Paving the green road: Dutch asphalt makers smooth the path for sustainability

Asphalt producers turn down the heat – literally

At the heart of the initiative assessed by the ACM is the transition from Hot Mix Asphalt (HMA), traditionally produced at scorching temperatures of up to 180°C, to Warm Mix Asphalt (WMA), which is created at a cooler 100–140°C. This change could result in significant environmental benefits, including a reduction in energy use, lower CO₂ emissions, and fewer harmful chemical releases. Bouwend Nederland, a trade association representing the construction and infrastructure sector, has championed the initiative, presenting it as a voluntary, market-wide ambition.

Green light, no red flags: ACM’s informal guidance

The ACM’s assessment of the initiative underscores its compatibility with competition law. Applying its Policy Rule on Sustainability Agreements, the ACM concluded that the collaboration fulfills the “soft safe harbor” criteria for sustainability standards. These criteria ensure that pro-sustainability collaborations do not stifle competition.

Here’s how the initiative checks all the right boxes:

• All asphalt producers in the Netherlands, regardless of their affiliation with Bouwend Nederland, are invited to join the initiative, ensuring inclusivity and transparency.
• Producers retain autonomy, i.e., they can decide independently whether and when to adopt WMA, and Bouwend Nederland will clearly communicate the voluntary nature of the collaboration. Producers are also encouraged to surpass the basic WMA standards by adopting even more innovative and sustainable production methods.
• ACM evaluated the initiative's potential cost implications and found minimal risk of significant price increases. The voluntary nature of participation ensures that competition on price and quality remains intact.

Regarding the potential impact on price, the ACM's guidance letter to the association highlights some interesting details regarding the impact of customer demand on the ACM’s assessment. The authority points out that

• Asphalt production is heavily influenced by customer demand, particularly through tender processes. Customers can continue requesting HMA if they prefer, though Bouwend Nederland hopes to use the initiative to nudge customers toward greener alternatives.
• While some WMA production methods may involve higher costs, others could lead to savings, such as reduced natural gas consumption and lower carbon credit expenses. ACM concluded that even if costs rise, the increases would likely be negligible in the context of broader road construction budgets. This perspective of analyzing price impacts from the standpoint of total road construction costs rather than the standalone price of asphalt is somewhat unorthodox. While this approach aligns with the purchasing reality of most customers, such as contracting authorities, it deviates from the conventional focus of competition law assessments, which typically scrutinize price impacts at the product level. Intriguingly, this reasoning was notably absent from ACM’s public-facing press release, perhaps reflecting the complexity of its argumentation.

Paving the way for sustainable competition

Martijn Snoep, ACM’s Chairman, highlighted the regulator’s proactive and cooperative stance: “Businesses are allowed to work together in order to achieve sustainability goals, such as this initiative of Bouwend Nederland. The Dutch Competition Act offers scope to such collaborations. If businesses have any questions, we will gladly answer them.” At the same time, the ACM remains vigilant. Should the collaboration lead to unforeseen anti-competitive effects, such as significant price hikes or reduced market access, the ACM reserves the right to revisit its assessment.

Is this a blueprint for balancing sustainability and competition? Not quite.

As we have laid out elsewhere already, the ACM is not just known for a particularly progressive view and “ESG-friendly” approach to competition law. It is also one of the pioneers in the field of ESG and antitrust in general and has commented several times before on specific cases of sustainability agreements in various industries. Examples include joint agreements by beverage companies to stop using plastic handles on their packaging, joint purchases of wind energy by members of a business energy users' association, a uniform price for CO2 used by distribution system operators in their calculation models for grid investments or price-fixing by Shell and Total Energies collaborating on a newly established market for CO2 storage in empty gas fields. Other jurisdictions do not have that body of case law yet, do not have issued (final) guidelines on ESG and antitrust or have a more critical view. For instance, the Greek competition authority has launched a “Sustainability Sandbox” to foster innovation and provide incentives for companies to explore sustainable business ideas, Australia has issued draft guidance, the EU Commission has a chapter on sustainability in its Horizontal Guidelines, the UK adopted the “Green Agreements Guidance” which gives companies more leeway than the EU’s guidelines, the United States remain sceptical about ESG cooperations altogether and Germany does not have any guidelines on this subject, but a growing number of related cases that indicate an approach similar to the ACM’s.

In its 2023/24 Annual Report, the German Federal Cartel Office (“FCO”) clarified the factors it may consider when assessing sustainability initiatives on a case-by-case basis. These include:

1. How strong are the restrictions on competition, for example through increasing the commonality of costs?
2. Does this affect sales prices?
3. Is there non-discriminatory access to the cooperation?
4. Have the sustainability criteria been developed in an open process?
5. Is there sufficient transparency for consumers ("labelling")?

The FCO is particularly opposed to price increases or fixed prices stemming from sustainability cooperations, which last year led an animal welfare initiative that compensates livestock owners for implementing higher welfare standards to abolish its mandatory price premium for customers of participating producers, replacing it instead with a non-binding recommendation for financing the additional costs associated with its animal welfare criteria.

The road ahead

The Dutch case once again puts the intersection of sustainability efforts and competition law in the limelight – an evolving landscape that presents both challenges and opportunities for businesses worldwide. As companies strive to align their operations with ESG objectives, understanding the nuances of competition law across different jurisdictions becomes paramount.

Comparing in particular the Dutch and German approach, certain basic requirements emerge to navigate this challenge. ESG cooperations have a good chance of being “in the green” if they are (1) voluntary, (2) offer non-discriminatory access to interested companies, (3) follow clear and transparent criteria that have been developed in an open process, (4) are communicated clearly to consumers and (5) do not amount to any (appreciable) restrictions of competition parameters such as quality and, in particular, price.

That said, the degree of flexibility and specific guidelines in any jurisdiction vary, necessitating a thorough understanding of local regulations. While there is a broader global trend to encourage sustainability initiatives, this is not the case in all major jurisdictions and the landscape is certainly going to change further in the future, with new guidelines or even legislative efforts to change the applicable provisions (for more details, see here). In any event, all ESG cooperations must be designed carefully to avoid anti-competitive practices. Seeking informal guidance from competition authorities or participating in consultations can help businesses align their sustainability goals with legal requirements – and clear communication about the objectives and outcomes of sustainability agreements is crucial to maintain trust and regulatory compliance.

So despite the “warm embrace” the ACM now gave to asphalt producers, the road ahead can be bumpy. Companies must be informed, compliant, and proactive. By understanding the regulatory landscape and engaging constructively with authorities, they can drive sustainable innovation while upholding the principles of fair competition.

Authored by Christoph Wünschmann; Florian von Schreitter.