A PYMNTS Company

When Climate Collaboration Is Treated as an Antitrust Violation

 |  November 4, 2022

By: Matteo Gasparini, Knut Haanaes & Peter Tufano (Harvard Business Review)

What do Covid-19, the Russian invasion of Ukraine, and the climate crisis have in common? All three challenge our sense of safety and illuminate the interconnected nature of the modern world. Each also calls for a reconsideration of boundaries between government and business, and the appropriate balance between competition and cooperation in business — and in antitrust law. In some jurisdictions, antitrust authorities see climate cooperation as a means to support greener economies; elsewhere, their counterparts see them as a violation of antitrust law that must be stopped.  

Pandemics, invasions, and carbon emissions have effects that spill over national borders. These “wicked” problems are caused by, and in-turn produce, complex webs of interacting forces. Their solutions, therefore, require collaboration across national borders and sectors. Society has considerable experience in cross-national coordination through multi-lateral organizations, treaty negotiations, and more. We encourage cross-sectoral cooperation between business and government, as well as between academia and government. We generally believe that these collaborations make a material difference in addressing broad systemic issues. 

While our societies are comfortable with these collaborations, we generally have institutionalized prohibitions on cooperation amongst rivals through antitrust laws. Introductory economics teaches that a monopolist will set prices to maximize their profits, raising prices and lowering quantities relative to a competitive outcome, and thereby transferring wealth from consumers to producers. And even when there is no single monopoly, if companies are allowed to collude together they can collectively act as if they were one. That’s why, throughout history, laws have banned companies from acting collectively to restrain trade. This principle is enshrined in the antitrust laws of all major jurisdictions, prohibiting agreements between firms that lead to higher prices, lower output, lower quality, or less innovation. 

There are legitimate reasons to ban collusion, yet collaboration is needed to battle climate change. A recent BCG study argued that to achieve sustainability, “companies must act aggressively — and collectively — to transform their ecosystems.” The same study noted that collaborations in sectors ranging from sustainable apparel to sustainable agriculture have produced some concrete outcomes. Our own research has identified more than 150 business climate collaborations ranging from common carbon accounting frameworks and principles for responsible investments to shared net zero objectives…