Environmental Sustainability: The role of competition and consumer

NUS Asia-Pacific Centre for Environment Law Working Paper 22/03

NUS Law Working Paper No 2022/0010

CCCS-ESS Essay Competition 2022: 3

Prize (Open Category)

protection laws and policies

Selene Tanne

Research Assistant

APCEL, Faculty of Law, National University of Singapore

[Uploaded August 2022]

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Abstract

Humanity is facing existential environmental crises, including climate change and

biodiversity loss. This must be mitigated through environmental sustainability, which entails

decarbonisation and reduced resource consumption. Despite the urgency, progress remains

sorely inadequate. Sustainable technologies exist but not at the large scale of production

and consumption required. Thus, this essay argues that competition and consumer

protection regimes (i.e., laws and policies) can and should be instrumentalised by Singapore

to push the economy-wide sustainability transition. While both are crucial, our competition

regime is an important driver in the background, while our consumer protection regime takes

a more front-facing role in driving our economy-wide sustainability transition.

Part I demonstrates how fair competition as we know it is environmentally damaging and

seems at odds with environmental sustainability. Part II reconciles the two by showing how

our competition regime maintains fair competition in a balanced and effective manner,

excusing collaborations and mergers if they can achieve net economic benefits and benefits

to consumers and wider society. Further, it draws on best practices from the Netherlands, a

jurisdiction that is a pioneer in sustainability-conducive competition regulation, to show that

we are on the right track and for ideas on how fair competition can be used to spur

sustainability activities. Part III argues that, in contrast, our consumer protection regime is

insufficient to protect consumers against greenwashing and regulate green claims. As a

solution, it suggests setting up an expert group to (1) create and promulgate standards for

green claims that are harmonised with international standards and national goals; and (2)

exercises monitoring, verification, and enforcement powers.

(261 words)

Introduction

Under the UN Paris Agreement and the Sustainable Development Goals, the international

community, including Singapore, has committed to environmental sustainability

(“sustainability”), especially to cap global warming at 1.5˚C or 2˚C at most to avert

irreversible environmental destruction. Economies must reduce resource consumption and

decarbonise to achieve this, but progress remains sorely inadequate. Sustainable

technologies exist but not at the large scale of production and consumption required (IPCC,

2022).

Competition and consumer protection regimes (i.e., laws and policies) can be

instrumentalised by Singapore to push the economy-wide sustainability transition. Part I

explores how fair competition as we know it seems at odds with sustainability. Part II

reconciles the two by showing how, for our economic transition, we need our competition

regime to continue maintaining fair competition in a balanced and effective manner through

the lens of sustainability. Contrastingly, Part III explains how our consumer protection regime

is insufficient to protect consumers against greenwashing and regulate green claims, giving

suggestions to remedy this.

I. Fair competition as we know it is unsustainable

Fair market competition incentivises businesses to constantly innovate, produce outputs of

favourable quality, and price their offerings attractively; thereby benefiting consumers

(CCCS, 2021). This conceptualisation of consumer welfare, popularised by classical

economics, is at the heart of fair competition and many competition regimes. However, the

problem with this business-as-usual view is its narrow focus on direct, short-term, and

quantifiable economic benefits; while preferring to disregard other factors, including

externalities borne by third parties (Holmes, 2020).

Therefore, there is tension between fair competition and circumscribing it in exchange for

benefits perceived as non-economic, longer-term in nature, and difficult to price.

Sustainability is one such benefit challenged in this way, despite (1) being the solution to

the existential threat of climate change and irreversible environmental destruction (IPCC,

2022) that humankind urgently needs; and (2) that it is an economic benefit (OECD, 2011).

Furthermore, the gap between fair competition and sustainability becomes even more

obvious when we consider how competition spurs maximal resource consumption for

minimal prices – thus far, it has always had direct negative implications for the environment

(Veljanovski, 2022).

It has been said that competition regimes deter corporations from collaborating on

sustainable G&S or standards, thereby preventing them from reaping economic benefits to

benefit consumers and, generally, benefits to wider society. In a study conducted by

Linklaters

, 57% of businesses polled claimed that they had shelved collaborative

sustainability projects because they were uncertain about whether these projects would be

deemed anticompetitive; the legal risks of breaching competition law were too high

(Linklaters, 2020). Numerous industry practitioners and experts in different countries have

also stepped forward to share similar personal experiences (BIICL, 2021).

This specific problem has not yet been reported in Singapore, possibly owing to a lacuna in

research and/or that sustainability activity in European markets is ahead. However, given

One of the UK’s global law firms.

that sustainability has repeatedly been confirmed as a national

and even regional priority

the acceleration of sustainable business activities is not just necessary, but also inevitable.

To this end, Singapore’s competition regime must support, not bar, her sustainability and

economic progress.

II. Singapore must protect fair competition through the

lens of environmental sustainability

If fair competition as such is unsustainable, must Singapore overhaul her existing

competition regime to achieve sustainability? Not necessarily. Doing so could instead harm

both consumers and sustainability. Competition itself is not the problem, but our use of it is.

The argument for dismantling competition regimes has gained traction particularly in UK and

the EU, two jurisdictions that have significant influence (Pang’s Motor Trading v CCS) on

Singapore’s competition and consumer protection regimes. Though it seems like a beneficial

course of action enabling producers to internalise more negative environmental externalities

(Veljanovski, 2022), it is fallible. To date, the European Commission has not blocked any of

cooperative agreements for sustainability production (Veljanovski, 2022). Furthermore,

many of the corporations professing reluctance and advocating for a looser competition

regime in the name of sustainability (e.g., Unilever), have in fact formed cartels knowingly

despite the risk of penalisation (Veljanovski, 2022).

Worse still, some “green cartels” pursuing sustainability have abused the market. For

example, a European car cartel (BMW, Daimler, and VW Group) colluded to limit the

For example, see the Singapore Green Plan 2030.

For example, see ASEAN Taxonomy for Sustainable Finance (2021).

development of emissions cleaning technology to the bare legislated minimum and agreed

not to compete for best possible performance (Veljanovski, 2022). Not only do such abuses

distort the market and inflate prices, but they also hinder the development of sustainability

technologies and prolong environmentally damaging practices. This is especially immoral,

considering their ability to do otherwise.

These dangers do not mean that Singapore’s competition regime should not accommodate

sustainability. Market abuse is relatively rare in Singapore – only seven in the last twelve

years, and most concerned elevator spare parts (CCCS Public Register). The number of

collaborations conducted in good faith, with the genuine purpose and potential to maximise

sustainability performance, are increasing (Jansen et al., 2021). While we should not

dismantle competitive pressures that keep businesses accountable to consumers and

society, we should leverage on them to spur sustainability innovations and widespread

adoption. Thus, the solution is for Singapore to carve space for sustainability within its

competition regime and clearly demarcate its thresholds.

Singapore’s existing competition regime takes flexible and balanced approach towards

potentially anticompetitive behaviours. Anticompetitive collaborations (Competition Act s34),

mergers (Competition Act s54), and abuse of dominance (Competition Act s47) are

prohibited by default. Where a net economic benefit could result, collaborations are allowed

(Competition Act Third Schedule). The Competition and Consumer Commission of

Singapore (CCCS) has willingly granted such exclusions and emphasised that

collaborations can be economically beneficial and pro-competitive (CCCS, 2021). It has also

issued industry-specific guidance for airline alliances, clearly explaining conduct and

considerations that would be economically beneficial and/or pro-competitive (CCCS, 2018).

Further, Singapore’s competition regime takes total social welfare into account, as opposed

to just the consumer welfare standard (CCCS, 2010). It looks beyond the prices paid by

direct consumers and considers the third-party externalities borne by wider society. This

attitude enables us to preserve our competition regime while pursuing an economy-wide

sustainability transition.

For example, in response to the COVID-19 pandemic, CCCS issued new, temporary

guidelines to allow collaboration between competitors to fulfil the demand of essential goods

and services (G&S) here. As part of that, CCCS adopted a general presumption that all

collaborative activities for essential G&S would result in net economic benefits and not

infringe the act, provided they do not involve “hardcore” anticompetitive practices (i.e., price

fixing, bid-rigging, market sharing or output limitation). Even then, “hardcore” agreements

were not automatically disallowed; they may have been permitted if they were indispensable

to attaining the net economic objective (CCCS, 2020). The COVID guidelines were

significant because they lowered the barriers to collaboration and removed the burden of

proof on businesses to justify collaborative agreements. Not only had this redirected time

and resources to economically productive activities to benefit that market, but it had also

provided legal certainty to market players and encouraged them to collaborate “for the

correct reasons”. The COVID guidelines, therefore, created the conditions necessary to

meet the needs of businesses, consumers, and wider society to be met; and helped to avert

essential G&S shortages that plagued other countries during the pandemic.

A similar, albeit permanent, pronouncement can be issued regarding collaborations and

mergers that focus on sustainability, to achieve similar benefits. In fact, this is the approach

pioneered by the Netherlands, which has one of the most sustainability-conducive

competition regimes in the EU, and is considered a best practice (Jansen et al., 2021).

Accordingly, these sustainability exclusions should be objectively weighed in terms of how

much environmental damage is circumvented, and can outweigh economic restrictions by

default, unless such restrictions are excessive and unnecessary (Jansen et al., 2021).

However, because this creates a space with lesser competitive pressures, CCCS must

remain vigilant and reserve its right to use its powers where anticompetitive harms arise.

Therefore, it is crucial for Singapore to preserve its comprehensive competition regime so

that sustainability exceptions can operate within that effective system. While the competition

regime is not the main regulatory intervention to push sustainability, it nevertheless is an

important driver in the background.

III. Contrastingly, Singapore’s consumer protection regime provides consumers

with inadequate protection from greenwashing and should be revitalised in this

aspect.

Greenwashing is the act of making false or misleading claims about the environmental

merits of a product, service, or technology (Channel News Asia, 2021). A burgeoning global

problem, businesses are exploiting increasing consumer preferences for sustainability by

using “green claims” as a marketing tactic, rather than as a genuine expression of their

product development. Not only are these practices unethical, but they also distort the market

and exacerbate allocative inefficiencies and negative externalities as consumers’ payments

continue funding unsustainable practices.

Singapore’s consumer protection regime is laissez faire, protecting consumers to the extent

that the knowledge they receive from producers is true, while ensuring that the regime is not

so strict as to be a barrier to entry to Singapore’s market (Low 2018). The legislative

frameworks within this regime – the Sale of Goods Act, the Unfair Contract Terms Act, and

the Consumer Protection (Fair Trading) Act 2003 – are not the problem. They capture

specific unfair practices by firms while still maintaining enough generality to apply across

various markets, including sustainability.

Instead, the problem lies with how enforcement is designed: responsibility for restitution is

squarely upon consumers’ shoulders. Legislative provisions and remedies are available but

only if the affected consumer seeks them out herself (Low, 2018). This approach is generally

adequate, but regarding sustainability, it fails to protect consumers and the market from

greenwashing distortions. The laws offer only ex post courses of action that penalises, rather

than prevents, damage. Granted, penalisations add to precedent and may deter

greenwashing by other companies in this way. However, as mentioned, these mechanisms

kick in too late, after harm is done and when restitution is sought. In this way, the existing

consumer protection regime allows greenwash to circulate in the market until a consumer is

harmed and decides to act. Even then, that is a costly and time-consuming process for

consumers. Thus, it is crucial to have a consumer protection regime that robustly regulates

sustainability claims and actively defends them from greenwash.

CCCS and the Consumers Association of Singapore do already assess and flag untrue

claims made by businesses. This role can be expanded specifically to target greenwashing.

Because sustainability is technically complex, a joint group of experts can be set up to

develop clear guidelines for making and substantiating sustainability claims, drawing upon

existing and developing standards, such as the ASEAN and EU green taxonomies, and

international climate-related disclosure frameworks (e.g., as mandated by the Singapore

Exchange). They are in a unique position to harmonise sustainability standards in Singapore

with that in the international community, which also increases Singapore’s contributions as

a global sustainability innovator and leader

. Each sustainability product is different, so

these guidelines would serve not as an exhaustive list but a baseline that sellers must

comply with as a minimum.

The expert group should also undertake active policing, which is how competition watchdogs

in other jurisdictions are handling the problem (Horton, 2022). This is especially important

considering that most consumers are unsophisticated laypeople, rather than sophisticated

investors who have the means to undertake details technical assessments to verify

sustainability claims of potential investments. As part of this, the expert group can be given

the mandate to access confidential information to verify sellers’ claims. It will function as the

official intermediary to strike the balance between business confidentiality and information

accuracy: sellers need not disclose confidential information to the market but if the expert

group finds that their claims are untrue using public and confidential information, those errant

sellers should be required to remove those claims from their product. If this mechanism is

in place, consumers can also shop with more confidence because they would know that the

claims they see are already verified and reliable, creating a more fair and efficient market.

Moreover, promulgating green claims standards in this way raises public sustainability

awareness, influencing consumer choices and spurring the sustainability transition even

more.

As such, our consumer protection regime must be revitalised to play an active role in

regulating green claims and improving both consumer expectations and holding businesses

to account. It must take a front-facing role in driving our economy-wide sustainability

transition.

Singapore’s intentions are clear in, for example, recently joining the global partnership to develop and

scale-up low emissions technology. See

https://www.channelnewsasia.com/singapore/singapore-joins-first-

movers-coalition-low-carbon-emissions-world-economic-forum-iswaran-2708616 (Channel News Asia, 26

May 2022)

Conclusion

Singapore’s competition and consumer protection regimes focus on protecting consumers,

and this is especially necessary in the economy-wide sustainability transition. Our

competition regime and CCCS regulate fair competition effectively and in a balanced

manner and should continue to do so while prioritising national goals and international

commitments for sustainability. However, our consumer protection regime is not proactive

enough to robustly regulate green claims and protect consumers and the market from

greenwash. More needs to be done for sustainability and this entails creating an expert

panel to develop harmonised guidelines, monitor claims and take enforcement action.

(2499 words, including footnotes, references, and bibliography)

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