Concurrences

ANTITRUST PUBLICATIONS & EVENTS

Competition Law,
Climate Change
& Environmental
Sustainability
Simon Holmes, Dirk Middelschulte, Martijn Snoep

Foreword by Frans Timmermans

Introduction by Suzanne Kingston
Competition Law,
Climate Change
& Environmental
Sustainability
Foreword by Frans Timmermans
Introduction by Suzanne Kingston SC

Edited by
Simon Holmes
Dirk Middelschulte
Martijn Snoep

Managing Editor
Sonia Ahmad
 The Footprint of Competition:
Power, Value Distribution
and Exploitation
in the Food Supply Chain
Michelle Meagher and Simon Roberts*
University College, London | University of Johannesburg

I. Introduction

Given the essentiality of food to human survival and its cultural, social and
political significance, food supply chains are of special importance in relation
to the climate change agenda, while food consumption, production and distri-
bution account for a significant proportion of emissions. 1 In addition, the
impact of global warming is already being felt by farmers around the world.

*
Michelle Meagher is a senior policy fellow at the Centre for Law, Economics and Society at UCL. She
is an expert in competition law and corporate governance. She has worked as a lawyer in private practice
for global law firms (Linklaters LLP, Allen & Overy LLP), national regulators (the Office of Fair Trading
in the UK and the Federal Trade Commission in the US) and the International Finance Corporation
(World Bank Group). Simon Roberts is a professor of economics at the University of Johannesburg,
where he founded the Centre for Competition, Regulation and Economic Development (CCRED). He
has been an economics director at the UK Competition and Markets Authority (2019 to 2020) and the
Chief Economist and Manager of the Policy & Research Division at the Competition Commission of
South Africa from 2006 to 2012. Simon has been closely involved in the development of competition
law in South Africa from the establishment of the authorities and has testified as an expert witness in
major cases. He has also advised competition authorities, regulators and governments across Southern
and East Africa, as well as further afield.
1 The food supply chain is estimated to account for around a quarter of greenhouse gas emissions, see
Joseph Poor and Thomas Nemecek, “Reducing food’s environmental impacts through producers and
consumers” (2018) 360(6392) Science 987.

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 The Footprint of Competition: Power, Value Distribution
and Exploitation in the Food Supply Chain

Within competition law, the changes required have led to an examination of

the need for coordinated action and the ways in which competition law is an
obstacle to such initiatives, including in this book.2 Proposals have been made
to reinterpret competition rules and widen exemptions in ways that would enable
key businesses such as supermarkets and multinational food processing
companies to implement sustainability agreements amongst themselves, that
might otherwise fall foul of the prohibition on anticompetitive agreements.3
It is argued that merger review should similarly take into account environmental
implications, potentially as a justification for approval of an otherwise anticom-
petitive merger.

While these are important aspects of the debate, we approach the issue from a
somewhat different standpoint in two regards.

First, we take as a starting point the critical need for rapid and radical decar-
bonisation of the global economy and a systemic rethink of resource use across
the planet. This requires an analysis of the resources that are used by and,
critically, for consumption in the developed world, and an assessment of the
investment needed to adapt production in developing countries. This involves
consideration of the geographical footprint of the food supply chain, the
challenges of industrialisation and inclusive growth in developing countries, and
the role of competition policy in opening up markets to wider ­participation.

Second, the approaches taken need to be based on an assessment of concen-

tration and market power in food markets. It is evident that concentration is
high and has increased at many levels of food production and supply. It is also
important to understand how value chains are governed by large and leading
companies, and how market power is entrenched and exerted within those
chains. The concerns over market power have important implications for the
design of any regulatory interventions, including under competition law, which
may otherwise have the effect of further entrenching the position of large
incumbents.

Each of these premises implies that the sustainability agenda will not be met
through the facilitation under competition law of coordination by multinational
corporations and, indeed, such coordination may in some cases undermine the
changes required. We need a much broader reset.

As part of proposing the basis for such a reset, this paper will explore the two
interrelated “footprints” of competition and markets along food supply chains:
first, the geographical footprint of the agrifood sector; and, second, the footprint

2 Simon Holmes, “Climate change, sustainability and competition law” (2020) 8(2) JAE 354; Autoriteit
Consument and Markt, Draft Guidelines: Sustainability Agreements (9 July 2020).
3 Unilever, “Sustainability cooperations between competitors & Art. 101 TFEU” (Submission to DG
Comp, 2020) <www.unilever.com/Images/unilever_submission_sustainability_competition_law_
tcm244‑551751_en.pdf> accessed 14 January 2020.

352 Competition Law, Climate Change & Environmental Sustainability

 Michelle Meagher and Simon Roberts

of relational power within the food supply chain. We then consider how compe-
tition law can be strengthened to promote sustainability in light of the current
distribution of power and wealth associated with food production.

II. The Geographical Footprint

of Consumption and Competition

While obvious, it is nonetheless important to observe that industrialised

economies have been built on high levels of past emissions. Today, while many
of the most polluting industries have moved to developing countries, the high
levels of consumption of the “Global North” include imports from around the
world and the high carbon footprint of developing country production is often
embedded in the supply chains of multinational corporations.4 The burning of
the Amazon to plant soya beans destined for animal feed for meat production
overwhelmingly consumed by relatively wealthy urban consumers is just one
example of this dynamic.

The intensification of international competition in fragmented global value

chains forces countries to compete to deliver lower-priced products, which
promotes short-termism and downward pressure on environmental and labour
standards.5 This is evident within, as well as across, countries as –  often
immigrant – farm labour is employed under exploitative conditions in industri-
alised countries as well as in countries from which produce is imported.

The temptation is to now place the burden of decarbonisation (and other changes
to resource use) on the current emitters – i.e. developing country producers
– through agreements on standards enforced by the leading “socially responsible”
producers in value chains. This reflects a number of fundamental failures.

First, it fails to recognise that developing countries are, in the model of the Global
North, seeking industrialisation. It also ignores the role that consumption in
industrialised countries continues to play in resource-use globally. It is simply
not realistic for the Global North to dictate sustainability requirements to the
Global South that would require the Global South to forgo economic development.
It is imperative that the concerns of developing countries are adequately addressed.

Second, investment in upgraded production capabilities of producers in devel-

oping countries is essential for their cooperation. A Green New Deal must be a
deal for participants right the way along global value chains, ensuring a fairer

4 We use the terms “Global North” and “Global South” as a shorthand for relative privilege, to reflect the
fact that inequality within countries mean that there are wealthy elites in developing countries which
share more in common in terms of consumption and lifestyle with populations in industralised nations,
while there are low income communities in industrialised nations who are in precarious and vulnerable
positions.
5 Michelle Meagher, Competition Is Killing Us (Penguin Business 2020).

Competition Law, Climate Change & Environmental Sustainability 353

 The Footprint of Competition: Power, Value Distribution
and Exploitation in the Food Supply Chain

share of returns and the realisation of dynamic improvements – in the form of
new business models and technologies consistent with a green transformation
of production systems. Many middle-income and developing countries are stuck
in a “technology trap” – competing against each other on a price basis – while
the value creation from R&D, design and brands is captured by the increasingly
concentrated global multinationals.6

Third, these changes require pressure by smaller developing-country producers

and civil society movements to countervail the power of dominant buyers and
to mitigate against the risks of price volatility and oversupply. This underscores
the need for cooperation within the supply chain, but at the producer and farmer
level, not just at the processor and manufacturer level.

This means that greater participation by developing-country producers, including

small farmers, in food value chains is essential, and not only at the concession
of multinational corporations. As we have seen in countries such as Brazil, high
levels of inequality mean populist agendas backed by big business are attractive
to voters. Imposing requirements from above, including through supermarkets
and through industrialised-country taxation on imports from developing countries
to reflect emissions, will simply exacerbate the sense of unfairness and injustice
felt in developing and emerging economies.

III. The Footprint of Power and Governance

To make sense of the geographic footprint of competition, we must understand

the footprint of power along value chains and, in particular, the governance of
value chains by large and leading companies. We can distinguish between horizontal
market power at any given market level and power that coordinates production
and establishes rules and norms along multiple levels of value-addition, through
varying degrees of vertical integration and differing institutional arrangements.7

There are high levels of concentration along food value chains, from seed, fertiliser
and other agrochemicals, to processing, trading and retail. In the last two decades,
concentration levels have increased, including through mergers of major seed and
agrochemicals producers, and of major food product manufacturers.8 In most
countries, a few very large supermarket chains account for the majority of grocery

6 Antonio Andreoni and Fiona Tregenna, “Escaping the middle-income technology trap: A comparative
analysis of industrial policies in China, Brazil and South Africa” (2020) 54(C) Structural Change and
Economic Dynamics 324.
7 Stefano Ponte, Business Power and Sustainability in a World of Global Value Chains (Zed Books 2019);
Mark P Dallas, Stefano Ponte and Timothy J Sturgeon, “Power in global value chains” (2019) 26(4) Rev
Int’l Political Econ 666.
8 IPES-Food “Too big to feed: Exploring the impacts of mega-mergers, concentration, concentration of
power in the agri-food sector”.(October 2017) <www.ipes-food.org>; Carl Folke and others, “Trans-
national corporations and the challenge of biosphere stewardship” (2019) 3 Nature Ecology and
Evolution 1396.

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 Michelle Meagher and Simon Roberts

sales. This affects the distribution of value in the supply chain, the bargaining
position of producers and workers, the nature of production along the chains,
and the changing patterns of land use and ­biodiversity.

Just 100 companies account for over 70% of global emissions.9 A nexus between
market power and unsustainable practices has been observed in EU findings of
abuse of dominance by Iacovides and Vrettos, which cuts across sectors, with
dominance facilitating the pursuit of firms of unsustainable practices.10 The
issues of market power are core concerns for competition authorities and are
central, not peripheral, to sustainability concerns in food supply chains.

Incumbents have a natural incentive to limit the threats to their position through
raising rivals’ costs and barriers to entry. This can be achieved through:

–– Using their dominance (if they are dominant) in traditional ways, which
competition law is designed to address;
–– The exercise of buyer power, abuse of a superior bargaining power, and
unfair competition;11
–– Seeking to shape private standards and, through lobbying, to influence
public regulations and policy in their favour.
The point is that, even while many large incumbents are moving to take sustain-
ability concerns into account in their businesses and along their supply chain, their
interest is naturally to do so in ways that bolster their own positions. And, while
large incumbents are aggressively marketing themselves in terms of their commit-
ments to environmental, social and governance standards, the expansion of private
standards organised by leading firms risks raising obstacles for smaller rivals and
imposing the majority of adjustment costs on smaller input suppliers.12

The extensive body of research on governance in global value chains emphasises

the role that the large and leading international businesses play in appropriating
and distributing the value along the chains.13 Environmental standards set by

9 Marios Iacovides, and Chris Vrettos, “Falling Through the Cracks no More? Article 102 TFEU and
Sustainability I – the Nexus Between Dominance, Environmental Degradation, and Social Injustice”
(25 September 2020) Faculty of Law, Stockholm University Research Paper No 79 <https://ssrn.com/
abstract=3699416>, citing Paul Griffin, “The Carbon Majors Database – CDP Carbon Majors Report 2017”
(CDP Report, July 2017).
10 Iacovides and Vrettos (n 9).
11 See Ioannis Lianos and Claudio Lombardi, “Superior Bargaining Power and the Global Food Value
Chain: the Wuthering Heights of Holistic Competition Law?” ? in Ioannis Lianos, and others, “Compe-
tition law and policy and the food value chain” (2016) Concurrences N° 1–2016 Art N° 78014, 22;
Tomaso Ferrando and Claudio Lombardi, EU Competition Law and Sustainability in Food Systems:
Addressing the Broken Links (Fair Trade Advocacy Office, Brussels 2019). However, we note that there
are differences in the antitrust community (enforcers and academics) on these issues.
12 See Elizabeth A Bennett, “Who Governs Socially-Oriented Voluntary Sustainability Standards? Not the
Producers of Certified Products” (2017) 91(C) World Development 53.
13 Ponte (n 7); Stefano Ponte, Gary Gereffi, Gale Raj-Reichert, “Introduction” in Ponte, Gereffi and
Raj-Reichert (eds) Handbook on Global Value Chains (Edward Elgar 2019).

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 The Footprint of Competition: Power, Value Distribution
and Exploitation in the Food Supply Chain

multinationals appear to be adding a “sustainability-driven supplier squeeze”

on developing country producers.14 It also reinforces the governance position of
these firms over global value chains. Even within the consumer welfare paradigm,
the extraction of value by particular firms in the supply chain has implications
for productivity and innovation that do not serve consumers, let alone the sectors,
producers and countries that are impoverished by the extraction.15

The agenda on which we need to engage must therefore start from an under-
standing of the power of governing companies over the supply chain itself, the
economies in which their products are most valued, the politics of those
economies, and the societies and people impacted by or embedded within the
supply chain. More broadly, we can see this type of power (governance of the
supply chains) as the power to skew market outcomes in the lead firm’s favour 16
– including the power to control rents in the chain, to undermine actual and
potential rivals and to ensure norms and regulations that will bolster its
position.

This poses a challenge to competition authorities. On the one hand, they can
prioritise exemptions from competition law for large companies that are coordi-
nating activities for the good of the environment. This could be agreements
between supermarkets to assist them in making changes to plastic packaging or
setting standards relating to carbon emissions by suppliers.17 On the other hand,
as institutions with in-depth knowledge about how markets work in practice,
competition authorities can play a crucial role in developing the market-shaping
measures that governments must implement to create a sustainable economy.
These measures need to ensure that market power is curtailed and dynamic
rivalry works to open up markets with opportunities for disruption by innovative
smaller rivals and businesses with different ownership models.

The hyper-internationalised organisation of activity, the international scope of

the businesses involved, and the pace of change required to address the climate
emergency pose a fundamental challenge to a patchwork of national regimes. The
agenda for more sustainable market outcomes must therefore be an international
one, focused on the positive competition policies required for wider participation
and production, organised in more resilient value chains. The adjustments required
by climate change cannot be identified as a shopping list of discrete changes.
Instead we need to think of the changes in more systemic ways, as a set of rules
to reshape markets.

14 Ponte (n 7).
15 Ioannis Lianos, “Global Food Value Chains and Competition Law: BRICS Draft Report” (2017) CLES
Research Paper series 11/2017, 57.
16 Marshall Steinbaum, Eric Harris Bernstein and John Sturm, “Powerless: Powerless: How Lax Antitrust
and Concentrated Market Power Rig the Economy Against American Workers, Consumers, and Commu-
nities” (Roosevelt Institute, 21 March 2018).
17 Holmes (n 2); Nicole Kar, “Competition rules stymie co-operation on climate goals” Financial Times
(London, 30 January 2020).

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IV. Effective Competition Policy and Law

Within a Wider Agenda For Sustainability

Once we recognise the complete footprint of competition – both geographically

and in terms of power relations – it is evident that we need to combine compe-
tition law and policy, regulation, and appropriate industrial policies in order to
open up value chains to wider participation and effective rivalry, while ensuring
rapid changes in production systems to reduce emissions. It is not just about
enforcing rules but about changing the rules to shape markets such that effective
rivalry works towards different (better) outcomes. The market rules should
prevent firms from unfairly competing through imposing costs on other parties
in supply chains, and by addressing market outcomes that have substantial
negative externalities (which are not reflected in prices and the decisions of
market participants). Market arrangements involving abuse of dominance, unfair
competition and negative externalities can be assessed in static terms, that is, in
terms of a given market outcome and set of production choices.

In dynamic terms, we know that we need rapid changes that transform the way
production and distribution happen. Investment and innovation are essential, for
example, in the adoption of precision farming techniques to reduce the resources
used (including fertiliser and water) in production. We know that market prices
do not necessarily reflect the societal benefits of the changes required and thus
may not set the appropriate incentives. The production changes therefore require
industrial and agricultural policies on the part of governments. Many of the
changes are cross-border – to reduce the European consumption footprint, farmers
in developing countries need to be able invest to change their production methods.

Beyond the internalisation of externalities, a dynamic recalibration of markets

along dimensions of future sustainability and in accordance with principles for
a just transition to ecosystem resilience must also account for historic harms
inflicted by the Global North, both environmental and social, before enjoining
all countries to begin to engage in sustainable and just competition going forward.

In this context, enabling cooperative agreements amongst multinational corpo-

rations may lead to marginal benefits but also risks perverse outcomes. Nor will
it be transformative on the scale that reordering competition and redistributing
power within global value chains can be.

The contours of the intersection of power and sustainability are well-understood

within civil society that (i) globally powerful transnational firms are able to
govern the sustainability of their supply chains and the sustainability of industry
as a whole; (ii) sustainability is meaningless without fairness, equality and justice,
which are each impacted by the existence of corporate power; and (iii) the
distribution of value within and across markets and nations is paramount. The
processes to address sustainability must be democratic, with a leadership played

Competition Law, Climate Change & Environmental Sustainability 357

 The Footprint of Competition: Power, Value Distribution
and Exploitation in the Food Supply Chain

by states and multilateral bodies, consulting with stakeholders including leading

firms, but not derogating decision-making to them.

It is now becoming better appreciated that competition law has a fundamental

role in challenging the power of such firms on the market and within the global
value chains that they govern.18 A failure to do so in the past can be attributed
primarily to a historic lack of willingness on the part of the competition
community to apply its expertise on these broader issues of corporate power.
Work to align competition law with these concepts has just begun.19

There are several ways in which competition law enforcement and competition
policy can be strengthened as part of a comprehensive sustainability agenda.

i. Holistic market regulation and sustainability – sustainability is not a

separate agenda from the agenda of competition law, rather both
concepts are subsumed within broader notions of making markets work
well within planetary boundaries and the ideas of fairness, equality and
justice embodied by the UN Sustainable Development Goals and the
EU treaties. In short, we must solve for sustainability first and embrace
whichever forms of economic organisation and regulation are compatible
with a sustainable economy.

ii. Foregrounding power – concepts of power have been relatively absent from
competition law as there has been an overwhelming focus on power only
over price and output. In light of the complex power of multinational
firms governing food supply chains, richer concepts of power must be
explored within competition, particularly vertical power within integrated
or coordinated supply chains20 and how power is both exercised and
entrenched.

iii. Distribution and exploitation – the global value chain literature makes
clear that within value chains companies compete to extract value from
the chain itself, as well as competing with other value chains. Dominant
companies within the value chain have (a) the power to inflict costs on
other parties within the value chain, on host countries and communities,
and on the environmental ecosystem (externalised costs); (b) superior
bargaining power, including buyer power to impose low input prices;
(c) the power to seek and protect rents through lobbying; and (d) the
market power to draw more value into the value chain from consumers

18 IPES (n 8); Lianos (n 15); Sophia Murphy, “Concentrated Market Power and Agricultural Trade” (2006)
Ecofair Trade Dialogue Discussion Papers 1; Meagher (n 5).
19 See e.g. Ioannis Lianos and Amber Darr, “Hunger Games: Connecting the Right to Food and Competition
Law” (2019) CLES Research Paper series 2/2019.
20 Lianos (n 15), 46 et seq.; Dallas, Ponte and Sturgeon (n 7); Pamela Mondliwa, Stefano Ponte and Simon
Roberts, “Competition and Power in Global Value Chains” (2020) Competition and Change
doi:10.1177/1024529420975154.

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 Michelle Meagher and Simon Roberts

through raising prices. All these mechanisms for the extraction of value
should be relevant to a competition analysis.

Distribution of value throughout the value chain has profound implications for
the quality and standard of life of people living and working within those value
chains. Exploitative conduct should be taken more seriously by competition
authorities, as it has been in the COVID-19 pandemic (such as in tackling price
gouging against vulnerable consumers).

In conclusion, we return to the over-arching risk that interventions can entrench

incumbents and existing power structures under a “greening” banner. Support
for sustainability cooperation between multinationals risks doing just that.
Relatedly, there is a myth that dominant companies are better able to pursue
sustainability objectives because they have more resources at their disposal and
their consumers may be less sensitive to price (as they are able to charge a
monopolistic price). The broader concept of power as “power to skew market
outcomes in a firm’s own favour” needs to be deployed in analysing alternative
paths to more sustainable production. If this is not done then the measures taken
risk continuing to allow powerful firms to inflict unsustainable outcomes on
other economic actors. It is a fundamental contradiction to argue that a dominant
firm may achieve higher sustainability outcomes when it is sometimes the existence
of the dominant, market-governing firm itself that generates the unsustainable
outcomes with which this paper is concerned.

Competition Law, Climate Change & Environmental Sustainability 359

Competition Law,
Climate Change
& Environmental
Sustainability
Simon Holmes, Dirk Middelschulte, Martijn Snoep

Foreword by Frans Timmermans

Introduction by Suzanne Kingston

The consensus is clear - climate change is the defining challenge of our time. Meeting this challenge
requires a collaborative and inclusive response from all segments of society - including private
businesses. What role then for competition law and policy?
This important and timely book gathers academics, enforcers, economists, lawyers, and industry
representatives to explore the applications and limitations of EU competition law in achieving
environmental sustainability aims in line with the European Commission’s Green Deal as well as
the UN’s Sustainable Development Goals. They identify the challenges of integrating environmental
considerations into competition analysis presented by the existing framework, whether through
cooperation by businesses, practices by dominant companies, or consideration of sustainability
efficiencies in merger assessments. Practical examples across various sectors are also provided,
alongside agency views from different jurisdictions, to illustrate how competition policy can faciliate
a sustainable economy.

Simon Holmes is Visiting Professor at Oxford University & Member of the UK Competition Appeal Tribunal.
Dirk Middelschulte is Global General Counsel Competition at Unilever.
Martijn Snoep is Chair of the Netherlands Authority for Consumers and Markets (ACM).

This is an excellent collection of essays by experts and deep-thinkers, into whether and how to
receive sustainability into competition law and policy.
Eleanor Fox, Professor, New York University

This innovative book provides rich inspiration for policymakers when defining the important
role of competition law in achieving a more sustainable economy.
Alan Jope, CEO, Unilever

The book is superbly structured and will be indispensable for anyone wishing to engage with
this most important of subjects.
Richard Whish, Emeritus Professor, King’s College London

ISBN:978-1-939007-22-3 230€ - 290$ - 200£