Prevent Antitrust Laws From Complicating Business Sustainability

Now that sustainability is a board-level issue, companies are under immense pressure to ensure that their supply chains are environmentally and ethically accountable. Inspiration can come from internal business, consumers, government, shareholders—or all of them. Along with deeds are goals, commitments, deadlines and board pressure words.

In some markets, companies pursue sustainability goals on their own to bring consumers the products they desire, but a company may not be able to move the needle on its own. A joint or regional initiative can sometimes achieve large-scale change that would be commercially impossible for one company to achieve alone. But the prospect of competitors working together could raise issues under antitrust laws in the US and other countries around the world.

Regulators cast a wide legal net because the law typically focuses on where the system may be affected, rather than where the parties are located. It is not always clear how national antitrust laws will treat sustainability collaborations, which can raise costs and reduce options.

The result is a complex and potentially risky legal landscape for companies looking to take decisive action to meet goals and lead in their fields. So how should companies navigate it?

Cartel is not acceptable

US legislators and antitrust enforcers have sent strong signals that they will not tolerate cartels under the guise of stability agreements. Companies can be fined and the subject of litigation, and publicly accused of greenwashing – which will require time and resources to defend in court and in the public eye.

There are no environmental, social and governance exemptions to antitrust laws, Federal Trade Commission Chair Leena Khan said in response to a question at a Senate hearing.

Earlier this year, a coalition of 19 state attorneys general sent a letter to a major investment firm expressing concern that “coordinated conduct with other financial institutions to implement net zero raises antitrust concerns.” “

In practice, cooperation may not actually be intended to restrict competition. Sustainability managers or technical experts can drive projects (under pressure), but have little knowledge of antitrust regulations because they are not considered in the risk-appraisal function.

Those implicated may think that a broader laudable environmental or social objective justifies projects in collaboration with competitors. It is also possible that discussion of legitimate topics may stray into illegal territory, such as prices and the benefits of market stability. Employees may be insensitive to antitrust risks on long-running projects that are subject to scope reduction.

acceptable cooperation

Industry standards and benchmarking are common ways for companies to achieve more sustainable and ethical results. Voluntary standards can have a positive impact on how workers are paid and what manufacturing methods can be used, and may even play a role in making recycling more efficient.

There are clear benefits to the standards, and many will not raise antitrust issues. However, companies must ensure that the standards are not developed in a way that harms or excludes—that is, excludes—others.

Companies may also be required to share information as they develop voluntary standards, verify compliance, or engage in benchmarking. They can be made compliant by non-disclosure agreements, clean-up teams, or by using a third party to collect data on supplied quantities.

Provided that enough firms are involved so that no contributor is able to reverse-engineer information about their competitors, there is no antitrust concern.

close calls

The challenge for companies and consultants lies in deciding how to approach projects on the right hand side of the continuum, where cost/benefit analysis may be required.

This is difficult because qualitative gains are harder to measure or may be more uncertain, eg. Because they will only arise in the long term. Sadly, companies may conclude that short-term antitrust scrutiny is more certain than environmental and commercial benefits.

There are no easy answers for this category of projects, and the legal assessment will always be factual and jurisdiction-specific. We recommend the following tips to reduce the risk:

  • Make sure those responsible for corporate sustainability initiatives seek antitrust counsel.
  • Consider auditing the group’s ESG activities to ensure in-house council knows what is going on and why any projects should be jointly driven: about the initiative in terms of risk and cost What do you mean it cannot be achieved alone?
  • Ensure that projects leave as much room for competition as possible, such as encouraging individual discretion on how to meet and exceed jointly set goals. Identify and quantify the benefits of the initiative, who will benefit and when.

Train all employees who have contact with competitors on how to approach the meetings using dos and don’ts sheets prepared for the project. Ensure that each initiative has a compliance program that includes information exchange safeguards, and the use of third parties to avoid sharing sensitive information. Corporate counsel periodically check for scope lapses, and consider inviting outside counsel to important meetings to ensure negotiations stay on track.

Also, consider the pros and cons of contacting a government body and/or antitrust agency about a pending project, which may be a good option where large investments are considered.

Don’t stay away from ESG

Antitrust law or the very notion of it can hinder legitimate projects focused on achieving more sustainable supply chains, which can be frustrating not only for businesses but also for antitrust agencies. However, with careful planning, businesses can take steps to ensure that antitrust laws do not unnecessarily stand in the way of legitimate ESG goals.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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author information

Jeffrey Martino Baker is a partner in McKenzie’s global antitrust and competition practice and co-leader of the firm’s Global Cartel Task Force. He represents multinational corporations and their boards and officers in high-stakes criminal and civil investigations by the DOJ and other agencies.,

Grant Murray Based in London, Baker is Principal Knowledge Counsel for Mackenzie’s Global Antitrust and Competition Group. He leads a team of antitrust knowledge attorneys and is responsible for the training needs of a practice group consisting of more than 300 competition attorneys in over 40 countries.

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