US antitrust chilling effect yet to spread to corporates, survey suggests

The anti-ESG backlash does not appear to have had a chilling effect on collaborative climate initiatives among US non-financial corporates, a study by Linklaters suggests.

The survey, carried out for the law firm by polling company Censuswide, questioned 502 sustainability professionals across the US, UK, Germany, France and the Netherlands on the interplay between competition law and sustainability efforts.

Concerns around competition law were seen as posing a significant barrier to collaborations, with 56 percent of respondents reporting concrete examples of projects which had not been pursued due to legal risks. But the poll results from US respondents were “broadly in line” with those elsewhere.

Linklaters said this indicated that highly visible attacks on collaborative ESG and sustainability efforts, mainly by Republican attorneys general on financial services initiatives, “do not appear to be significantly chilling the appetite for sustainable collaboration with US-based respondents”.

Nicole Kar, global head of the firm’s antitrust and foreign investment team, told Responsible Investor that the US results had come as a surprise.

Given the highly visible meltdown of the Net Zero Insurance Alliance and repeated investigatory demands of other collaborative groups, US lawyers have warned of a potential chilling effect on collaborative action.

Kar suggested that the financial services sector is “somewhat different in risk profile in terms of competition law” to other sectors. For instance, banks are the only sector in the UK with a mandatory reporting requirement for potential or actual competition breaches.

There was a “heightened sensitivity” in financial services sector, Kar added, noting that the presence of “lots and lots” of compliance professionals also changes the situation.

She also said it was debatable whether some finance sector initiatives “were constructed in a way that took account of competition law considerations from the early stages”.

“Some of the initiatives that we have seen haven’t necessarily factored in competition law advice right from the beginning. I’m not saying every initiative can be pursued, particularly in concentrated sectors, but we do a lot of work structuring initiatives at the beginning so that they are as compliant with competition law as they can be.”

Competition authorities in Europe, including in the UK, Netherlands and the EU itself, have provided detailed guidance on their views of climate collaborations.

Such guidance is unlikely in the US at a federal level, Kar said. The Federal Trade Commission (FTC) or Department of Justice would be the best source, but the FTC is battling a number of other issues at the moment, so climate is unlikely to be at the top of its list.

While many companies on both sides of the Atlantic are still deterred from collaborating by legal concerns, the survey suggested that there is still a high desire to do so, with 82 percent of respondents saying it is important to work with peers.

Kar said that the number of firms discouraged from collaborating by competition law had not changed as much as she expected since Linklaters ran the survey in 2020.

“We’re called in to sit in meetings to think about term sheets or structure arrangements – and whether it’s competition law fears or something else lingering behind it’s not always clear, but competition law is cited in those initiatives very, very often as being a barrier to parties collaborating”.