CMS Competition Law and Sustainable Development Series Part 4: Sustainability and Mergers


In the fourth instalment of this series, we will address in two parts the sustainability considerations that arise within the course of merger procedures and highlight a few important cases and legislation. The first part of this fourth instalment of the series will focus on how the concept of sustainability can be used as a metric in assessing the effects of mergers.

The concept of sustainability as it relates to mergers

The concept of sustainability varies depending on its context. As addressed in the previous articles of this series (Part 1, Part 2, Part 3), the environmental aspects of sustainability tend to be prevalent in the field of competition law. Nevertheless, it is becoming increasingly apparent that when it comes to merger clearance procedures, competition agencies are more and more likely to address and consider sustainability considerations with broader social objectives.

As an example from previous years, the Netherland’s Authority for Consumers and Markets (“ACM”) considered animal welfare in its evaluation during a merger clearance procedure. The ACM pointed out in the contemplated merger of veal producer Van Drie with calf trader Van Dam that “one of the theories of harm that we are investigating is a theory of harm based on sustainability and animal welfare”. The ACM considered “whether these possible lower prices will lead to a degradation of animal welfare and less investment in sustainable dairy farming in the Netherlands”.

How does sustainability play a role in mergers?

Sustainability can operate both as a “sword” and as a “shield”, meaning that it can be used both by competition agencies as a theory of harm to impose punitive or corrective measures, or by undertakings to formulate a case defence for otherwise anticompetitive conduct.

2.1. Sustainability as a sword

There are two scenarios that arise under this concept:

  • In the first scenario, a merger that adversely affects prices on the relevant market also has a harmful effect on sustainability. In such a case, sustainability operates as a sword, but not as a standalone theory of harm since it can have anti-competitive results in the same way as price increases. In these cases, competition agencies tend to focus on the more “traditional” non-coordinated theory of harm (i.e., increase in price).
  • The second scenario arises if the merger does not adversely affect the prices on the market, but instead has harmful effects on sustainability. In this respect, sustainability operates as a standalone theory of harm. 

In the second scenario the question arises of how one should measure the effects of a merger on sustainability, and what is the applicable test to balance these effects against one another (i.e., harm to sustainability, but no harm to prices). It is well-established in merger assessment that a decrease in quality, choice or innovation can be as harmful to competition as an increase in price. Therefore, it could be a viable option to consider sustainability as a non-price dimension of competition (i.e., the dynamic effect).

While measuring non-price-based effects is not straightforward, there is a clear tendency towards taking such effects into account. The Commission, in its Horizontal Guidelines, underlines that “in markets where innovation is an important competitive force […] effective competition may be significantly impeded by a merger between two important innovators, for instance between two companies with “pipeline” products related to a specific product market.” An example from the Commission’s practice is the Dow/DuPont merger where the Commission emphasised that the innovation in crop protection is not only of the utmost importance to farmers or consumers, but must be evaluated due to its given impact on food, environmental safety, and human health. As for the EU Member States’ practice, the Hungarian Competition Authority (“HCA”) puts special emphasis on non-price-based effects as well, such as innovation, quality, variety, or even consumer convenience (see for example, VJ/12/2019. Netrisk/Biztosítá; VJ/34/2018. Media Markt/ Tesco part of undertakings; VJ/14/2019. eMAG/Extreme Digital; VJ/16/2019. Travel). Likewise, the Dutch ACM has also indicated that it will analyse sustainability concerns among other non-price-based effects in its further investigation of the merger of two waste management companies (see AEB/AVR).


There are two other ways in which sustainability could become a standalone theory of harm in merger cases:

  • Green killer acquisitions. A green killer acquisition could be defined as the acquisition of smaller companies with a high potential of sustainability related innovations with the aim to remove them from the market before they have a chance to become a more viable competitor. It is worth mentioning that the Commission has put a special emphasis on killer acquisitions in recent years, and there is a chance that these cases will soon “turn green” (i.e. that the Commission will start to target green killer acquisitions). In Norsk Hydro/Alumetal, the Commission opened a Phase II investigation, inter alia, due to the concern that “Norsk Hydro […] may eliminate a growing competitor able to bring cheaper and advanced recycled aluminium products to the market”.
  • Referrals under Article 22. The Commission’s newly established case-law regarding Article 22 referral cases under the Merger Regulation could also support the objectives of the Green Deal, particularly by preventing mergers harming sustainability, which fall below the notification thresholds. Although the Commission’s intervention in the Illumina/Grail case was not motivated by green objectives, it is noteworthy to mention that the Commission prohibited the merger on the basis of having considered its possible negative effects on the innovation of cancer-detection tests. This indicates that if the Commission considered innovation as a sufficient factor to refer the case under Article 22, we cannot exclude the possibility that the Commission will apply the same approach in relation to green objectives in the future.

As the above suggests, sustainability as a standalone theory of harm has not yet been afforded a prominent role in specific cases. However, since sustainability directly relates to innovation – which as mentioned is already an emerging factor subject to review – it would seemingly not be a new exercise for competition agencies to consider such sustainability related cases in the near future.

2.2. Sustainability as a shield

Sustainability as a “shield” encompasses situations where anticompetitive effects are found but – taking into consideration the possible positive effects of the merger on sustainability – the merger is nonetheless likely to be cleared.

Currently, the “efficiency-test” is perhaps the most notable mechanism in merger control procedures to advance sustainability arguments when advocating that a merger will result in environmental benefits. In the Horizontal Guidelines, the Commission sets out the three cumulative conditions that “efficiency claims” must satisfy if they are to serve as the basis for a merger clearance. The merger must (i) benefit consumers, (ii) be merger-specific, and (iii) be verifiable. The relevant HCA guidance document largely echoes the Commission’s approach on accepting efficiency claims.

In practice, however, competition agencies seem reluctant to accept such claims. Although there are strong arguments in favour of viewing environmental and sustainability benefits as clear consumer benefits, many concerns could arise from such an approach. For example, verifiability becomes a concern given that many environmental benefits are likely to take time to materialise and can be correspondingly difficult to quantify. An additional concern is that any such possible benefits cannot be predicted with high certainty at the time of the merger. An example from the Commission’s practice is the Aurubis/Metallo merger, where the Commission evaluated green innovation efficiencies based on the parties’ argument that the merger could have positive environmental benefits through technology transfers within the merged entity. Although the merger was eventually cleared by the Commission, clearance was not granted on the basis of these efficiencies, as the Commission concluded that the innovation efficiencies could not be considered transaction-specific, timely, and verifiable. Another relevant example is the Sika/MBCC merger where the Commission cleared the merger between two major actors in the chemical admixtures and construction chemicals industry despite the existence of competition issues. In order to alleviate the Commission’s concerns, Sika proposed a comprehensive worldwide sale of MBCC's chemical admixture division and its global research and development facilities to a single buyer. This instance illustrates the Commission's willingness to consider research and development capabilities and sustainability matters during merger assessments.

Martijn Snoep, the Chairman of the Dutch ACM mentioned during a webinar in 2021 that “the ACM is more reluctant to accept “green efficiencies” […] in merger control cases. This is because the approval of a merger brings a structural change to the competitive structure in the relevant market(s)”. Since the Dutch agency is a sustainability pioneer in Europe, its reluctant approach indicates that it will likely take significant time for agencies to accept such claims.

Looking towards Part 2

In Part 2 of this fourth instalment of the CMS Competition Law and Sustainable Development Series, CMS will continue its overview of how sustainability plays a role in mergers. Part 2 will consider sustainability:

  • in the context of the market;
  • in light of public interest considerations; and
  • through considerations that arise after a merger assessment by a competent authority.

For more information on EU and Hungarian competition law, contact your CMS client partner or local CMS experts.