Belgian Competition Authority clears sustainability initiative for living wages in the bananas sector

Sustainability and competition

Sustainability and competition law has been high on the agenda of the European Commission and several national competition authorities. Last year, the European Commission published its Draft Horizontal Guidelines, which contains a new chapter on sustainability cooperation and agreements.

This Commission’s guidelines come on top of the activities of national competition authorities, which have also been active in this space. Notably, the Dutch Competition Authority published draft guidelines in 2020.

Bananas and living wages

The Belgian Competition Authority (“BCA”) has now followed suit. The case concerns the sustainability commitment of IDH Sustainable Trade, a social company which accelerates and upscales sustainable trade by building impact-oriented coalitions of front-running companies, civil society organizations, governments and other stakeholders. In December 2022, IDH Sustainable Trade reported that five Belgian retailers had signed a commitment to ensure a living wage for banana workers throughout their international supply chains by 2027. The project covers fresh bananas sold on the Belgian market either as branded or private label products.

The BCA’s assessment

In a press release of 30 March 2023, the BCA announced that it had reviewed the initiative and found no competition law concerns.

The BCA explains that sustainability initiatives consisting of partnerships between companies can require a complex balancing of interests between the environmental and sustainability benefits of the cooperation and their effects on competition. It is noteworthy that, like the Commission’s Draft Horizontal Guidelines, the BCA here also confirms that sustainability is a broad concept that also encompasses social development (including labour and human rights).

In this case, the BCA considered that the balance tipped in favour of the sustainability benefits. In its analysis, it took into account  the following parameters, which reflect the European Commission’s Draft Horizontal Guidelines on sustainability standard agreements:

• The level of transparency for the participants in the standard selection process;
• Whether participation to the initiative is voluntary;
• Whether parties remain free to set stricter standards for themselves;
• Whether the initiative makes it possible to exchange commercially sensitive information;
• Whether third parties have effective and non-discriminatory access to the requirements and conditions of the standard;
• Whether the standard could lead to significant price increases or choice reduction for consumers; and
• Whether the standard foresees continuous monitoring of the implementation of the sustainability standard.

  On the basis of those parameters, the BCA concluded that the initiative does not raise competition issues and found that:

• The initiative contains sufficient safeguards to prevent the exchange of commercially sensitive information.
• The commitment also contains sufficient measures to preserve a participant’s individual pricing autonomy. In particular, no mandatory or recommended minimum prices will be communicated. The IDH will also make no recommendations on how to pass on any changes in costs in the supply chain. Although it is not explicitly mentioned in the BCA’s press release, we assume this fundamentally also covers recommendations or statements as to whether cost should be passed on in the first place.
• The IDH will monitor the implementation of the project across the supply chain by reviewing different KPIs on a regular basis, to measure progress. The actual impact of the initiative in the main source countries will be assessed annually. Data entered by the participants will be verified by an independent third party.
• IDH will also keep the BCA informed of any changes and any further development of the proposed initiative.

With the press release, the BCA shows that it will apply the principles of the Commission’s Draft Horizontal Guidelines in practice. It is clearly open for parties to discuss this type of agreement in order to increase legal certainty.

For more information, please contact Hein Hobbelen, Baptist Vleeshouwers or Ruben Verdoodt

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