Scrutiny of ESG and Sustainability Initiatives Under Antitrust Laws

At a Glance

• U.S. regulators have confirmed that no sustainability or ESG commitment antitrust exemptions exist or will be announced. 
• Lawmakers are keeping the pressure on ESG/sustainability initiatives through continued investigations of the potential anticompetitive impact of collaborations, information exchanges and agreements advancing social and environmental goals.
• Despite recent and continued investigatory activity, U.S. companies should implement some basic antitrust law tenets on the scope of permissible collaborations between potential competitors in designing and/or implementing ESG/sustainability policies and initiatives.

The intersection between antitrust and environmental, social, and governance (ESG) initiatives continues to draw attention from regulators and lawmakers. While unilaterally and independently adopted ESG and sustainability initiatives continue to carry low risk for companies under the antitrust laws,¹ governmental scrutiny of arguably collaborative efforts among competitors for potential antitrust violations endures. 

Since we last wrote about the intersection of antitrust and ESG, investigations into potential ESG antitrust violations continue, and U.S. regulators have confirmed that no sustainability or ESG commitment antitrust exemptions exist or will be announced. These trends likely are here to stay under President-elect Donald Trump’s second term. Despite this ongoing scrutiny, companies should take steps early to navigate collaborative initiatives or commitments and mitigate antitrust risk against potential scrutiny from lawmakers and regulators. 

U.S. Lawmakers Investigate Potential Antitrust Violations for ESG Initiatives

Lawmakers are keeping the pressure on ESG initiatives with a focus on the potential anticompetitive impact of collaborations, information exchanges and agreements advancing social and environmental goals. Late last year, the U.S. House of Representatives Judiciary Committee subpoenaed BlackRock and State Street Global Advisors to assess potential anticompetitive conduct of the Climate Action 100+, an investor-led initiative focused on investing in companies critical to net-zero emissions transmissions. Relatedly, in June of this year, the House Judiciary Subcommittee on the Administrative State, Regulatory Reform and Antitrust held a hearing regarding potential anticompetitive conduct stemming from Climate Action 100+, calling certain companies as witnesses for the hearing. Information requests also were sent to over 100 U.S. companies regarding their involvement in Climate Action 100+, expressing concern that “financial institutions are colluding with climate activists to . . . adopt left-wing [ESG] related goals in violation of U.S. antitrust law.” Moreover, state attorneys general have initiated ESG investigations of members of Climate Action 100+ as well as signatories of the Net Zero Financial Service Providers Alliance, a global group of service providers supporting the goal of net-zero emissions, for potential antitrust violations and breaches of fiduciary duties. 

No Special Exceptions Exist for ESG or Sustainability Efforts Under U.S. Antitrust Laws

Pressure on these initiatives is not likely to ease up, particularly because regulators have confirmed no special exceptions exist for ESG initiative collaborations. Antitrust exemptions are narrowly tailored and relatively rare under U.S. antitrust law. But some hoped U.S. lawmakers would announce presumptive antitrust safety zone guidelines for sustainability exemptions similar to those adopted by the European Commission in 2023. Nonetheless, Federal Trade Commission Chair Lina Khan confirmed earlier this year that the antitrust laws contemplate no ESG exemption. Her comments support her prior testimony before the Senate Oversight Committee in 2022 that no such ESG exemption exists, and that the FTC has previously rejected claims by companies of the existence of any such exemption. 

Assistant Attorney General of the Antitrust Division of the Department of Justice Jonathan Kanter has made similar comments, noting that companies should not expect an exemption for ESG initiatives and that companies will need to assess how to advance their ESG initiatives under the existing antitrust law. 

Companies Can Be Prepared Despite Continued Scrutiny

Despite recent and continued investigatory activity, U.S. companies should implement some basic antitrust law tenets on the scope of permissible collaborations between potential competitors in designing and/or implementing ESG/sustainability policies and initiatives. Indeed, companies seeking to implement collaborative ESG/sustainability initiatives should contact antitrust counsel in advance of discussing any such initiatives with collaborators to ensure that the discussions and related activities are procompetitive and follow best practices such as these to mitigate risk: 

• Participants should understand the procompetitive impact of the collaboration and consider quantifiable, competent, scientific, reliable supporting data that is not competitively sensitive.
• Collaborations should be voluntary and nonbinding.
• Collaborations should avoid topics relating to:
  
  • Strategic plans, output plans, and products under development
  • Competitively sensitive information like price, costs or strategic plans about products or services (regardless of whether the product or service is part of the ESG/sustainability collaboration)
  • Facts or opinions regarding contract or product prices, costs, margins, pricing terms, promotional allowances, profitability, bidding or pricing strategies
  • Projected or intended process to be bid or offered for any project, contract or series of contracts
  • Relationships with specific customers or vendors or information you or your competitors are contractually obligated to keep confidential under the terms of your respective agreements with customers or vendors
  • The terms of potential sales and bids or the terms of a particular purchase from a customer
  • Anything that relates to prices or the costs of inputs that impact prices
  • Verification of prices or exchanges of price lists
  • Which company or contractor will serve what competitors, customers, classes of customers, markets and/or geographies
  • Employee salaries, wages, or benefits
• Collaborations should be open to all in the industry.
• Participants should maintain proper documentation of meetings with collaborators regarding ESG/sustainability initiatives.
• Initiatives requiring the use of confidential information should work with antitrust counsel to engage a neutral third party to collect, anonymize and aggregate information necessary to advance ESG/sustainability efforts. 

The antitrust laws are nuanced and complex and enforcement of those laws continues to develop. Companies should work with experienced counsel to assess the landscape of collaborative ESG/sustainability efforts under the antitrust laws.