Antitrust Enforcers Differ on When ESG Collaboration Is Collusion

Agreements between industry competitors and sharing competitively sensitive information in the name of promoting an environmental, social, and governance initiative are likely to draw concern from antitrust agencies—no matter the jurisdiction or how good the intention.

Although US antitrust enforcers have shed little light on the parameters that separate legitimate ESG collaboration from improper collusion, some jurisdictions have provided specific guidance for ESG collaboration.

US Approach

In 2022, US antitrust enforcers made clear in public statements and testimony that there’s no exemption from US antitrust laws for agreements involving ESG initiatives. These comments clarify that ESG initiatives won’t benefit from any exemption or special treatment under US antitrust laws that put companies on notice if they are considering collective action in the name of ESG.

US states are focusing on enforcement regarding ESG initiatives, with 19 state attorneys general expressing concern to Blackrock about the company’s involvement in the Climate Action 100+ initiative. They highlight the “coordinated conduct with other financial institutions to impose net-zero” as potentially violating antitrust laws.

Republican members of the House Judiciary Committees similarly have criticized ESG efforts and even subpoenaed information from members of Climate Action 100+, raising similar concerns for the potential antitrust violations. Republican senators also sent a letter to over 50 US law firms reiterating the firms’ legal duty to advise clients of the antitrust risk they incur by pursuing ESG initiatives.

EU Approach

Ensuring sustainable economic development is a key objective of the EU’s Green Deal, and the European Commission must ensure that ESG coexists with antitrust law. The EC recently added a new section on sustainability agreements to its horizontal block exemption regulations and guidelines, where it defines “sustainability agreement” as a “horizontal cooperation agreement that genuinely pursues one or more sustainability objectives, irrespective of the form of cooperation.”

The guidelines contain examples of agreements that don’t raise concerns, will benefit from a newly created “soft safe harbor,” and may be exempted because the procompetitive benefits outweigh any negative impact on competition.

Agreements between competitors still need to be self-assessed and businesses should remain very cautious, as the EC sent a clear message that sustainability agreements that restrict competition will be severely punished and it will accept no “greenwashing.” In practice, there hasn’t been a fundamental shift at the EC level.

By contrast, the Dutch Authority for Consumers and Markets takes a more flexible approach. The Authority for Consumers and Markets made ESG one of its key priorities. Its sustainability guidelines encourage businesses to consult the ACM to confirm whether agreements can be exempted.

As an example, in October 2023, the ACM responded to the Dutch Waste Management Association that it wouldn’t take action against arrangements between collectors of commercial waste promoting recycling.

At a conference in May 2023, the president of the German Federal Cartel Office said ongoing discussions on sustainability should be limited to the environment. Despite this statement, the FCO issued a statement in June that it wouldn’t investigate a social initiative: the “Kakaoforum.”

Initiated by various stakeholders—from NGOs to companies in the cocoa and chocolate industry—one of Kakaoforum’s main objectives is to encourage its members to commit to individualized minimum prices, quotas, and premium systems to achieve better prices for producers in African countries.

Sustainability is also a priority of the French Competition Authority, which is seeking feedback on a draft notice aimed at providing informal guidance to companies with sustainable projects that could present competition law difficulties. The FCA also launched two ex officio sector inquiries where the green transition is particularly important: land passenger transport and charging stations for EVs. More sector inquiries can be expected and social and governance objectives don’t appear to be of particular focus.

UK Approach

UK enforcers have been actively issuing guidance on ESG and related initiatives. In October 2023, the UK Competition and Markets Authority published its Green Agreements Guidance following extensive stakeholder consultation. The UK guidance provides insight into how the CMA intends to apply competition law to ESG efforts, setting out key principles, along with practical examples.

Unlike the EC guidance, the UK guidance contains a chapter dealing with climate change agreements, adopting a more permissive exception to climate change agreements between competitors. Notably, the UK guidance only applies to “environmental sustainability agreements,” as defined by the CMA, leaving out agreements which cover wider eco-societal objectives. Although nonbinding, the new guidance is intended to “ensure that competition law [in the UK] does not impede legitimate collaboration between businesses that is necessary for the promotion or protection of environmental sustainability.”

Best Practices

Although current guidance across jurisdictions isn’t consistent, companies seeking ESG initiatives worldwide can follow certain best practices:

• Provide antitrust warnings before meetings to discuss ESG with competitors.
• Avoid discussions involving competitively sensitive information, including prices, customers, and supply.
• Seek legal guidance in all appropriate jurisdictions before engaging with competitors.
• Consider reaching out to relevant competition authorities—possibly through a trade organization—for pre-approval and evaluate the jurisdiction’s interests and official guidance.
• Consider the lack of consistency between authorities and tailor conduct to prevent exposure to scrutiny.
• Review compliance training to include antitrust risks associated with ESG collaboration.
• Weigh the potential benefits of collaboration versus doing it alone.

Companies will need to tread carefully when working with competitors to pursue ESG goals to avoid antitrust concerns until global jurisdictions align on enforcement policies.

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

Author Information

Camille Paulhac is partner and head of Paul Hastings’ antitrust and competition department in Brussels and Paris.

Jade-Alexandra Fearns is partner in the London office of Paul Hastings, focused on antitrust and competition law.

Emma Hutchison is an associate in Paul Hastings’ litigation practice in Washington, D.C., focused on antitrust and competition law.

Craig Lee and Juliette Hua contributed to this article.

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