But sustainability-focused collaboration can present antitrust risks. When sustainability professionals talk about joint efforts to send “market signals” to spur innovation and drive change, antitrust lawyers––and enforcers––take note. A key component of antitrust law is preventing competitor collusion and arrangements that harm competition. Because many sustainability activities have features that can adversely impact some market participants, like setting or adhering to standards or targets that disadvantage them, collaborating can spur antitrust complaints. Moreover, different countries take different approaches when drawing the line between legitimate sustainability initiatives and actions inappropriately limiting competition. Thus, while antitrust law permits carefully designed and executed sustainability collaborations, a growing role for the sustainability lawyer is to help companies recognize and manage antitrust risks to enable them to pursue worthwhile sustainability efforts.
Companies that collaborate to promote sustainability should approach such projects with the same care as other collaborations with competitors, while recognizing that collaboration not motivated (entirely or directly) by profit can raise different issues. Companies can recognize and mitigate antitrust risks in the following ways:
- Ensure sustainability efforts and ESG policies also embed antitrust compliance. Even bona fide attempts to “save the planet” can raise antitrust risks, as the law focuses on prohibited conduct and anticompetitive outcomes, not on intent. Companies should not commit to sustainability initiatives without reviewing them for antitrust compliance, and the employees involved should receive antitrust compliance training and oversight. Examples of actions that could raise issues include participating in trade associations or other groups where industry targets or competitively sensitive information could be discussed, and developing or adopting sustainability standards (including certification schemes, targets, or goals).
- Take particular care in concentrated or dominant position markets. Antitrust law is particularly sensitive where the markets in question are highly concentrated (i.e., with few effective competitors) or where one or more companies has a dominant position (e.g., monopoly). In these markets, any agreements (including verbal) or generally shared views on sustainability goals, programs, or how to implement them should be carefully vetted for antitrust compliance from the outset. Further, a company’s unilateral sustainability initiatives should be examined to ensure they cannot be regarded as an abuse of a dominant position, a means to acquire or maintain a monopoly, or a way to exclude actual or potential competition.
- Analyze sustainability initiatives’ impacts on competition by examining what activities are being restricted and who benefits from the resulting change in market dynamics. Antitrust law protects competition, not competitors. To demystify the idea of harm to competition, begin by asking what (if anything) the relevant sustainability agreement, standard, or policy restricts its participants from doing, whether formally or in practice. Are those activities a means of competing? Against whom? A “naked” agreement between competitors not to compete in some way (e.g., a simple agreement not to do business with certain customers) raises red flags, and restrictions on competitive activities that are part of broader arrangements require careful assessment if they cause more than a small portion of effective competitors to restrict those activities. Next consider how the agreement, standard, or policy advantages and disadvantages participants in the marketplace. A sustainability policy is not illegal just because it disadvantages someone, but risks increase greatly if those developing, adopting, or causing others to adopt it may benefit financially from that disadvantage.
- Carefully consider and substantiate the pro-competitive reasons for improving sustainability. It is important to clearly identify and substantiate the pro-competitive reasons why a company is engaging in sustainability cooperation. For example, companies frequently seek to attract customers, suppliers, and capital by marketing themselves as more sustainable, making sustainability a dimension of competition itself. Where sustainability practices directly benefit the user of a product or service, this is a clear pro-competitive quality improvement. But even if the benefits are experienced directly by others, the user or consumer may still value them, for example by preferring alternatives with a smaller carbon footprint. See European Commission Horizontal Cooperation Guidelines at ¶¶ 575–81. These benefits are, in principle, also forms of quality improvements U.S. antitrust law recognizes as pro-competitive. But authorities are likely to demand substantiation for such a claim, such as underlying market research that reliably demonstrates a willingness to pay.
- Ensure any restriction on competition goes no further than reasonably necessary to achieve pro-competitive benefits. Once pro-competitive benefits are identified, ensure and substantiate that there are no restrictions on competitive activity beyond what is reasonably necessary to achieve those benefits, and consider whether substantially less restrictive alternative arrangements would suffice. See generally N.C.A.A. v Alston, 594 U.S. 69, 96–97 (2021). Any means to “enforce” a standard or impose consequences for noncompliance, any restrictions on a collaborating company’s actions independent from the collaboration, or any direct or indirect restrictions on non-collaborators’ conduct (like the effective imposition of standards on them) call for particular attention in this respect.
- Look to non-U.S. jurisdictions’ guidance––with caution. European authorities including the European Commission have provided detailed guidelines on how their competition laws address common forms of sustainability cooperation. See Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, 2023/C 259/01 (July 21, 2023). See also It’s Not Easy Being Green: The European Commission’s New Guidance on Sustainability Agreements. These guidelines can help orient the competition analysis, but U.S. practitioners must be mindful of differences in substantive law and policy therein. For example, U.S. law might not recognize all theories of pro-competitive benefits that would be cognizable under E.U. law, and the Commission’s “soft safe harbour” has no effect or counterpart under U.S. law. Similarly, one member state, Austria, has enacted a sustainability-related exception to its national competition law that does not exist under U.S. law, and authorities including the U.K. Competition and Markets Authority and Netherlands Competition Authority have adopted distinctive rules regarding sustainability as matters of enforcement policy. Simultaneously, some non-U.S. jurisdictions’ competition laws may be more restrictive than U.S. law. Merely because a sustainability arrangement is permissible in one jurisdiction does not mean it is permissible in others.
- Ensure standard-setting does not serve exclusionary purposes. Recent high-profile attacks on ESG groups in the United States (see below) have underscored that almost any standard-setting activity affecting business relationships can be framed as a concerted refusal to deal, but that does not mean it violates antitrust law. U.S. law has generally condemned these activities as “group boycotts” only where they were means to exclude or otherwise disadvantage their participants’ competitors, typically by causing suppliers or customers to cut off those competitors’ access to a supply, facility, or market necessary to compete. See Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 294 (1985). Antitrust practitioners will recognize this as a vertical theory of exclusion. By contrast, standards that may support efficiency-enhancing arrangements, or which are set objectively and with safeguards to prevent them from being biased by participants with anticompetitive interests, are generally considered under the “rule of reason” taking into account their pro-competitive benefits. See Nw. Wholesale Stationers, 472 U.S. at 293–98; Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500 (1988). Thus, one should ensure any jointly or externally developed standard affecting business relationships is objective and not affected by anticompetitive motivations, for example by relying on a competitively disinterested third-party authority in the standard-setting process.
- Consider the political and institutional context affecting risk––and perception of risk. The U.S. antitrust framework gives many elected officials and private parties with diverse interests and priorities the power to enforce the law, complicating the risks of expense, reputational damage, and potential liability resulting from legal action. Some state attorneys general, for example, have subpoenaed and threatened to sue asset managers over ESG policies, and the Judiciary Committee of the U.S. House of Representatives has undertaken a controversial investigation into a so-called “climate cartel” of sustainable investors. Simultaneously, the political dimension of anti-ESG “backlash” and potential disadvantages sustainability efforts could generate for some businesses and constituencies give many companies, advocacy groups, and political actors reason to magnify the perception of those risks. Those advising companies should not uncritically credit all antitrust accusations, but they should be mindful of practical risks driven in part by these political and institutional considerations.
