Jason Clay talks about ‘precompetition’ in Guardian Sustainable Business

Jason Clay, senior vice president of market transformation at WWF, has written on Guardian Sustainable Business the issues arising from consumer goods giants Procter & Gamble and Unilever being fined €315.2m (£280m) by the EC on 13 April 2011 for breaching competition law in the laundry detergent market in eight countries.

“Here lies the challenge in defining what is precompetitive versus what is collusion. While the companies crossed the line of the EC’s antitrust rules, they also accomplished much in reducing the impact of producing, delivering, selling, using and disposing of their products.

“The firms were motivated by shifting the market to greater sustainability, while making it easy for consumers to choose a sustainable product. The new products were better because they were concentrated and worked in cold water. But both of these traits were in conflict with consumer perceptions. Most consumers, for example, think that more detergent means cleaner clothes, and that hot water is more effective for washing laundry than cold.

“This posed a dilemma for manufacturers. The companies believed that if any one of them introduced concentrates independently they would risk losing market share. A consumer confronted with a choice between a 5kg box of powder at €10 and 2.5kg box of a concentrated version at the same price is going to be tempted to go for the big box.

“To avoid this first mover “disadvantage,” the companies co-ordinated the timing of their launches so that all the new product formulations would arrive on the market at the same time. They did this without publicly stating the virtues of one product over another.

“The moral of this story is that such initiatives are essential, but caution must be exercised. As an environmentalist, I applaud companies that work together to put better products on the shelves and take away the ones with the worst impact…

“We can better understand the complicated balance between what is precompetitive behaviour addressing legitimate sustainability issues, and what is collusion around fixing prices or market share. The key component to striking this balance is multi-stakeholder participation. The project should be inclusive of other stakeholders, including regulatory officials and perhaps even NGOs, many of whom don’t have a direct financial interest. This is how successful global sustainability round tables have avoided these issues.

“In light of more companies working together in a precompetitive fashion to improve sustainability, wouldn’t it be forward-thinking for regulators in the EU and elsewhere to invest in the creation of a legal group that defines boundaries? It would be money well spent, because precompetitive sustainability is working, and it’s essential to market transformation.”

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