Reclarifying antitrust standards are key to depoliticizing enforcement---that allows climate protections

Competition policy and antitrust law are experiencing a global renaissance. New market realities such as digital market gatekeepers, the financialization of firms, highly concentrated markets, a rising labor movement, industrial policy, and trade wars, among others, are radically reshaping how this policy area is understood and applied. Sustainability concerns have also been a driving force for reconstituting antitrust to meet twenty-first century challenges. It is now widely accepted that competition policy – both its aims and its enforcement – has wider societal impacts beyond competition, including effects on democracy, economic inequality, growth and innovation, racial and gender imbalances, privacy, geopolitical implications and more. Its effects on the environment can also no longer be ignored. Increasingly, private-sector firms say that antitrust is chilling the mobilization of non-state actors to address climate change and other sustainability challenges. Activities such as joint standard-setting, industry-wide competitor collaborations, and information sharing have raised new questions and controversies. Coordinated engagement by investors and financial institutions has become a particular target of politicized attack in the United States, further muddying the waters. These trends have generated confusion among private actors regarding permissible behavior, which has prompted many international competition agencies to issue updated guidelines. Although a common narrative emphasizes that antitrust law is getting in the way of coordination, antitrust law is, fundamentally, an allocator of coordination rights.3 It defines what kind of market coordination is pro-social or benign, and where private actor coordination becomes anti-social (for example, cartel behavior). Competition agencies, since their inception, have wrestled with how to define what constitutes pro-social coordination, and how to measure any anti-competitive harms against other social and economic benefits. For these reasons, competition policy is a profound shaper of markets. Competition enforcers and regulators must grapple with the role that it can play in advancing or hindering sustainability objectives. Various competition agencies define the scope of sustainability considerations differently, but broadly they can include: mitigating environmental impacts, accelerating the energy transition to clean energy, protecting human rights, and advancing worker rights and prosperity. Vigorous debates about the normative goal of competition policy have renewed urgency. For every position on what antitrust law should accomplish, differences in methodology and technical implementation follow. Biden administration antitrust enforcers are experimenting with a wholesale revival of the antimonopoly origins of antitrust and are exercising long-dormant enforcement authorities, focusing on addressing concentrations of power and protecting the competitive process. Due to both the increasingly politicized nature of the debate in the US, and the Neo-Brandesian belief that ancillary benefits like environmental or social benefits follow from increased market competition, US agencies largely remain silent on sustainability issues. Instead, the US is debating and experimenting with what new goal should replace the longstanding “consumer welfare standard” that has guided antitrust application for more than four decades. The US federated system – whereby states enforce their own antitrust laws parallel to federal law enforcement – creates additional complexity. In contrast, Europe is still largely operating under the consumer welfare standard, expanding who is considered a ‘consumer’ (“in market” or “out of market”) while moving to new semantic versions like the ‘citizen welfare standard,’ which allow for a wider set of welfare considerations beyond price or efficiency gains. Compared to the US, the EU, UK, and Dutch agency approaches to sustainability collaborations are more permissive, more experimental, and more oriented around exceptions and safe harbors. European agencies are now directly incorporating environmental and other sustainability concerns into their mandates and updated guidelines. Using the long-standing “balance of harms” approach for sustainability collaborations raises new and substantial challenges of measurement and enforcement. The anti-ESG (“Environmental, Social, Governance”) narrative battles have also heightened focus on financial institution coalitions such as the Global Financial Alliance for Net Zero (GFANZ), Climate Action 100+, Ceres, and others. In the US, Republican Attorneys General and Congressional representatives have launched investigations for alleged antitrust violations. The claim that coordinated behavior among financial institutions such as banks, asset managers, or insurers is a violation of antitrust, and a “collective boycott” in particular, has dominated headlines, although no lawsuits have been brought to date. As the political pushback has intensified, some major asset managers and insurers have withdrawn from their respective climate alliances. The rising anti-ESG movement overlaps and intertwines with antitrust concerns but must be parsed closely to differentiate narrative fiction from legal reality. In the US, state-level anti-ESG bills employ “boycott” language but are more concerned with questions of fiduciary duty than antitrust violations. Nevertheless, the coordinated statelevel activity means that firm risk from purported antitrust violation investigations is difficult to mitigate, even if federal agencies offered updated guidelines or safe harbors (as other international competition agencies are doing). For this reason, it is nearly impossible to provide a unified US approach to these questions, in contrast to international jurisdictions. Other industries – like fashion and agriculture – claim that a “first mover disadvantage” afflicts companies pursuing sustainability goals which may entail higher costs. For this reason, they assert that collective action amongst competitors – such as standard-setting and industry association activities, collective purchasing requirements or mandatory standards, information sharing, and others – is an important way to institute needed reforms, and they perceive antitrust as standing in the way of these collaborations. Most competition agencies have long-standing competitor collaboration guidelines to inform businesses about what kinds of collaborations are permissible under the law; there is also existing case law which has provided clarity on various kinds of collaborations. But some collaborations and activities with sustainability objectives continue to raise challenging questions. Some contend that antitrust’s focus on reducing prices or maximizing output is fundamentally in tension with sustainability goals. Competition agencies now wrestle with what amount of a reduction of competition among firms – if any – should be permissible to obtain certain sustainability benefits. How should agencies assess the benefits and harms of restrictions of competition against consumer or citizen benefits? And does this require legislative change, or simply updated guidelines? Discussions about how sustainability benefits should be quantified, to whom, and over what time horizon are ongoing. These technical questions absorb much of the European dialogue on “green antitrust.” However, it is worth noting that competition agencies have wrestled with technical questions relating to competitor collaborations for decades. Historically, competitor collaborations have been assessed using the lens of maximizing efficiency, rather than sustainability benefits. So, while the weighing of benefits and harms of these collaborations is not new to competition policy, ‘sustainability gains’ are becoming the new ‘efficiency gains’ that companies propose as deserving of new regulatory or legislative carve outs. To provide increased clarity on these issues in the US, financial institution coalitions and other non-financial industry collaborations can seek advisory opinions or business reviews from the Department of Justice (DOJ) and the Federal Trade Commission (FTC). They can also request that the FTC use its power to compel information (known as 6(b) authority, from section 6 of the FTC Act) to conduct market studies on critical industries relevant to energy transition or sustainability, which may raise new questions about permissible collaborations. This can help the agency investigate the unique competitive dynamics of a relevant industry, and perhaps yield specific case studies for updated competitor collaboration guidelines which would take sustainability oriented collaborations into consideration. Concurrently, the whole-of-government approach to competition policy – instituted under President Biden’s Executive Order on Promoting Competition in the American Economy in July 2021 – provides an opportunity to infuse sustainability considerations through existing interagency collaborations. While the FTC and DOJ are primarily responsible for enforcing the federal antitrust laws, other agencies such as the Department of Transportation, US Department of Agriculture, National Labor Relations Board, and many others also have antitrust authority. And increasingly, the FTC and DOJ have memorandums of understanding (MOUs) with other federal agencies, and often comment on rulemakings, as they intersect with competition concerns. At a time where the antitrust agencies are politically constrained from engaging questions of sustainability directly, they can support other agencies which may consider sustainability considerations in their rulemaking and other regulatory actions. Ultimately, competition policy and its enforcement agencies are one component of a broad policy framework that shapes private sector activities and their alignment with, or contributions to, climate or other policy objectives. Incentivizing private actors to align their practices with sustainability and climate goals will require policies and regulations throughout the economy. Antitrust policies and agencies should be a coherent part of this robust policy framework.