Expanding antitrust is key to address environmental issues

To make good on its consumer welfare goals, a realignment of antitrust law is needed to promote climate progress in America. In  recently published in the Harvard Business Review, Matteo Gasparini et al. cites a survey finding 60 percent of companies are deterred from climate collaboration due to antitrust concerns. This is problematic because industry-wide collaboration is critical to address climate change. Collaboration helps mitigate the first-mover disadvantage, challenges that come with being the first firm to change their business strategy. In the context of sustainability, actions businesses take to decarbonize can be costly, resulting in higher prices and lower margins in the short run. So those who invest in sustainable transformation may find themselves at a competitive disadvantage. Collective industry action is one way to resolve this, as it ensures that competitors adopt costly practices simultaneously. Without collaboration, firm-level action is far less likely. Thus, when fear of antitrust violations deters collaboration, it deters climate action more broadly.

In  published in the Hastings Law Journal, Amelia Miazad echoes this assessment, and points out an additional flaw of antitrust doctrine: it falsely assumes that collaboration on social and environmental goals is anti-competitive. To illustrate this point, Miazad references when four automakers reached a voluntary agreement with the State of California in 2019 to establish vehicle emissions standards that were stricter than national levels. In response, the Department of Justice launched an  on the basis that this collaboration was anti-competitive by limiting the vehicle types offered to consumers. Ultimately, the probe was . While this probe has been criticized as politically motivated, Miazad argues that it underscores the disconnect between economic and non-economic goals in antitrust law. The automakers’ collaboration reflects a recognition that the auto industry is threatened by climate change with , , and . Addressing this risk is an economic decision that is needed to maintain profitability. Ultimately, Miazad concludes that antitrust law should remain firmly tethered to economic considerations. However, these considerations must also weigh the economic impacts of climate change.

As a solution, Miazad recommends use of the Universal Consumer Standard. The Universal Consumer Standard would allow competitor collaboration if the relevant parties can demonstrate that the collaboration is designed to mitigate a specifically identified systematic risk (i.e., climate change) and that prohibiting the collaboration will reduce the welfare of future consumers (i.e., decreased supply). Notably, this standard aligns with the existing constraints of antitrust law. While some scholars have suggested that social or environmental factors be integrated into antitrust decisions, the Universal Consumer Standard remains rooted in the economic factors that antitrust law already considers.

Contrary to Miazad’s recommendation, Simon Holmes suggests changing the scope of consumer welfare to account for non-economic factors. The antitrust definition of consumer welfare in the United States remains confined to promoting innovation and low prices. In  published in the Journal of Antitrust Enforcement, Holmes suggests that welfare is not just about profit or fortune, but also about health and well-being. Thus, if the consumer welfare standard is written into law, it is capable of taking into account non-economic factors. Holmes’ work focuses on the European Union, but his point is applicable to the United States: in both places, climate change is linked to consumer welfare through its effects on clean air and water. Therefore, antitrust doctrine should consider a wider set of goals that focus on both competitive processes and sustainability.

Sarah Light offers a different perspective and argues that antitrust law enforcement can protect consumer interests and serve as an environmentally friendly mandate. In  published in the Stanford Law Review, Light references a 2011 case from the European Union. Several detergent providers trimmed package size and detergent loads to decrease their environmental impact. Despite reducing unit volume, the firms . This attempt to rig prices and restrict competition violated antitrust law. The European Commission ultimately fined the detergent companies . Light argues the detergent companies feared that being the first to market an environmentally preferable product would create a first-mover disadvantage. To avoid this, the companies formed a cartel and fixed prices. Antitrust law enforcement deters such behavior by exposing and punishing on-face environmental actions that hurt consumers.

In an , the Managing Director of the International Monetary Fund stated that stronger collaboration across the private sector is vital to address the impacts of global warming. However, businesses will operate within the bounds prescribed to them by policy. In the status quo, perceptions of antitrust regulation hamper necessary climate collaboration. There is a need to re-evaluate how long-standing systems consider systemic risks like climate change. These policies will define the priorities and frameworks within which stakeholders work, ultimately influencing how quickly we reach net-zero.