Environmental, social, and governance (“ESG”) initiatives have been a hotly debated topic in recent years. These initiatives often involve industry collaborations and standards in order to maximize their impact on environmental and social goals. However, some have warned that ESG collaborations may violate the antitrust laws.
During the Biden administration, leaders of the Federal Trade Commission (“FTC”) and the U.S. Department of Justice’s Antitrust Division (“DOJ”) confirmed that ESG initiatives are subject to the antitrust laws. Under the current administration, there are signs that the FTC and the DOJ may further raise the antitrust stakes for ESG. State attorneys general have also joined the fray by filing antitrust lawsuits involving ESG activities, while Congress continues to scrutinize alleged ESG “collusion.” As a result, a company’s decision to participate in industry ESG initiatives should include an assessment of potential antitrust risks.
Antitrust laws cover all aspects of competition, including competition over product features and quality. Antitrust liability can result not only from an increase in prices or a reduction in the quantity of products, but also from a reduction in the variety and quality of products available in the market. Accordingly, the FTC or the DOJ may scrutinize sustainability collaborations, which may set collective environmental sustainability goals such as low carbon emissions, as a form of output restriction when they are intended to reduce output of a less environmentally friendly product. An agreement among competitors that limits or decreases output may be treated as per se unlawful under Section 1 of the Sherman Act—that is, presumed to be unreasonable without detailed inquiry into the anticompetitive impact of, or procompetitive justifications for, the conduct.
In addition, ESG initiatives may be scrutinized as potential group boycotts (or concerted refusals to deal), which may also be treated as per se violations. For example, competing manufacturers might agree not to deal with suppliers who fail to meet emissions targets, competing retailers might agree not to stock brands that do not use recycled materials in their packaging, or competing financial institutions might agree not to provide financing to certain companies. Although an alleged boycott may be shielded from antitrust liability if it is political in nature rather than commercial, risk still remains if firms participating in the alleged boycott stand to benefit financially from a lessening of competition in the boycotted market.
FTC leadership during the Biden administration expanded the range of business conduct that it considered as potential antitrust violations—including through a broader interpretation of Section 5 of the FTC Act. According to former FTC Chair Lina Khan, with regard to ESG, the “antitrust laws don’t permit us to turn a blind eye to an illegal deal just because the parties commit to some unrelated social benefit.” The new FTC leadership may take the baton and apply this expanded enforcement approach to sustainability initiatives. Indeed, shortly before being appointed Chair, then-FTC Commissioner Andrew N. Ferguson stated in a ‘policy sheet’ that, among other things, investigating and prosecuting alleged collusion on ESG would be a top priority for the FTC under his leadership.
Although it is too early to tell whether DOJ Assistant Attorney General (AAG) Gail Slater also will focus on sustainability issues, based on actions taken during the first Trump administration, it would not be surprising if the DOJ prioritized sustainability-related investigations. For example, in 2019, DOJ launched an antitrust investigation into an alleged conspiracy among four automobile manufacturers that had announced an agreement with the state of California on automotive emission standards. The investigation, ultimately closed by the DOJ, reportedly was based on a concern that an emissions agreement among automakers might result in an artificial limit on the types of cars and trucks offered by the manufacturers—whereas absent such an agreement, the automobile manufacturers may have offered a wider range of vehicles. In explaining the probe, then-AAG Makan Delrahim stated that “even laudable ends do not justify collusive means in our chosen system of laws.” Thus, regardless of their social justifications or the participants’ good motives, agreements among competitors that reduce competition in some way may invite FTC or DOJ scrutiny.
It is also important to consider whether an agreement among competitors regarding the sustainability aspects of a product might expose companies and individuals to criminal antitrust liability. Criminal liability typically applies only to hardcore collusive agreements to fix prices, restrict output, rig bids, or allocate markets. However, product-feature agreements can constitute or facilitate per se unlawful collusion, potentially resulting in a criminal antitrust violation.
For example, in National Macaroni Manufacturers Association v. FTC, the FTC challenged an agreement among macaroni manufacturers. The Agency alleged that, during a drought affecting durum wheat production, the macaroni manufacturers fixed the quality of macaroni products by agreeing among themselves to offer only macaroni blends of 50% durum wheat and 50% other kinds of wheat, as opposed to higher quality 100% durum macaroni. The court concluded that the agreement was per se illegal, holding that “price fixing is contrary to the policy of competition. . . . It makes no difference whether the motives of the participants are good or evil[.]”
Additionally, in U.S. v. Lischewski, the DOJ during the first Trump administration indicted the former CEO of Bumble Bee Foods in the U.S. District Court for the Northern District of California for participating in a conspiracy to fix prices of canned tuna. The DOJ alleged that the conspiracy included an agreement to “limit and restrict competition between the conspirators as to certain types and categories of products, including, but not limited to, competition for products based on certain types of fishing methods.” The DOJ argued that this agreement—which involved the environmental impact of certain fishing methods—supported the price-fixing conspiracy by limiting alternatives to the price-fixed products. In 2019, the CEO was convicted at trial and sentenced to 40 months’ imprisonment.
These cases show that agreements limiting product features may result in criminal penalties when they facilitate price-fixing agreements and that the DOJ will be aggressive in prosecuting all forms of collusion.
States attorneys general can bring suit under federal law in the same way as private plaintiffs and can also bring enforcement actions under their own state antitrust and consumer protection laws. State AGs have increased their activity and aggressiveness on antitrust issues in recent years and are likely to be increasingly active in the ESG space.
Soon after the November 2024 presidential election, Texas spearheaded a coalition of Republican-led states to sue BlackRock, Inc., State Street Corporation, and The Vanguard Group, Inc., alleging that they acquired substantial stockholdings in every significant publicly held coal producer in the U.S. to influence the policies of these companies to lessen competition in coal markets. According to the complaint, the defendants allegedly had announced in 2021 “their commitment to use their shares to pressure the management of all the portfolio companies in which they held assets to align with net-zero goals,” and thus, the defendants’ “holdings threaten to substantially reduce competition in violation of Section 7 of the Clayton Act.” The litigation is ongoing.
Also in November 2024, the State of Nebraska, along with two trade associations of state energy marketers and Nebraska ethanol producers, sued truck manufacturers and an industry trade association in Nebraska state court for alleged violation of Nebraska’s antitrust law. Reminiscent of the DOJ investigation during the first Trump administration, Nebraska alleges that defendants colluded to phase out medium and heavy-duty internal combustion engine vehicles to meet regulatory requirements set by California. Although the California Air Resources Board (“CARB”) is not named as a defendant, the complaint also alleged that, by promulgating the regulations, CARB was involved in the conspiracy. Nebraska alleged that consumers in states who do not intend to follow California’s clean-energy regulations will pay higher prices for vehicles with internal combustion engines because the output of those types of vehicles would be reduced to meet California’s regulations. The litigation is ongoing.
These enforcement actions illustrate a state regulatory minefield. While some states actively encourage industries to adopt ESG goals, other states may investigate and file suit against the same ESG initiatives.
Because of the increased politicization of ESG, Congress also is likely to investigate ESG issues, including alleged “climate cartels.”
In June 2024, the U.S. House Judiciary Committee issued a report alleging that “members of the climate cartel have agreed to decarbonize the American economy by forcing corporations to disclose their carbon emissions, to reduce their carbon emissions, and to enforce (and reinforce) their disclosure and reduction commitments by handcuffing company leadership and muzzling corporate free speech and petitioning.” A second report, issued in December 2024, focused on the alleged cartel’s influence campaign over ExxonMobil (“Exxon Report”). The Exxon Report alleges that “climate cartel” participants engaged in a campaign to force ExxonMobil to make misleading climate disclosures based on theoretical carbon restrictions, reduce output to meet emission reduction goals, and surrender to the cartel’s “net-zero” demands by voting against ExxonMobil’s directors. Targets of the investigation have produced over 250,000 documents, and five individuals were deposed pursuant to Congressional subpoenas.
Shortly thereafter, the U.S. House Judiciary Committee separately requested information from over 60 U.S.-based asset managers regarding their involvement in the Glasgow Financial Alliance for Net Zero and the Net Zero Asset Managers Initiative (“NZAMI”). According to the press release, “[t]he Committee continues to examine whether existing civil and criminal penalties and current antitrust law enforcement efforts are sufficient to deter anticompetitive collusion to promote ESG-related goals in the investment industry.” In January 2025, J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs withdrew from the Net Zero Banking Alliance. Blackrock similarly withdrew from NZAMI.
Importantly, Congressional inquiries may also trigger investigations by the FTC, the DOJ, or State AGs, as well as private antitrust suits. Indeed, the subject matter of the Texas AG suit discussed above appears to overlap with the U.S. House Judiciary Committee’s inquiry. Accordingly, companies facing questions from Congress should be aware of, and prepare for, potential follow-on investigations and litigation.
In addition to environmental initiatives, the antitrust agencies may also focus on Diversity, Equity, and Inclusion (“DEI”) initiatives. During the first Trump Administration, the DOJ sued the National Association for College Admission Counseling (“NACAC”), alleging that certain NACAC rules unlawfully restrained competition for early admission and transfer students by denying them access to financial incentives available to other types of students. The rules were purportedly intended to avoid disadvantaging low-income and first-generation applicants who may not have had the resources or guidance to navigate the complex early decision or transfer process. The NACAC agreed to revoke the allegedly anticompetitive rules in its membership code as part of a settlement.
Under the Biden administration, the FTC and the DOJ both aggressively pursued conduct they viewed as restricting competition in labor markets. In January 2025, shortly before the change in administration, the FTC and the DOJ issued the Antitrust Guidelines for Business Activities Affecting Workers (“Worker Guidelines”), replacing previous guidance from the Obama administration. The Worker Guidelines identify several categories of business practices involving labor markets that may violate the antitrust laws.
Upon his return to Office, President Trump signed on January 21, 2025, an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The executive order directs the U.S. Attorney General to submit a report within 120 days providing “appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The report must include a “strategic enforcement plan,” with each agency identifying “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.” Targets of the EO may be subject to investigations and enforcement actions.
Because industry DEI initiatives can affect employment decisions, the FTC and the DOJ may scrutinize DEI practices as potential labor-market antitrust violations. FTC Chair Andrew N. Ferguson already has made investigating and prosecuting alleged collusion in DEI one of his top policy priorities. Under his direction, the FTC launched a labor task force aimed at pursuing deceptive, unfair, and anticompetitive labor practices, including “collusive or unlawful coordination on DEI metrics.”
In addition, the FTC and the DOJ may use antitrust to combat efforts to moderate content on the internet. Republican members of Congress have previously complained that such efforts constrain free-speech rights. In her Senate confirmation hearing, DOJ Assistant Attorney General Gail Slater discussed an advertising industry group, the Global Alliance for Responsible Media, and stated that a “certain amount of collusion [not to advertise on certain websites] went on via this trade association and I think that pattern of conduct is quite troubling.” Likewise, the FTC announced on February 20, 2025, the launch of “a public inquiry to better understand how technology platforms deny or degrade users’ access to services based on the content of their speech or affiliations.” According to FTC Chair Andrew N. Ferguson, “[t]his inquiry will help the FTC better understand how these firms may have violated the law by silencing and intimidating Americans for speaking their minds.” These statements from DOJ and FTC leadership may be a prelude to antitrust investigations.
ESG initiatives often are associated with beneficial goals, but they are not immune from antitrust risk. The enforcement priorities of the Trump administration, as well as certain State AGs and congressional committees, include aggressively investigating environmental and social initiatives. Therefore, companies should evaluate industry standards, initiatives, or collaborations for antitrust risk and prepare for government scrutiny.
