers and acquisitions problems, versus the regulation of these actions in the UK? 363 00:31:15,600 --> 00:31:21,600 Okay, yeah, so this is a pretty important question. 364 00:31:21,600 --> 00:31:27,600 So when indeed there seems to be a conflict between competition law and sustainability objective, 365 00:31:27,600 --> 00:31:36,600 this is largely the case in, so, agreement between competitors, what we just discussed earlier, or in the context of mergers, 366 00:31:36,600 --> 00:31:42,600 where the agreement between competitors can give rise to a price increase, or a merger can give rise to a price increase, 367 00:31:42,600 --> 00:31:52,600 which is going to harm the consumer on the market, and then at the same time you can have benefit from, say, the acquisition of a better standard, 368 00:31:52,600 --> 00:31:57,600 which will result in reduction of greenhouse gases emission. 369 00:31:57,600 --> 00:32:04,600 Now, so that problem has been identified, and how competition agencies are going to handle it. 370 00:32:04,600 --> 00:32:09,600 And this is where it's important to realize that, to come back to what I said earlier, 371 00:32:09,600 --> 00:32:15,600 is that, you know, the objective of competition policy is not a reduction of emission of gases. 372 00:32:15,600 --> 00:32:18,600 That's just not, okay? So people need to realize this. 373 00:32:18,600 --> 00:32:26,600 At the same time, we don't want necessarily competition law or the intervention by competition agencies 374 00:32:26,600 --> 00:32:33,600 to limit the progress towards, you know, a carbon neutral economy. 375 00:32:33,600 --> 00:32:40,600 Now, authorities, so therefore, have published, as you said, guidance for a company, 376 00:32:40,600 --> 00:32:43,600 and this is a really good thing by the way, let me just open a parenthesis. 377 00:32:43,600 --> 00:32:49,600 Competition authorities are doing a great job in trying to explain how they will look at the agreement, 378 00:32:49,600 --> 00:32:52,600 and this is not just about sustainability agreements, it's about everything. 379 00:32:52,600 --> 00:33:02,600 So the European Commission, as well as the CMA, are definitely doing a great job in explaining to lawyers and their advisors, 380 00:33:02,600 --> 00:33:05,600 how, you know, they're going to assess agreement. 381 00:33:05,600 --> 00:33:15,600 Now, the Commission has published a new guidelines in this year on a horizontal agreement, 382 00:33:15,600 --> 00:33:20,600 and in that guidelines, there is a new chapter on sustainability agreement, 383 00:33:20,600 --> 00:33:26,600 and the CMA has also, last month, published a green agreement guidance, 384 00:33:26,600 --> 00:33:32,600 which basically tackles the same issues as what the European Commission is doing, okay? 385 00:33:32,600 --> 00:33:37,600 Now, these documents are very interesting, and I mean, so I know well the European Commission agreement, 386 00:33:37,600 --> 00:33:44,600 I knew a little less well the CMA, and I mean, there are differences, but by and large, they're very similar. 387 00:33:44,600 --> 00:33:54,600 The UK still use a very similar provision than the European Commission when it comes to the assessment of agreement. 388 00:33:54,600 --> 00:34:04,600 Now, so one of the issues that this agreement tackles is what we call standardized agreement, or standard agreement. 389 00:34:04,600 --> 00:34:16,600 So when companies, as I said, you know, decide to set up this common agreement, and this seems to be raising a concern. 390 00:34:16,600 --> 00:34:21,600 And like I said, for me, I'm not sure what the concern is, but anyway, they tell us there is a concern, 391 00:34:21,600 --> 00:34:25,600 and then they tell us how the benefit can be assessed. 392 00:34:25,600 --> 00:34:29,600 So I don't want to enter into super technical discussion here for your audience, 393 00:34:29,600 --> 00:34:40,600 but whenever an agreement is seen as restricting competition, it can be exempted if it meets a number of conditions, 394 00:34:40,600 --> 00:34:47,600 which means essentially, to put it simply, that the benefits outweigh the harm, okay? 395 00:34:47,600 --> 00:34:51,600 So there is harm to competition, which is usually assumed, and then, you know, 396 00:34:51,600 --> 00:34:55,600 a company, if they show there is a benefit that accrues to the consumer, 397 00:34:55,600 --> 00:35:02,600 then there will be a balancing exercise between the harm and the benefit, and if the benefit outweigh the harm, 398 00:35:02,600 --> 00:35:05,600 then the agreement is exempted, i.e. it is legal. 399 00:35:05,600 --> 00:35:13,600 Now, when it comes to standardized agreement towards environmental sustainability, the benefits are pretty clear. 400 00:35:13,600 --> 00:35:22,600 Benefit is typically, when it comes to environmental benefit, I mean, the obvious one is reduction of greenhouse gases, okay? 401 00:35:22,600 --> 00:35:24,600 That would be one of the benefits. 402 00:35:24,600 --> 00:35:31,600 Now, the authorities need to translate this into benefit for consumer, okay? 403 00:35:31,600 --> 00:35:40,600 So an agreement can be exempted if an agreement generates benefits, and a fair share of this benefit goes to consumer. 404 00:35:40,600 --> 00:35:49,600 And this is where it gets tricky, and yet this is where competition is not going out of their way to help. 405 00:35:49,600 --> 00:35:53,600 And I agree with them in many ways. 406 00:35:53,600 --> 00:35:59,600 What the authority is telling us is that the benefit must accrue to consumers that have been harmed. 407 00:35:59,600 --> 00:36:04,600 So that's the debate between what we call in-market and out-of-market efficiency gains, okay? 408 00:36:04,600 --> 00:36:13,600 So in other words, and to put it simply, you pay more because you're a consumer of the product that is the object of the agreement, 409 00:36:13,600 --> 00:36:15,600 and for whatever reason, the price is increased. 410 00:36:15,600 --> 00:36:22,600 To me, again, I repeat, this is not obvious why there would be a price increase because we have a standardized agreement, 411 00:36:22,600 --> 00:36:28,600 which leads to less competition, but anyway, come from... spark that. 412 00:36:28,600 --> 00:36:38,600 But let's imagine that there is a harm, and then the benefit must be that you breathe cleaner air, right? 413 00:36:38,600 --> 00:36:43,600 And what we're going to do is the commission and the CMS saying, 414 00:36:43,600 --> 00:36:47,600 well, it's got to be the cleaner air that these consumers are breathing. 415 00:36:47,600 --> 00:36:57,600 So if you want the benefit per users is very small, given that you take only the portion of the benefit that is accrued to consumers that have been harmed by the agreement, 416 00:36:57,600 --> 00:37:04,600 then you may end up in a situation where something that is really good for society is not going to be deemed lawful 417 00:37:04,600 --> 00:37:09,600 because essentially the harm to this small group of consumers is too high. 418 00:37:09,600 --> 00:37:17,600 So if they say 100 consumers have been harmed, and they pay a higher price, and then 10 million people breathe better air, 419 00:37:17,600 --> 00:37:21,600 so you would think, okay, I didn't do the math, but we should go for it, right? 420 00:37:21,600 --> 00:37:28,600 Because 10 million people breathing better air is probably better for society, better for their health, there could be a lot of benefit, 421 00:37:28,600 --> 00:37:33,600 and too bad 100 people pay more, although I'll come to that in a minute. 422 00:37:33,600 --> 00:37:36,600 And then you would say, okay, well, we should let this go through, right? 423 00:37:36,600 --> 00:37:45,600 And then because the authorities are going to say, no, hang on, we're going to look at only the benefit of air quality for these 100 consumers. 424 00:37:45,600 --> 00:37:52,600 And that's, you know, clearly that's going to raise the bar, that's the hurdle that's very difficult to overcome, right, for the group. 425 00:37:52,600 --> 00:37:59,600 So now this is where this is where competition authority have been put in a difficult spot, 426 00:37:59,600 --> 00:38:06,600 because the reason they do what they do is because if you start opening the gate towards out of market efficiencies, 427 00:38:06,600 --> 00:38:11,600 then you need to have limiting principle, limiting factors, because anything can come. 428 00:38:11,600 --> 00:38:21,600 You know, why not unemployment benefit? The standard of the authority might start changing towards, you know, the effect on competition to public interest. 429 00:38:21,600 --> 00:38:32,600 And then the margin of discretion is huge, it's more difficult to administer, and it's not even obvious that, you know, who is going to resolve conflicting objective? 430 00:38:32,600 --> 00:38:35,600 And like I said, it goes against the principle of one instrument, one object. 431 00:38:35,600 --> 00:38:41,600 So I see where the authority come from and why they're trying to have this limited principle. 432 00:38:41,600 --> 00:38:48,600 But at the same time, you do wonder why is it that we cannot let an agreement go through its benefit millions? 433 00:38:48,600 --> 00:38:51,600 And this is where, you know, I think there are discussion here. 434 00:38:51,600 --> 00:38:58,600 Some people will say, well, so long as the regulator has not intervene, we hope they will intervene because they should, you know, 435 00:38:58,600 --> 00:39:07,600 they should be responsible for the reduction of greenhouse gases emissions and it's not the job of competition authority to do that. 436 00:39:07,600 --> 00:39:14,600 And they should set the standard so that it's clear that competition authority won't have to deal with this. 437 00:39:14,600 --> 00:39:25,600 So but until then, maybe competition authority should do more and should exempt this disagreement, even though, you know, a few people might be harmed. 438 00:39:25,600 --> 00:39:30,600 And that's what the commission authority don't want to go there. That's not they don't want. 439 00:39:30,600 --> 00:39:38,600 I mean, a few trying to, but by and large, the European Commission, the CMA, have been pretty clear that they don't want to do this. 440 00:39:38,600 --> 00:39:43,600 Now, so you could see that the balancing can be done, you know, and then we can talk a little bit about that. 441 00:39:43,600 --> 00:39:51,600 But it will be limited to those who to look at individuals who have been harmed by the agreement or the mergers 442 00:39:51,600 --> 00:39:57,600 and whether they've you know, the benefit from the merger of the agreement will our way to the harm. 443 00:39:57,600 --> 00:40:06,600 So you and you know, economies can do that because we know we're great at putting a number or at least we're putting a value to things. 444 00:40:06,600 --> 00:40:10,600 Right. So there are ways you can you can stop, you know, price increase. 445 00:40:10,600 --> 00:40:14,600 You can try to to to gauge it or to estimate it. 446 00:40:14,600 --> 00:40:23,600 And then the benefit from a reduction in greenhouse gases emission can also be you can put a pound value, your value, dollar value to this as well. 447 00:40:23,600 --> 00:40:31,600 Yeah. So actually, as an economist, how do you put a numerical value on, for example, someone's preference for cleaner air? 448 00:40:31,600 --> 00:40:37,600 What kind of, for example, methodologies do you use? Is it like survey based or how do you do that? 449 00:40:37,600 --> 00:40:43,600 So this is a really good question. And so for some of those, I know the answer for some, I know less the answer. 450 00:40:43,600 --> 00:40:50,600 But first of all, there is typically not always a market price for this. 451 00:40:50,600 --> 00:40:58,600 You know, what's the value of what's the value to you or me or a consumer reduction in emission of greenhouse gases? 452 00:40:58,600 --> 00:41:02,600 I mean, there's that's there's no market for this. Right. 453 00:41:02,600 --> 00:41:08,600 So so then it becomes comes with the notion of we need to find a shadow price. 454 00:41:08,600 --> 00:41:13,600 It's called shadow price because there is no no no no no market for this. 455 00:41:13,600 --> 00:41:23,600 And so the way it works is the shadow price is basically what is the social value or the social cost of this reduction in greenhouse gases emission. 456 00:41:23,600 --> 00:41:30,600 So now the good news is, you know, there are agencies who are working on this and trying to tell us what the shadow price is. 457 00:41:30,600 --> 00:41:36,600 My colleague was previously at the AGCM, which is the Dutch Competition Authority, has worked on this. 458 00:41:36,600 --> 00:41:43,600 And the Dutch Authority is very much a big proponent of putting sustainability on the agenda. 459 00:41:43,600 --> 00:41:52,600 And they, for example, in the Netherlands, they've been estimated at the price of CO2 is fifty seven euros per kiloton. 460 00:41:52,600 --> 00:41:56,600 So how do you how do you do this? There are different ways of doing this. 461 00:41:56,600 --> 00:42:00,600 There is the notion of, you know, we can put values to anything. 462 00:42:00,600 --> 00:42:09,600 You know, and I'm taking the example from from again is that if you want to know, for example, the value of a cleaner hair when you're living in cities, 463 00:42:09,600 --> 00:42:12,600 you can look at the difference in prices of housing. 464 00:42:12,600 --> 00:42:16,600 Those are close to the highway and close to a park. 465 00:42:16,600 --> 00:42:27,600 Right. I mean, in addition to many other characteristics that they'll tell you, I mean, you're controlling for everything else that matters in affecting the price of a house. 466 00:42:27,600 --> 00:42:40,600 You could actually consider that some of it may be explained by the fact that people are paying a higher price to live close to a green pasture compared to live next to a highway. 467 00:42:40,600 --> 00:42:43,600 You can you can. And there may be some aesthetic to this as well. 468 00:42:43,600 --> 00:42:48,600 So the way one way to do this is to look at. 469 00:42:48,600 --> 00:42:52,600 So what's the benefit of a reduction in air pollutants? 470 00:42:52,600 --> 00:42:59,600 Then you can so basically try to figure out what are the different component. 471 00:42:59,600 --> 00:43:06,600 So obviously one is health. So, you know, looking at, you know, we know that nitrogen oxide is bad for our health. 472 00:43:06,600 --> 00:43:09,600 I don't know. I mean, I'm not an expert, but I'm told it's bad. 473 00:43:09,600 --> 00:43:17,600 And there are studies who actually say, you know, reduction in X amount emission will lead to, you know, that kind of health benefit. 474 00:43:17,600 --> 00:43:21,600 And in some countries, we are starting to quantify health benefits. 475 00:43:21,600 --> 00:43:28,600 It is also good for, you know, the climate, maybe a connection between climate change and housing. 476 00:43:28,600 --> 00:43:31,600 You know, air pollutants are very bad for housing. 477 00:43:31,600 --> 00:43:34,600 You know, it's to deteriorate where it's worse. 478 00:43:34,600 --> 00:43:38,600 So this you can add this up, for example. 479 00:43:38,600 --> 00:43:41,600 And in some ways, you go and do surveys. 480 00:43:41,600 --> 00:43:46,600 You can do surveys. So as economists, what we we care is the willingness to pay of people. 481 00:43:46,600 --> 00:43:55,600 So there is no market. The problem is there is no real preference. People are not paying because there is no trade. 482 00:43:55,600 --> 00:44:00,600 So the benefit of a reduction in air pollutants is not traded. 483 00:44:00,600 --> 00:44:03,600 So how do you assess the willingness to pay for people? 484 00:44:03,600 --> 00:44:09,600 But survey is obviously a way to go. It's obviously has its limitation. 485 00:44:09,600 --> 00:44:13,600 It's people may overstate massively the willingness to pay for things. 486 00:44:13,600 --> 00:44:16,600 But, you know, you can do survey, conjoint analysis. 487 00:44:16,600 --> 00:44:18,600 Conjoint analysis is used in marketing. 488 00:44:18,600 --> 00:44:23,600 The way it works, conjoint analysis, is to, you know, you put pair. 489 00:44:23,600 --> 00:44:26,600 You ask people to choose between two options typically. 490 00:44:26,600 --> 00:44:32,600 And you change, you know, there's a price and then you describe the product and the product of different features. 491 00:44:32,600 --> 00:44:36,600 And then you change that continually to get an understanding of what how people, 492 00:44:36,600 --> 00:44:39,600 what attributes of a product or service people attribute to. 493 00:44:39,600 --> 00:44:41,600 You can do the same thing for. 494 00:44:41,600 --> 00:44:46,600 So you could do that. The commission alludes to this in its guidelines. 495 00:44:46,600 --> 00:44:49,600 I'm now diverging to what the commission is saying. 496 00:44:49,600 --> 00:44:59,600 In its guidelines, the commission is telling us that there are three types of benefits that you could consider when you do this weighting, this balancing exercise. 497 00:44:59,600 --> 00:45:06,600 There is the use value that people just like to buy, you know, better products. 498 00:45:06,600 --> 00:45:15,600 If you go to the supermarket and you buy organic food or food that has been made through sustainable waste, they are tend to be more expensive. 499 00:45:15,600 --> 00:45:18,600 And you pay for it. OK, fine. That's easy. 500 00:45:18,600 --> 00:45:21,600 That's what we buy. That's that's it. 501 00:45:21,600 --> 00:45:34,600 But the point comes when this called a non-use value that I would be willing to pay a higher price for detergent that cleans less well, but it creates no waste to water. 502 00:45:34,600 --> 00:45:39,600 It's not going to pollute water. And then there is the collective benefit. 503 00:45:39,600 --> 00:45:45,600 I mean, you know, production pollutants obviously benefits everybody and multiples. 504 00:45:45,600 --> 00:45:50,600 Health, human health, you know, climate change, ecosystems, housings. 505 00:45:50,600 --> 00:45:53,600 So that's that's hard. That's hard to do. 506 00:45:53,600 --> 00:46:01,600 And I think that what's going to happen is the commission will probably and maybe the CMS as well. 507 00:46:01,600 --> 00:46:12,600 Well, people will come to the commission or to the CMA to examine this agreement will have to essentially hire economists. 508 00:46:12,600 --> 00:46:26,600 And the focus will be largely on developing surveys to actually show that people value, you know, a cleaner solution or something that is sustain environmentally friendly solution. 509 00:46:26,600 --> 00:46:29,600 And how much, you know, pounds they put to that. 510 00:46:29,600 --> 00:46:37,600 I think that that's and you could do survey that are, you know, that are trying to prevent people from overstating. 511 00:46:37,600 --> 00:46:40,600 I mean, you'll never prevent them from completely overstating. 512 00:46:40,600 --> 00:46:44,600 But, you know, at least limit the overstating. 513 00:46:44,600 --> 00:46:46,600 So that, you know, this is where we're going. 514 00:46:46,600 --> 00:46:58,600 But I think I mean, the authorities also accepting and the commission as well as the CMA accepting that they need to learn how to do this. 515 00:46:58,600 --> 00:47:07,600 So they are asking firms to come forward to discuss their plans and to see how they can work together. 516 00:47:07,600 --> 00:47:12,600 So I think the authorities are quite an open point to this. 517 00:47:12,600 --> 00:47:14,600 They won't wield the stick. 518 00:47:14,600 --> 00:47:16,600 They will probably want to listen. 519 00:47:16,600 --> 00:47:26,600 I mean, so long as these agreements are genuine and they are not the way to actually, you know, collude or exchange information that will lead to. 520 00:47:26,600 --> 00:47:30,600 I think that's that. So I think more is to be seen in the next few years. 521 00:47:30,600 --> 00:47:38,600 But it's clear that at least the authorities are opening the door to say, OK, we'll do our best to exempt those agreements. 522 00:47:38,600 --> 00:47:40,600 But we're not going to bend the rules. 523 00:47:40,600 --> 00:47:47,600 I just wanted to pick up on what you said about, I guess, almost like the greenwashing of the collusion agreement. 524 00:47:47,600 --> 00:48:01,600 So actually, how do you tell between an agreement that's basically just a collusion agreement with a lot of environmental jargon thrown on top of it and in contrast, an actual sustainable agreement? 525 00:48:01,600 --> 00:48:05,600 Other economic measures that you use to assess this? 526 00:48:05,600 --> 00:48:07,600 That's an extremely good question. 527 00:48:07,600 --> 00:48:12,600 I'm not aware of cases that where that has been an issue. 528 00:48:12,600 --> 00:48:22,600 But is it a sham, where essentially greenwashing and then nothing really, there's nothing tangible behind it. 529 00:48:22,600 --> 00:48:26,600 I think, I mean, I think this is it boils down to evidence. 530 00:48:26,600 --> 00:48:33,600 It boils down to, you know, demonstrating the benefit of the agreement. 531 00:48:33,600 --> 00:48:46,600 You know, if it's telling, you know, agreeing to use less plastic, for example, when you can see this as a pretty clear case in distribution for, you know, product and consumer goods. 532 00:48:46,600 --> 00:48:50,600 You know, reducing the use of plastic. 533 00:48:50,600 --> 00:48:54,600 I think, I mean, in Europe, we have a direct tape now, and that's probably a good thing. 534 00:48:54,600 --> 00:49:01,600 But, you know, the industry may want to go beyond and maybe we want them to go beyond some of this mandated. 535 00:49:01,600 --> 00:49:12,600 And so we will come to, you know, explaining to the authority, you know, we are going to use less plastic and what it is. 536 00:49:12,600 --> 00:49:19,600 My sense is that greenwashing is often more about companies that say, I'm greener than I really are. 537 00:49:19,600 --> 00:49:22,600 And that's more consumer protection issues. 538 00:49:22,600 --> 00:49:25,600 You know, it's false advertising in many ways. 539 00:49:25,600 --> 00:49:29,600 And I think that should be picked up clearly. 540 00:49:29,600 --> 00:49:32,600 But, I mean, do they need to agree to use less plastic? 541 00:49:32,600 --> 00:49:33,600 Not clear to me. 542 00:49:33,600 --> 00:49:35,600 I mean, I think there is first mover disadvantage here. 543 00:49:35,600 --> 00:49:37,600 So I'm not sure there is a movement. 544 00:49:37,600 --> 00:49:42,600 So then it comes to the question of indisputability, whether you need to discuss. 545 00:49:42,600 --> 00:49:45,600 And I think it only comes to standard. 546 00:49:45,600 --> 00:49:51,600 When there is this first mover disadvantage that we discussed earlier, this is really when the issue comes. 547 00:49:51,600 --> 00:49:55,600 Otherwise, companies probably don't need to discuss. 548 00:49:55,600 --> 00:49:57,600 Compete on being greener. 549 00:49:57,600 --> 00:49:58,600 That's good. 550 00:49:58,600 --> 00:50:05,600 Just one last question would be, I guess, as an economist, you work a lot with lawyers across different jurisdictions. 551 00:50:05,600 --> 00:50:12,600 So how do you think lawyers and economists can kind of work together and coordinate better in the future? 552 00:50:12,600 --> 00:50:15,600 Oh, that's a really general question. 553 00:50:15,600 --> 00:50:21,600 I think so clearly competition law needs to work in a legal framework. 554 00:50:21,600 --> 00:50:23,600 I mean, that's clear. 555 00:50:23,600 --> 00:50:25,600 So lawyers are indispensable. 556 00:50:25,600 --> 00:50:27,600 They'll be very happy to hear this. 557 00:50:27,600 --> 00:50:31,600 They're indispensable to the good order and working of competition law. 558 00:50:31,600 --> 00:50:39,600 Now, I think in the terms competition law, there is one term that's called competition, which is mostly economics. 559 00:50:39,600 --> 00:50:41,600 Although maybe some people would disagree with that. 560 00:50:41,600 --> 00:50:44,600 But I think economists have a lot to say about competition. 561 00:50:44,600 --> 00:50:47,600 And we are making things too complicated. 562 00:50:47,600 --> 00:50:50,600 It comes sometimes are unnecessary. 563 00:50:50,600 --> 00:51:06,600 I mean, at least they can add insight into how market operates, which help regulators and lawyers understand whether an agreement, a merger or practice is actually detrimental to competition or stifle competition. 564 00:51:06,600 --> 00:51:14,600 And so the way it works best is when, you know, the way it works best is when economists are not involved, for sure, because this is easy. 565 00:51:14,600 --> 00:51:15,600 This is simple. 566 00:51:15,600 --> 00:51:18,600 And we all want clear and simple rules. 567 00:51:18,600 --> 00:51:19,600 That's for sure. 568 00:51:19,600 --> 00:51:22,600 Competition is not a simple matter. 569 00:51:22,600 --> 00:51:25,600 It's not, you know, there is a red light. 570 00:51:25,600 --> 00:51:26,600 You stop. 571 00:51:26,600 --> 00:51:27,600 There's a green light. 572 00:51:27,600 --> 00:51:28,600 You can go. 573 00:51:28,600 --> 00:51:29,600 It's sometimes more complicated. 574 00:51:29,600 --> 00:51:31,600 It's often more complicated than that. 575 00:51:31,600 --> 00:51:35,600 And assessment needs to be done thoroughly. 576 00:51:35,600 --> 00:51:40,600 And economists, you know, must work hand in hand with it. 577 00:51:40,600 --> 00:51:48,600 With lawyers often, I mean, in cases where things are complex, to provide some insight. 578 00:51:48,600 --> 00:51:49,600 And they do that. 579 00:51:49,600 --> 00:51:54,600 And you can see that guidelines from authorities are often inspired by economics. 580 00:51:54,600 --> 00:51:57,600 There's a lot of economics in these guidelines. 581 00:51:57,600 --> 00:52:03,600 And I think they are written in a way that are clear to non-economists. 582 00:52:03,600 --> 00:52:16,600 And I think this is a job of non-economists to try to, not to try, but this is a job of economists to be understood by non-economists to add their insight in a way that is understandable by everyone. 583 00:52:16,600 --> 00:52:21,600 And I think that's how lawyers and economists work hand in hand together. 584 00:52:21,600 --> 00:52:28,600 And I think in the context of a sustainability agreement, I think the insight of economists is particularly important as well. 585 00:52:28,600 --> 00:52:31,600 Well, I think that's all the questions I have for you today. 586 00:52:31,600 --> 00:52:36,600 But thank you so much for agreeing to speak to us and for sharing your insights with our audience. 587 00:52:36,600 --> 00:52:39,600 It's like a sort of like niche intersection. 588 00:52:39,600 --> 00:52:44,600 And I think that's something that's really interesting and kind of new and refreshing to our audience. 589 00:52:44,600 --> 00:52:46,600 So thank you. 590 00:52:46,600 --> 00:52:47,600 Well, thank you for having me. 591 00:52:47,600 --> 00:52:52,600 It's been a pleasure to discuss this very important topic today. 592 00:52:52,600 --> 00:53:04,600 And I think, like I said, I think there will be more discussion and your audience should pay attention to what authorities are doing in that space because we are writing in many ways history here. 593 00:53:04,600 --> 00:53:15,600 While authorities are looking in ways into promoting sustainability agreement and it will be interesting to see how they're going to act when they actually face actual cases. 594 00:53:15,600 --> 00:53:38,600 So thank you.