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The Antitrust Source

The Antitrust Source | August 2023

Antitrust and Sustainability: Potential Paths Forward for U.S. Companies

Brent Snyder, Matthew McDonald, and Ada Wang


  • Sustainability collaborations between competitors inherently raise antitrust risk and the U.S. governmental scrutiny has had a chilling effect on sustainability-focused alliances.
  • Collaborations reviewed and approved by Germany, the Netherlands, and Australia suggest a path forward for companies operating in the U.S. to engage in certain types of sustainability collaborations while complying with antitrust law.
  • These sustainability collaborations show how they can be thoughtfully designed to accomplish sustainability goals while also addressing antitrust risk and how U.S. companies can follow a similar path and seek advisory opinions from the U.S. antitrust agencies on proposed collaborations.
Antitrust and Sustainability: Potential Paths Forward for U.S. Companies
Artur Debat via Getty Images

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Companies operating in the United States are stuck between a rock and a hard place. On the one hand, they face unprecedented pressure from employees, shareholders, and other stakeholders to pursue sustainability goals. Effectively addressing these goals requires collaboration with other firms—including competitors. But competitor collaborations inherently raise antitrust risk. In the United States, some members of Congress and state attorneys general have raised antitrust concerns regarding sustainability collaborations. For example, House Judiciary Chairman Rep. Jim Jordan and two other House Republicans recently sent letters to asset managers BlackRock, Vanguard, and State Street, alleging their efforts to “decarbonize” their investments potentially violated U.S. antitrust law. Similarly, FTC Chair Lina Khan and Assistant Attorney General Jonathan Kanter have made no statements of encouragement or comfort for sustainability collaborations; rather, they have made clear that U.S. antitrust law does not recognize any exception for environmental, social, and governance (“ESG”) collaborations among competitors. This scrutiny has had a chilling effect, causing some firms to leave sustainability-focused alliances.

Faced with the tension between sustainability goals and antitrust risk, what are companies to do? Experience from Germany, the Netherlands, and Australia suggests a path forward for companies operating in the U.S. to engage in certain types of sustainability collaborations while complying with antitrust law. This article describes and analyzes sustainability collaborations that have been reviewed and approved by antitrust enforcers in those countries.

These initiatives are worthy of attention for two reasons. First, they show how sustainability collaborations can be thoughtfully designed to accomplish sustainability goals while also addressing antitrust risk. As we discuss below, some of the analyzed collaborations would likely be permissible under U.S. antitrust law, though others include provisions that may raise risks. Second, U.S. companies can follow a similar path and seek advisory opinions from the U.S. antitrust agencies on proposed collaborations. There are established procedures for seeking advisory opinions from the FTC and DOJ, and they have often been used to evaluate antitrust risks in other types of competitor collaborations, such as patent pools and joint purchasing arrangements.

Voluntary Standard-Setting: Living Wage for Banana Workers

In March 2022, the German Federal Cartel Office (“FCO”) approved the German Retailers Working Group’s (“Working Group”) initiative to promote living wages in the banana industry. While the Working Group is not strictly sustainability-focused, the FCO’s review provides useful insights for sustainability collaborations.

The Working Group is a collaboration among German grocery retailers to achieve living wages for workers in the banana supply chain. It is currently running a pilot project in Ecuador, which is one of the main exporters of bananas to Europe and has established living wage laws for farm workers. The Working Group’s efforts will be expanded to other banana-growing countries, such as Costa Rica and Colombia, in summer 2023.

Members of the Working Group have voluntarily committed to ensuring at least 50% of all private label bananas they sell in Germany conform to living wage criteria by 2025, with the target for bananas from Ecuador being 90%. A banana is considered “living wage” if it comes from a producer who has been verified as paying a living wage, or if the retailers gave a bonus to the producer to close or reduce the gap towards a living wage. The Working Group employs the Anker methodology, a data-driven approach for estimating living wage benchmarks for particular countries and regions. These benchmarks include estimates for banana-producing countries such as Ecuador, Colombia, and Costa Rica.

The FCO analyzed the Working Group and concluded it did not raise competition concerns under either a vertical resale price maintenance theory or a price-fixing theory. First, the collaboration is voluntary. The envisioned sales volumes for living wage bananas are “solely target values without any sanctioning mechanisms in place.” Second, the collaboration does not set a binding level for wages, nor does it involve any agreement on banana prices. The only commitment in the collaboration is the percentage of private label bananas that meet living wage criteria. Third, there is no exchange of competitively sensitive information regarding purchasing prices, production costs, volumes, or margins. Fourth, the collaboration “has only a minor influence” on supply chain participants’ ability to individually set prices for bananas and makes no agreements or recommendations regarding if or how increased costs are passed on to consumers.

The Working Group’s collaboration provides a useful model for structuring sustainability collaborations in compliance with antitrust law. Because the collaboration involves a qualitative production standard that is voluntary in nature, does not result in agreements on costs or prices, and does not involve the exchange of competitively sensitive information, it would likely pass muster under U.S. antitrust law. Similar sustainability collaborations would likely also present low risk under U.S. law. For instance, retailers could employ a similar model to set targets for products manufactured in plants powered by renewable, low carbon energy sources and to provide funding for plant owners to shift to such sources.

Ancillary Restrictions: CO2 Storage

In June 2022, the Netherlands Authority for Consumers and Markets (“ACM”) approved a collaboration between Shell and TotalEnergies regarding storage of carbon dioxide (“CO2”) in empty natural-gas fields in the North Sea. The purpose of storing CO2 in undersea gas fields is to stop its release into the atmosphere, thus limiting carbon emissions.

The collaboration, called “Aramis,” consists of a CO2 transport and storage network connecting to empty gas fields. It is slated to begin operations in 2024. According to the ACM, the project required major investment because it entailed building a high-capacity natural gas line (“trunkline”). To get the project off the ground, Shell and TotalEnergies intend to jointly offer and price CO2 storage, with the goal of getting the first 20 percent of the trunkline’s capacity into operation. For the remaining 80 percent of capacity, Shell and TotalEnergies will compete to offer CO2 storage. Because Shell and TotalEnergies compete, they sought ACM’s informal guidance as to whether the collaboration passed muster under antitrust law.

ACM approved the collaboration, concluding that the contemplated restrictions on competition were necessary for the project’s success, and that the benefits to customers and society outweighed the costs of restricting competition. The ACM thought it was important that the collaboration only restricted competition on the first 20 percent of trunkline capacity, and thereafter allowed competition. The collaboration also ensured the creation of a new market for storage of CO2 in empty gas fields.

This collaboration would likely be permissible under U.S. antitrust law. It would be evaluated as a joint venture, and an agency would ask whether the collaboration’s restriction on competition is reasonably necessary to achieve its procompetitive benefits. Here, the facts suggest (and ACM agreed) that jointly offering and pricing the first 20 percent of CO2 storage was necessary to get the project up and running. As ACM emphasized, the parties will compete for the remaining 80 percent of capacity, meaning that the restriction on competition is narrowly tailored to achieve the project’s procompetitive benefits and will end once no longer necessary.

This model could be applied to other sustainability collaborations that involve “signaling demand” for new technologies or inputs, such as cleaner energy sources or recycled raw materials for products. Parties could collaborate to the extent necessary to innovate and achieve economies of scale, and then compete once the technology or input has become sufficiently commercialized.

Industry-Wide Levies: Animal Welfare, Paintback, and Refrigerants

Antitrust authorities in Germany and Australia have accepted collaborations imposing levies on industry to further sustainability goals.

QM+ Program

In March 2022, the German FCO announced it had no serious competition law concerns regarding an industry-wide agreement among dairy farmers, dairies, and food retailers seeking to improve animal welfare in cow milk production (“QM+ program”). Under the QM+ program, farmers implement heightened animal welfare requirements in milk production, and the milk is labeled as QM+ compliant when sold through retailers. Retailers pay dairies a surcharge for milk products satisfying the QM+ criteria, and the money is passed on to farmers to help implement QM+ requirements. Participation in the QM+ program is voluntary.

The FCO concluded that the surcharge approach was acceptable from an antitrust perspective because “there are many different competing labels and vigorous competition between the different brands.” Further, only some dairies would participate in the QM+ program.


In May 2021, the Australian Competition and Consumer Commission (“ACCC”) authorized Paintback’s industry levy to fund paint collection and recycling activities. Paintback is a non-profit entity that contracts with state, territory, and local governments and waste service providers for the collection and safe disposal of waste architectural and design paints and woodcare products (“A&D paint”). To fund these services, Paintback facilitates the imposition of a surcharge of $0.15 per liter on certain A&D paint products. Seven A&D paint suppliers, accounting for over 90% of all A&D paint sold in Australia, participate in the program. Participating paint suppliers impose the surcharge at the wholesale level and send the funds to Paintback to fund its collection, recycling, and disposal activities. Suppliers recommend that retailers pass on the charge to retail customers but there is no requirement to do so.

The ACCC approved the Paintback scheme, including the levy, reasoning it “is likely to result in environmental benefit through increased collection and less improper disposal of waste A&D paint.” Further, the small size of the levy relative to the cost of A&D paints, and its uniformity across wholesalers, meant it was unlikely to affect competition.

Refrigerant Reclaim Australia

In May 2021, the ACCC granted authorization to enable Refrigerant Reclaim Australia to continue to operate a product stewardship program to recover ozone depleting and synthetic greenhouse gas refrigerants (“Refrigerant Gases”).

Refrigerant Reclaim Australia is a not-for-profit entity established by Australia’s refrigerants industry. It operates an industry product stewardship scheme that involves agreements between competing importing firms, product manufacturers, wholesalers and contractors as to how used and unwanted Refrigerant Gases are collected and disposed of. This includes agreements as to the levies paid by end users on Refrigerant Gases, which are used to fund rebates encouraging the proper collection and disposal of the Refrigerant Gases. The ACCC saw the greater reduction in the uncontrolled release of Refrigerant Gases and the higher prices for Refrigerant Gases reflecting their inherent externalities as public benefits. Accordingly, the levy was considered as generating little public detriment.

The German QM+ program’s and Australian levy programs’ prospects would be more uncertain under U.S. antitrust laws. A collaboration among competitors to establish heightened production standards, and accompanying certification, would likely pass antitrust muster as long as participation were voluntary and participants did not agree on price or output. However, any binding agreement among participants to charge levies could raise price-fixing concerns, as an agreement among competitors regarding any element of price is per se illegal.

Further, the German and Australian authorities’ willingness to accept the levies appear to hinge on country-specific considerations. The FCO noted that its decision to tolerate the QM+ program was made in light of Article 210a of the European Regulation, which establishes a common organization of the markets in agricultural products and creates exemption from the EU antitrust law for sustainability agreements involving agricultural products. In contrast, U.S. antitrust law recognizes no such exception. And unlike the ACCC, the U.S. antitrust authorities would be unlikely to accept the imposition of levies even if they are small relative to the overall cost of the product. That said, industry participants could consider a collaboration in the United States where they fund a Paintback-like entity through alternative means, such as a membership fee paid by each voluntary participant.

Industry-Wide Agreements on Inputs: Soft Drink Multipacks

In July 2022, the Netherlands ACM announced that it had approved a joint agreement among soft-drink suppliers to discontinue plastic handles on all soft-drink and water multipacks (multiple bottles wrapped in plastic with a plastic handle on top). By removing the plastic handles, multipacks become more recyclable and less plastic is required in their production process.

ACM explained that the joint agreement was permissible because, according to the suppliers, plastic handles did not play a role in the competitive process. Further, joint agreement participants were free to make their own commercial decisions, including when and how to discontinue adding handles to their multipacks.

This type of joint agreement would likely raise risk under the U.S. antitrust laws because U.S. antitrust agencies would likely conclude that plastic handles do play a role in the competitive process. Plastic handles are a component of product design that arguably makes multipacks more convenient for shoppers, which means they may be a competitive differentiator among soft-drink or water brands. An agreement among competitors to discontinue plastic handles would eliminate such competition and therefore violate Section 1 of the Sherman Act. At a minimum, the U.S. agencies would be very skeptical of the suppliers’ claims that plastic handles do not play any role in competition.

In clearing the agreement, ACM cited its finding that the agreement was “aimed at improving product quality, while, at the same time, certain products or products that are produced in a less sustainable manner are no longer sold.” U.S. antitrust law recognizes no such exception. Under U.S. law, the fact that an agreement results in ending the sale of “less sustainable” products does not matter if the agreement also reduces competition among products.

It is not clear how much discretion the soft-drink suppliers had in implementing the removal of plastic handles, although the fact that the arrangement was framed as a “joint agreement” suggests the suppliers’ decision-making authority was at least somewhat constrained. Indeed, even if suppliers had some leeway to decide when or how to eliminate plastic handles, it would seem that they were still bound to do so. The involuntary nature of the collaboration would also raise antitrust concerns under U.S. law.

Lessons for the United States

The initiatives surveyed above show how companies may structure sustainability collaborations to comply with antitrust laws. While the antitrust analysis for every collaboration will be fact-specific, companies should keep the following best practices in mind. First, any restrictions on competition ancillary to a collaboration must be narrowly tailored and reasonably necessary to accomplish the collaboration’s goals. For example, the Aramis CO2 storage project was approved by the Netherlands ACM in part because it limited competition only to the extent necessary to get the project up and running. Second, participation in the collaboration must be voluntary. Participants should be free to decide how they will implement the collaboration’s activities and how much effort they will expend. Third, the collaboration must not limit participants’ ability to freely set prices or output levels, or otherwise dictate competitively significant terms. Finally, the collaboration should not involve the exchange of competitively sensitive information unless absolutely necessary, and safeguards should be imposed to aggregate any such data before sharing among participants.

The collaborations discussed above also suggest a procedural path forward for companies interested in pursuing sustainability collaborations. As in Europe and Australia, companies can pursue advisory opinions from the U.S. antitrust agencies to confirm that proposed collaborations do not expose them to legal risk. Seeking advisory opinions from the DOJ or FTC can be a useful way to ensure a proposed collaboration is low risk and has the added benefit of assuring the business community at large that there are safe paths forward for such collaborations.

Both the DOJ and FTC have established procedures for businesses to seek advisory opinions regarding proposed business conduct. DOJ refers to its advisory opinions as “business review letters” while FTC refers to them as “competition advisory opinions.” As with merger review, the DOJ and FTC operate a “clearance” process to ensure the appropriate agency handles a given request, based on factors such as jurisdiction or familiarity with the industry at issue. In general, businesses may only seek advisory opinions from the agencies regarding proposed (not ongoing) business conduct. However, the proposed conduct must be sufficiently advanced such that agency staff can conduct an in-depth review and analysis. Requesting parties also need to provide agency staff with a detailed description of the proposed course of conduct and may also need to provide supporting documents and information. The agencies may conduct their own market research and reach out to industry participants.

The U.S. antitrust agencies have provided advisory opinions on a wide variety of collaborations, including patent pool arrangements, health care collaborations, and collaborations related to the COVID-19 crisis. To date, however, the agencies appear to have issued only one advisory opinion related to a sustainability-focused collaboration. In 2007, FTC staff reviewed the proposed adoption of a code of conduct for the global coffee industry, called the Code of Conduct for the Coffee Community (“4C”). In brief, the 4C was intended to improve sustainability in the coffee industry and increase the quantities of coffee meeting sustainability criteria. Members include coffee growers, roasters, exporters, importers, processors, and other stakeholders. 4C promulgated baseline standards for working conditions and environmental improvements in coffee production. 4C also provided members with aggregated data on purchases and sales of 4C coffee.

In their competition advisory opinion, FTC staff said they had no intention to challenge the arrangement, given its focus on sharing best practices and lack of agreement on any significant competitive parameters. FTC staff also approvingly noted that participation in 4C was voluntary, as was each participant’s degree of effort. Further, while coffee buyers committed to increasing their purchases of 4C coffee over time, the commitment was not binding or specific as to quantity or time. Buyers thus maintained independent decision-making authority over their purchases. Finally, while 4C collected purchase information from members, the data was aggregated and any commercially sensitive information was protected.

As with other types of competitor collaborations, sustainability collaborations can raise antitrust risk. Indeed, sustainability initiatives face increasing politicization and scrutiny from Congress and state attorneys general. That said, companies should have confidence that low-risk sustainability collaborations are feasible. The initiatives reviewed in this article suggest there is a safe path forward for a variety of collaborations structured consistent with antitrust principles.