As consumer and investor engagement continues to rise, there is intense pressure on companies to ramp up their corporate social responsibility (CSR) efforts. Being a good corporate citizen is no longer an option but a necessity in order to stay in business. As a result of this increased pressure, there has been an influx of CSR collaborations among competitors—some initiated by governments and NGOs, and others established by industry participants themselves. In each case, generally, the goal is to do good and promote various CSR goals ranging from environmental, health and safety, and labor.

That said, an effort to be socially responsible can still run afoul of the antitrust laws. For example, an industry agreement to improve the quality of life for animals may be alleged to increase prices or reduce output. Re Processed Egg Prod. Antitrust Litig., 851 F. Supp. 2d 867, 877 (E.D. Pa. 2012)). Similarly, an industry agreement to lower air emissions may be accused of raising prices or choice for consumers. Ben Foldy and Brent Kendall, Justice Department Issues Civil Subpoenas to Auto Makers in California Emissions Pact Probe, Wall Street J. (Nov. 7, 2019)). But companies that want to do good should not fret completely. There are still several options to consider that are well within the bounds of the antitrust laws.

Avoid an Agreement

Companies are often asked to enter into industry-wide agreements that are viewed as socially responsible. Under §1 of the U.S. Sherman Act, companies are prohibited from entering into any agreements which unreasonably restrain trade (15 U.S.C. §1.). The first step in establishing a §1 claim is proof of an agreement. Policies, standards, certifications or codes of conduct that are set and administered by groups of private firms, trade associations or other non-profit organizations can create antitrust risk if the industry as a whole agrees to adopt them. By contrast, it is very low risk for a company to unilaterally adopt a set of standards, particularly if they are created by groups that include non-competitors. Without an agreement, plaintiffs and enforcers cannot prove collusion.

To avoid an agreement, industry participants must take care of their communications. Since agreements need not be formal or even explicit, companies should be careful about how they communicate their views on the standards to competitors. Industry participants should avoid making predictions about whether their company will join, and particularly about whether their company's participation is contingent on others joining. The industry group should also consider documenting a written policy prohibiting members from making any agreements and requiring that all actions be taken voluntarily and unilaterally.

Of course, some CSR initiatives may require the participation of most or all industry participants to ensure that standards are similar for customers or to prevent free riding. In these cases, acting unilaterally may not be enough. But there are still two potential fall-backs for companies in these circumstances.

Advocate for Governmental Action

If industry-wide agreement is needed for a CSR initiative to succeed, companies may consider adopting it through government regulation. If done in this way, the antitrust risk is limited. Under the Noerr-Pennington doctrine, any efforts—whether joint or unilateral—to petition the government are immune from antitrust liability. United Mine Workers v. Pennington, 381 U.S. 657, 669 (1965); Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 137, 136-37 (1961). In addition, under the state action doctrine, regulation by state actors—even state boards dominated by industry participants—are generally not subject to antitrust scrutiny. Parker v. Brown, 317 U.S. 341, 351 (1943). Companies may therefore want to consider industry-wide lobbying efforts as a means of achieving their CSR goals.

Using government regulation to provide antitrust cover, however, comes with a cost: the loss of control. A regulator may choose standards that are not ideal for the industry, and may not be flexible about modifying them if experience teaches that they should be modified. Particularly in the context of CSR, government regulators may have political motivations that go against the industry's broader CSR goals. Importantly, unlike voluntary standards, companies cannot opt out of state-enforced regulations. Once they are set, they must be followed no matter what the cost is to the company or industry as a whole.

Limit Impact on Competition

The antitrust laws do not prohibit all agreements among competitors but only those which unreasonably restrain trade. A third way to avoid antitrust risk is to adopt CSR standards that have limited impact on competition, or can be shown to be on balance beneficial for consumers. Certain activities are deemed so inherently anticompetitive that they are viewed as presumptively unreasonable and "per se" unlawful. Northern Pacific R. Co. v. United States, 356 U.S. 1, 5 (1958). These include price fixing, market allocation, and output reduction. Companies should steer clear of any agreements that could be viewed as "per se" illegal. Michael Bloom, Doing good well, Fed'l Trade Comm'n (Oct. 20, 2015). Short of that, however, courts will generally permit agreements that are on balance more pro-competitive than anti-competitive, thereby satisfying the so-called "rule of reason." To that end, agreements where there is limited impact on pricing and output are safer. For example, an agreement not to use sweatshops for manufacturing would likely not be challenged by the government, given that labor typically accounts for a very low percentage of the retail price of clothing made in domestic sweatshops and garments sewn abroad. Business Review Letter from Joel I. Klein, Assistant Attorney General, U.S. Dep't of Justice, Antitrust Div., to Kenneth A. Letzler and Richard M. Lucas (April 7, 2000). Likewise, regulators will not prosecute CSR arrangements if they can be shown to provide useful information to consumers and provide options to them. Staff Advisory Opinion Letter from Alden F. Abbott, Assoc. Dir. of the Bureau of Competition, Fed. Trade Comm'n, to Roxann E. Henry and Jacqueline I. Grise (April 4, 2007). CSR collaborations are also less risky if they can be shown to result in some material cost savings for consumers (Business Review Letter from Thomas O. Barnett, Assistant Attorney General, U.S. Dep't of Justice, Antitrust Div., to Robert M. Langer, Phillip H. Rudolph, and Suzanne E. Wachsstock (June 19, 2006)) or greater output (Business Review Letter from Joel I. Klein, Assistant Attorney General, U.S. Dep't of Justice, Antitrust Div., to Bruce M. Hull (Feb. 29, 2000)). Furthermore, CSR standards and certifications, even if agreed upon by industry participants, are less risky if they are applied non-discriminately and do not exclude a certain competitor or group of competitors. Allied Tube & Conduit v. Indian Head, 486 U.S. 492, 501 (1988); see also Business Review Letter from Sharis A. Pozen, Acting Assistant Attorney General, U.S. Dep't of Justice, Antitrust Div., to Donald I. Baker (Dec. 16, 2011). Finally, companies should ensure that their standards and collaborations avoid the exchange of competitively sensitive information among competitors, something which could be viewed as facilitating a price-fixing agreement. Staff Advisory Opinion Letter from Michael Bloom, Assistant Dir. for Policy & Coordination, Bureau of Competition, Fed. Trade Comm'n, to Eugene A. Guilford, Jr. (July 2, 2012). Note, however, that altruistic motives alone cannot justify a trade practice under the antitrust laws—rather, to the extent a defendant seeks to raise social or policy considerations, they must be linked to an impact on competition. In National Society of Professional Engineers v. United States, 435 U.S. 679, 695 (1978); United States v. Brown Univ., 5 F.3d 658, 669 (3d Cir. 1993).

Conclusion

As the FTC has cautioned, "[p]roposed collective actions by competitors, even for the purpose of promoting laudable social welfare goals, are proper matters of antitrust concern." Bloom, supra. Antitrust laws are not a roadblock to social good, but companies seeking to collaborate on social responsibility initiatives should be aware of the potential antitrust risks involved. Ideally, all action should be taken unilaterally. But where coordination is required, companies should consider promoting CSR goals through government regulation and/or through actions which have minimal impact on competition.

John Roberti is the partner in charge of Allen & Overy's Washington, D.C. antitrust practice and a member of the firm's investigations and litigation practice. Puja Patel is an associate in the antitrust practice group in New York.