Are Antitrust Laws Standing in the Way of Climate Action? - Pacific Standard

Are Antitrust Laws Standing in the Way of Climate Action?

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Corporations could lead the fight against climate change, a new paper argues. But it’s starting to look like the government is standing in their way.

By Ben DeJarnette

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Teddy Roosevelt with trust-busting stick, circa 1904. (Image: Library of Congress/Wikimedia Commons)

The ascendance and continued political momentum of Bernie Sanders has thrilled liberals who long for a return to “trust-busting” — the practice of breaking up big companies (think JPMorgan Chase or Monsanto) that regulators have designated as anti-competitive monopolies.

Despite this yearning for Teddy Roosevelt-style progressivism, a recent paper published in the American Business Law Journal suggests that, in order to combat global climate change, the United States might need to consider weakening antitrust law — at least in certain cases.

The paper by Inara Scott, assistant professor specializing in business law at Oregon State University, argues that the Sherman Antitrust Act of 1890 makes it nearly impossible for corporations to collaborate on sustainability initiatives. Under the 126-year-old statute, price-fixing and other anti-competitive behaviors are strictly prohibited, regardless of the details of any particular case — and even if companies are collaborating in the public interest.

Of course, most economists would agree that the Sherman Act is a crucial safeguard against collusion by profit-hungry corporations. But Scott says its ironclad rules barring collusion also prevent collaboration between businesses looking to reduce their carbon footprint. If timber companies wanted to agree to a maximum annual timber cut — a policy that would inflate prices but help retain valuable carbon sinks—for example, they would be rebuffed by antitrust law. As a result, most companies don’t even try to collaborate, Scott says. “They’ve been trained to avoid anything that looks like an antitrust violation.”

The real question is whether Americans could swallow market interventions that, whatever their environmental benefits, also serve to protect the profit margins of multinational corporations.

But there are signs that some companies — even really big ones — would be eager to partner on sustainability efforts if the law allowed it. Scott points to the case of Procter & Gamble and Unilever, two multinational corporations that tried to work together in the late 2000s to release a more efficient laundry detergent. Concerned that consumers would balk at paying the same price for a product sold in smaller packaging, the two companies agreed to introduce the new product simultaneously and to fend off a price war by freezing prices and market share. Arguably, this agreement made it economically feasible for Unilever and Procter & Gamble to “go green.” But it also ran them afoul of antitrust law. When regulators in Europe learned of the scheme, they fined the companies more than 300 million euro.

“I think we have to look at the incentives in our economic system and ask what kind of behaviors they reward,” Scott says. “It’s absolutely true that companies are interested in profits and the bottom line. But there are also companies, both multinational and local, that are really trying hard to figure out how to become sustainable.”

Scott envisions an antitrust system that, instead of flatly prohibiting collaboration, would allow companies to seek permission from regulators on a case-by-case basis. With enough oversight and transparency, she says, this system could allow pro-sustainability collaboration without opening the floodgates for anti-competitive collusion. And that would be a big win for the environment.

“In the U.S., we have a heck of a time trying to address climate change through government,” Scott says. “But businesses have so much power. Maybe that’s something a lot of people don’t like, but the reality is that if Walmart gets together with Unilever and Procter & Gamble, they could have a really big impact on the world’s carbon footprint.”

Scott’s critique of antitrust law is rooted in a premise that would once have seemed heretical — that low prices are not always in the consumer’s best interest. Sure, she says, the low-price standard might have seemed logical a century ago, when natural resources appeared limitless and when “a stump was the symbol of our progress,” as Aldo Leopold famously said. In those days, carbon emissions and business’ other social costs scarcely received a second thought, and artificially high prices would have done nothing more than boost profits.

But a lot has changed since then. In today’s world, glaciers are melting, seas are rising, droughts are deepening, and climate change is threatening to unhinge the global economy. With these trends beginning to reveal the full social value of natural resources, Scott says it’s no longer clear that paying the lowest possible price for such goods is necessarily the best option.

“If we don’t price our goods correctly, they might go away,” she says, citing ecologist Garrett Hardin’s Tragedy of the Commons. “It’s important that we not get rid of antitrust law’s essential goal, which is to protect consumers, but that we start looking at it through a different lens.”

So what would it take to revise existing antitrust law? The short answer is: an awful lot. Technically, the courts could change their interpretation of antitrust law, but that would involve overturning more than a century of precedent. Similarly, Congress could pass an updated version of the Sherman Act, but amid the current surge of economic populism, it’s hard to imagine Democrats signing on to any law that carries even a whiff of corporate welfare.

That said, the notion of overriding free-market principles to promote social welfare is hardly a radical or new idea. After all, the federal minimum wage is essentially a fixed price on labor, and proposals to set price caps on life-saving drugs have enjoyed broad popular support.

The real question is whether Americans could swallow market interventions that, whatever their environmental benefits, also serve to protect the profit margins of multinational corporations. Undoubtedly, critics would argue that weaker antitrust laws would simply allow companies to raise prices behind the cover of “sustainability.” But Scott believes that most companies are genuine about wanting to slow the progress of global warming — and for good reason.

“Climate change is a really, really big problem,” she says, “so companies are really asking, is there going to be enough water for me to grow cotton to make my clothing? Is there going to be a market for me to sell my clothing to?

“Sustainability issues are profitability issues, so I think the altruism is tied up in the long-term health of these companies.”

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