On 5 July 2024, the Dutch Competition Authority (“ACM”) published yet another informal guidance on sustainability initiatives and their compatibility with competition law. This time, it concerns an agreement between nine coffee capsules manufacturers in order to recycle more plastic and aluminium coffee capsules. Unsurprisingly, the ACM has no objections to this initiative. This blog discusses the main takeaways of the ACM’s informal guidance and how these can be applied to other sustainability initiatives.

The initiative of promoting the recycling of coffee capsules

The Royal Dutch Association for Coffee and Tea Companies (the “Association”) intends to cooperate with coffee manufacturers to increase the percentage of recycled aluminium and plastic coffee capsules by making arrangements with waste processors. The nine manufacturers involved represent around 90% of the production of coffee capsules on the Dutch market. The initiative will be implemented by a to be established association (“KCR-NL”). As most aluminium (±75%) and plastic (±95%) coffee capsules end up in residual waste, KCR-NL will invest in technologies (such as sorting machines) that will enable waste processors to sort out coffee capsules from the residual waste and transport these coffee capsules to a recycling facility. The revenue from the sale of sorted capsules goes to the waste processors. KCR-NL will share in the investment costs and the monitoring costs (the waste processors will monitor how many capsules are sorted and submitted for recycling), subject to the individual agreements with each waste processor.

The initiative currently only focuses on the recycling of coffee capsules from the waste streams of municipalities that use post-collection separation (phase one; this is where the plastics, metals and beverage cartons (PMD waste) are not separated by households but after collection through a mechanical sorting process).

The Association argues that the cooperation is necessary due to free riding (as it is not possible to separate capsules by brand, meaning that individual investments in sorting machines would lead to free riding of other manufacturers). Furthermore, waste processors do not invest in the required sorting machines as coffee capsules only make up a fraction of the total waste stream (less than 1%) and individual manufacturers do not have a strong position vis-a-vis waste processors to force a change.

The assessment of ACM

ACM has informally assessed the initiative on the basis of its Policy Rule regarding ACM’s oversight of sustainability agreements of 4 October 2023. The ACM assesses whether the initiative encompasses a sustainability agreement between competitors, which it does. The initiative contributes to a circular economy and higher levels of recycling.

The potential anti-competitive risks seem non-existent as the ACM concludes that in the setup of KCR-NL there is i) no exchange of competitively sensitive information (“CSI”), ii) no risk of foreclosure, iii) no risk of a price increase and iv) no risk of impediments of innovation. However, this last risk is flagged as a point of attention by the ACM.

To come to these conclusions, KCR-NL has taken measures to limit potential risks. On point i) KCR-NL has engaged an external service provider to calculate and invoice the fees that the members of KCR-NL contribute (which is calculated based on market share). These invoices are sent to the individual members by an independent secretary of KCR-NL who also processes the information and is bound by a confidentiality agreement. The board of KCR-NL has no access to this information. Market shares are thus not shared amongst members (i.e. competitors) of KCR-NL as this could potentially constitute CSI. 

The ACM does not see a risk of foreclosure of competing coffee capsules manufacturers or individual waste processors (point ii). All manufacturers of coffee capsules who want to recycle their capsules can participate in the initiative and KCR-NL has no interest in excluding waste processors as this would undermine the intended objective. 

As regards point iii), the Association notes that the investment costs borne by its members are only a fraction of their total costs and a small percentage (which is confidential) of the retail price of capsules. This means that the likelihood of an increase in the price of capsules is negligible. Furthermore, there is no coordination as to whether these costs are passed on to consumers and the Association indicates that it is unlikely that the costs will have an impact on the retail prices as the competition at the retail level is fierce.

Impediment to innovation is the final concern of ACM (point iv). The Association explains that members remain free to take sustainability measures that go beyond the objectives of the initiative. For example, members of KCR-NL are free to choose alternative packaging materials and to take other (more) sustainable measures (such as compostable coffee capsules). There is also no minimum percentage or volume of aluminium or plastic capsules for participating in the initiative. The ACM states that it does not currently see a risk of innovation being hampered but has given the Association a point of attention in this respect. The Association must ensure that the initiative does not have a negative impact on investment in making coffee capsules more sustainable in ways other than through recycling.

The ACM therefore concludes that it is plausible that, at the moment, the initiative does not present a risk of an appreciable restriction of competition. The ACM stresses that this is an informal decision based on the information provided by the Association and that it may decide to investigate the initiative in more detail at a later stage. In principle, however, this will not lead to the imposition of fines.

Key takeaways for cooperation on sustainability agreements

It may be questioned whether this initiative justifies an informal assessment by the ACM and whether it is necessary for the ACM to invest resources. From a competition law perspective, it seems a fairly obvious slam dunk. Historically, the ACM has been reluctant to provide informal guidance on such matters, but for initiatives that have a sustainability objective, the ACM is happy to provide guidance on anything it can get its hands on (at least, so it seems).

Nevertheless, cooperating for a more sustainable future for next generations is an immensely important topic. Any positive push towards such cooperation (where this is necessary to achieve sustainability goals) is, of course, very welcome. So, what did we learn from ACM’s informal guidance?

1. It is likely that guidance will be provided: if you are considering cooperation with a sustainability objective and are looking for comfort from the ACM as to its compatibility with competition law, you are likely to get it (even if an appreciable restriction of competition is rather unlikely or if the benefits quite clearly outweigh the restrictions of competition);
2. The definition of ‘sustainability agreement’ is broad, even if the impact of the agreement seems somewhat limited (less than 1% of the total waste stream in this case);
3. The exchange of (potential) CSI remains an important point of attention and it continues to be necessary to have sufficient safeguards in place when cooperating with (potential) competitors; and
4. Protecting continued (investments in) innovation is an important element of the assessment. Cooperation should not be detrimental to innovation nor an obstacle to taking measures that go beyond the sustainability objectives of the initiative.

Finally, the ACM has a useful and comprehensive information page (in Dutch) on cooperation with a sustainability objective that can be used for reference.

If you need more information or further guidance in this area, please contact Pauline Kuipers and Tialda Beetstra.

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