Mitigating Antitrust Risk in ESG Activities: Collaborations with Competitors and Industry Working Groups
The Biden-Harris Administration has not only identified Environmental, Social and Corporate Governance (ESG) as an administration priority, but also has prioritized increased enforcement of the antitrust laws.
Certain ESG activities—especially those that bring together competitor companies—may give rise to antitrust risk. The fact that such conduct might occur for ESG purposes does not automatically immunize the conduct from antitrust scrutiny. As a former head of the Antitrust Division of the Department of Justice has noted: “The loftiest of purported motivations do not excuse anti-competitive collusion among rivals.” So, it is vital that companies engaged in ESG activities remain mindful of avoiding antitrust pitfalls.
Competitor Collaborations & Industry Working Groups
The goal of antitrust law is to ensure that companies compete vigorously and fairly in the marketplace. The antitrust laws prohibit agreements that unreasonable restrain trade (for example, agreements among competitors to raise price or allocate customers). While individual companies are certainly free to pursue their ESG priorities as they see fit, risk can arise when competitor companies work together, particularly because implementing ESG-related product changes may affect product prices, output, and features. For example, although two companies might be lauded for introducing “greener” product offerings, they should not agree that they will or will not sell products with certain features, and certainly should not agree among themselves on the prices or premiums to charge for the new product. Similarly, although a company might announce the intention to limit emissions, such an announcement might attract antitrust scrutiny if announced simultaneously with competitor companies.
Industry working groups and trade associations can be a powerful force for defining and guiding ESG efforts. And the antitrust authorities have recognized that such groups can provide important and pro-competitive benefits to consumers. However, by their nature, these organizations bring together individuals from companies that compete against one another. This can create the opportunity for the occurrence—or even just the appearance—of collusive activities among competitors. This could expose companies to risk of antitrust investigations or challenges by federal authorities (US Department of Justice, Federal Trade Commission), state attorneys general, or private plaintiffs.
Companies should seek antitrust guidance when collaborating with competitors or participating in industry working groups, even if motivated by ESG priorities. Antitrust risk inherent in competitor collaborations can be mitigated by the following steps:
- Companies should act independently when setting prices for products or introducing new product offerings. Companies should not form agreements with competitors regarding product introductions or withdrawals, product features, bidding, pricing, or the allocation of customers or projects.
- In meetings among competitors, avoid even the appearance of impropriety by holding formal meetings with agendas pre-approved by counsel. Avoid informal or “side” meetings among competitors.
- Avoid sharing confidential or proprietary information with competitors (such as prices, marketing or product plans, profit, or cost details) as part of any collaboration, without antitrust guidance.
- ESG-focused industry “certifications” and other standard-setting activities can present special antitrust risk. We’ll have a future post with advice on how to manage antitrust risk in these situations.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.