Empowering Consumers, Encouraging Competition, Yet…Eliciting Claims of Antitrust Violations?

ESG has been all over the news lately as companies consider how to empower consumers to make informed choices. Recently, Colorado Attorney General Phil Weiser spoke out against efforts to put a stop to these “pro-competitive, pro-consumer” practices.*

AG Weiser pushed back against recent efforts to oppose the ability of companies to consider environmental, social, and governance (ESG) factors—including climate related risks and opportunities. For example, a group of state attorneys general led by Utah recently warned companies that making a commitment to support climate action might violate antitrust laws, and last fall, states led by Tennessee sent a similar letter to the signatories of an alliance of financial service companies supporting net zero goals. A report by Pleiades Strategy came out earlier this week cataloging these many “attempt[s] to undermine corporate responsibility.”

Let’s take a look at what AG Weiser said about the merits and the impact of these anti-ESG claims.

Businesses and consumers alike are grappling with many of today’s complex issues, including climate change. As this unfolds, “there is a temptation, and a risk, that [attorneys general] will make selective enforcement threats against American businesses that are consistent with, or even driven by, political priorities,” warned AG Weiser.

To protect against this, AGs need to “evaluate rigorously—in the First Amendment arena, the antitrust arena, and other domains—whether a particular action would be taken” regardless of the topic, AG Weiser explained.

So, would the Utah- or Tennessee-led coalitions have sent letters warning of antitrust violations if the topic had been different? Is there any legal merit to the antitrust claims being made against corporate ESG commitments, or is this merely a case of “selective enforcement…driven by political priorities,” as AG Weiser reminds us to be leery of?

Three Case Studies, Same Antitrust Principles

To work through this question, AG Weiser presented three case studies. Each involved an example of corporate self-regulation in an area of public concern. One was hypothetical: standards for responsible use of artificial intelligence. The others were based on real scenarios: international standards for sustainable fisheries and the Net Zero Alliance mentioned above.

As these three examples illustrate, self-regulation can be a valuable way for companies to address consumer concerns. But does antitrust law permit it?

To help set the stage for this discussion, AG Weiser gave a short lesson on antitrust. He explained that antitrust law asks “whether there is a specific agreement among competitors or whether there is merely a general and aspirational commitment.” If there are specific requirements, the question is “whether those requirements relate to the dimension of competition where coordination would be potentially anticompetitive.”

It is true that some forms of self-regulation can “merit scrutiny when they fail to follow appropriate safeguards or appear to advance an anticompetitive scheme,” AG Wesier explained. However, there are cases where self-regulation is simply a “collaborative effort…to provide consumers with additional information—including businesses’ commitment to using best practices to address climate issues.” Antitrust law allows for this kind of collaboration because it “can enable more informed choices in the marketplace and allow consumers to use their purchasing power to drive progress on issues they care about.”

In short, self-regulatory programs are able to both “provide policymakers with a living laboratory and comply with antitrust law (when they follow key safeguards),” he explained.

If claims about antitrust violations have no legal merit, what is the harm? The problem is that companies may choose to back out of self-regulatory programs, such as ESG commitments, when faced with the possibility of legal action. AG Weiser described this as “a test for companies,” because if they “give in to intimidation that’s not based on a true legal analysis,” then those companies are “inviting more of this activity” and “in effect rewarding” it.

“Providing clear information to consumers is good for consumers. And when companies are looking for ways they can disclose how they address climate issues, that’s helping consumers make informed choices,” AG Weiser explained. So when companies are intimidated out of providing this information, it “undermin[es] choices that can be made in the marketplace, whether there’s a marketplace of ideas, investor marketplace, or consumer marketplace.”

As AG Weiser concluded, he explained that he wanted to urge companies to continue to make “smart business decisions” and to “act in ways that are responsible and that consumers are looking for,” rather than walk any of their DE&I or ESG commitments back.

*AG Weiser spoke at an event which was cosponsored by the State Energy & Environmental Impact Center and the Institute for Corporate Governance & Finance. Quotes attributed to AG Weiser in this piece are from his prepared remarks for this event and from the Q&A that followed. The event was hosted at NYU Law on April 20 and was part of NYU Law’s Reunion.