Collaboration and Competition: Antitrust Law Through an Environmental Lens
Dana Chen
Coordination among firms is traditionally viewed as a violation of antitrust laws, but it can also have benefits for furthering social welfare goals, such as addressing climate change. For example in 2017, a group of over 600 investors launched Climate Action 100+, an initiative focused on engaging some of the largest greenhouse gas emitters to reduce emissions, improve governance, and strengthen their climate-related financial disclosures.[1] However, coordination among firms on environmental, social, and governance (“ESG”) goals has prompted antitrust scrutiny from Republican Members of Congress and state attorneys general. In June 2024, the House Judiciary Committee published a report alleging that environmental activists and financial institutions had formed a “climate cartel” that is colluding to decarbonize.[2] Members of this alleged “climate cartel” include Climate Action 100+, asset managers, state pension funds, and environmental nonprofits.[3] The report claimed that collaborations focused on reducing emissions violate antitrust laws and called for U.S. antitrust enforcement agencies to take legal action.[4]
The Ranking Member of the House Judiciary Committee subsequently released a Democratic staff report countering the “climate cartel” report.[5] The Democratic staff report argued that the evidence produced in the House Judiciary Committee’s investigation undermines, rather than supports, theories of antitrust liability for ESG initiatives.[6] The Democratic report contended that ESG initiatives in fact promote competition by encouraging companies to provide their investors with more information about the risks of climate change.[7]
While federal antitrust enforcers did not heed the Republican Members’ call to take legal action against the alleged “climate cartel,” a group of states sued three asset management companies just a few months later for allegedly conspiring to restrict coal output as part of their commitments to reduce carbon output.[8] The complaint cited the asset management companies’ participation in initiatives such as Climate Action 100+ as “substantial evidence of a horizontal agreement” that violates the Sherman and Clayton Acts.[9] Lawsuits such as Texas v. Blackrock, Inc. may be the tip of the iceberg. While ESG collaborations were not a focus of the Biden Administration’s antitrust enforcement efforts, they very well could be a priority for the new Trump Administration. During the previous Trump Administration, the Department of Justice (“DOJ”) opened an antitrust investigation into four car manufacturers that entered into an agreement with the State of California to abide by vehicle emissions standards that were stricter than federal standards.[10] Although the investigation was short-lived, it prompted criticism from California officials, Democrats in Congress, and environmentalists, who alleged that the investigation was an attempt to retaliate against the carmakers and California for agreeing to higher emissions standards.[11] As such, antitrust enforcement may have a chilling effect on ESG collaborations.
Regardless of whether there were legitimate antitrust concerns in the DOJ investigation or in the states’ lawsuit against asset management companies, private-sector collaborations on ESG goals and emissions standards appear unlikely to go anywhere. Given the imminent threat the climate change poses to the environment and economy, more investors are expecting companies to address climate-related risks.[12] Rather than view coordination among firms as inherently anticompetitive, federal and state antitrust enforcers should provide guidance that preserves competition but encourages meaningful collaboration on sustainability goals. In a recent article, UC Davis School of Law Professor Amelia Miazad argues that antitrust law’s traditional approach to collaboration is flawed in that it falsely assumes that “competitors’ joint pursuit of prosocial goals is either completely noneconomic or a sham to cover up collusion and price-fixing.”[13] Miazad proposes adopting the Universal Consumer Standard, which would permit competitor collaboration if the competitors demonstrate that the collaboration is narrowly tailored to mitigate a systemic risk and that prohibiting the collaboration would reduce future consumer welfare.[14] Under this standard, companies could collaborate on climate goals like reducing emissions without fear of running afoul of antitrust laws.[15]
UK Competition Appeal Tribunal Judge Simon Holmes lends further support for the contention that antitrust law should account for prosocial goals in a recent article.[16] He suggests taking things a step further than Miazad by expanding the definition of “consumer welfare” (the traditional standard for evaluating antitrust harms) to account for non-economic factors such as general well-being, health, and clean air.[17] While Holmes’s article focuses on the European Union, his recommendation is also applicable to the U.S.[18] The U.S. can look to foreign competition agencies for guidance on how to support private-sector collaborations that improve consumer welfare as Holmes defines it while preserving competitive markets. For example, in 2023 the UK Competition and Markets Authority (“CMA”) issued updated guidelines on sustainability-focused collaborations.[19] The CMA guidelines take a three-prong approach by: (1) encouraging competition in new markets such as electric vehicle charging; (2) ensuring consumers have accurate information about the products they purchase, which helps limit greenwashing; and (3) providing clarity to businesses regarding what types of collaborations violate antitrust laws.[20] Under the third prong, sustainability agreements between competitors must contribute to certain benefits (e.g., improving technical progress), be indispensable to those benefits, provide benefits to consumers, and preserve substantial competition.[21]
The current state of antitrust regulations in the U.S. misses the mark on providing guidance on ESG collaborations, but the DOJ and Federal Trade Commission (“FTC”) should adopt guidelines that track those adopted by the CMA. The DOJ and FTC have yet to issue similar guidelines for U.S. companies.[22] The DOJ and FTC recently withdrew the Antitrust Guidelines for Collaborations Among Competitors (“Collaboration Guidelines”), which had been in place for nearly 25 years.[23] The agencies’ statement of withdrawal explained that the Collaboration Guidelines failed to reflect up-to-date jurisprudence on the Sherman Act, modern analytical methods, and evolving business combinations (e.g., vertical integration, algorithmic pricing models).[24] It remains unclear whether the DOJ and FTC will issue new guidelines that reflect the current state of markets and case law, or if companies will need to continue guessing as to whether their sustainability collaborations will catch the attention of antitrust enforcers. If the agencies do publish new guidelines, they would benefit greatly from accounting for prosocial goals such as allowing collaborations that address systemic risks and would benefit consumer welfare in the long term.
The bottom line is that antitrust enforcement is in need of reform if it is to keep up with collaborations among firms on ESG goals. An excellent starting point for such reform is for the DOJ and FTC to adopt updated collaboration guidelines that account for prosocial goals such as climate change.
[1] Frequently Asked Questions, Climate Action 100+ (Mar. 2024), https://www.climateaction100.org/frequently-asked-questions/.
[2] Committee on the Judiciary, U.S. House of Representatives, Climate Control: Exposing the Decarbonization Collusion in Environmental, Social, and Governance (ESG) Investing i (2024).
[3] Id. ati-ii.
[4] Id. at iv.
[5] Committee on the Judiciary, U.S. House of Representatives, Unsustainable and Unoriginal: How the Republicans Borrowed a Bogus Antitrust Theory to Protect Big Oil (2024).
[6] Id. at 4.
[7] Id.
[8] Complaint, Texas v. Blackrock, Inc., No. 6:24-cv-00437 (E.D. Tex. filed Nov. 27, 2024).
[9] Id. ¶ 116.
[10] Timothy Puko & Ben Foldy, Justice Department Launches Antitrust Probe Into Four Auto Makers, The Wall St. J. (Sept. 6, 2019), https://www.wsj.com/articles/justice-department-launches-antitrust-probe-into-four-auto-makers-11567778958.
[11] Id.
[12] Committee on the Judiciary, U.S. House of Representatives, supra note 5, at 24.
[13] Amelia Miazad, Prosocial Antitrust, 73 Hastings L.J. 1637, 1666 (2022).
[14] Id. 1690-91.
[15] Id.
[16] Simon Holmes, Climate change, sustainability, and competition law, 8 J. of Antitrust Enf’t 354, 362 (2020).
[17] Id.
[18] See generally Maurice E. Stucke, Should Competition Policy Promote Happiness?, 81 Fordham L. Rev. 2575 (2013).
[19] Denise Hearn et al., Antitrust and Sustainability: A Landscape Analysis 28 (Columbia Ctr. on Sustainable Inv. and Sabin Ctr. for Climate Change Law ed., 2023).
[20] Id.
[21] Id. at 29.
[22] Hearn et al., supra note 18, at 50.
[23] Dep’t of Just. & Fed. Trade Comm’n, Justice Department and Federal Trade Commission Withdraw Guidelines for Collaboration Among Competitors (2024).
[24] Id.