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Antitrust, ESG, and Supply Chain: Risks and Tips

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Recently, many companies have been taking a closer look at their supply chains to confirm that suppliers are meeting certain standards and complying with internal corporate social responsibility (“CSR”) policies as well as external environmental, social, and governance (“ESG”) objectives or goals. This examination is being driven by stricter regulation and increased pressure from shareholders, consumers, employees, and other stakeholders in the business.

Companies looking for ways to ensure their supply chains are environmentally and socially ethical often doubt whether they can effect change alone. Companies in certain industries may decide that a joint initiative can be more effective in developing industry-wide standards, and may determine that working together could be more efficient to meet these goals or objectives. However, such collaborations may raise antitrust risks, and many competition authorities are starting to increase scrutiny of these types of collaborations.  

Companies looking to engage in joint initiatives or projects to advance a more sustainable or ethical  supply chain should be conscious that certain conduct can create antitrust risks, and may result in anticompetitive conduct:

  • Ruse for cartel conduct. Competitors should not engage in sustainability agreements or collaborations that restrain trade. Companies should not enter into agreements to fix prices, allocate markets, rig bids, or limit output under the ruse of a pro-competitive justification to achieve a more sustainable or ethical supply chain.  
  • Information sharing. Exchanging sensitive business information with competitors to help assess supply chain issues can raise antitrust concerns. Companies should not engage in the exchange of commercially sensitive information, such as price, costs, production levels, business plans, or employee wages. Certain information exchanges could facilitate collusion and impede competition in that market.
  • Performing audits on supply chain vendors and sharing audit results. Sharing results of a supplier audit with competitors could potentially raise antitrust concerns because some business audits may include commercially sensitive information. Discussions among competitors regarding any commercially sensitive information contained in any audit results are prohibited, and any coordinated conduct based on those discussions could also raise antitrust concerns.
  • Implementing Mandatory Standards. Antitrust risk arises when there is joint collaboration on implementation of standards or mandatory practices, metrics, or norms. Companies should not enter into agreements to set mandatory standards; all standards must be voluntary and should not have the effect of blocking out competitors. Companies should always make independent decisions on whether and how to promote standards to address industry issues. Suppliers should be free to comply with or disregard these standards.
  • Group boycott or refusal to deal. Companies must not participate in a group boycott, such as by refusing to engage with certain suppliers because they fail to comply with certain metrics or standards. Companies should not make a collective decision to terminate supplier relationships, refuse to deal, or discriminate against suppliers who refuse to comply with voluntary standards.

Consult with counsel when setting standards or norms for suppliers, especially when collaborating with competitors in developing those standards.

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Author

Jeff Martino brings an in-depth understanding of a wide variety of white collar and fraud related matters to his antitrust litigation and investigations practice. Jeff is co-lead of the Firm's Global Cartel Task Force and represents multinational corporations and their boards and executives in high-stakes criminal and civil investigations by the US Department of Justice (DOJ) and other federal and state agencies Prior to joining Baker McKenzie, Jeff spent nearly two decades at the DOJ and his last 7 years as a senior leader in two different DOJ components. He has extensive experience as “first chair” on trials and investigations in the most complex areas of criminal antitrust. Jeff's work at the DOJ included providing technical assistance to competition agencies in Asia, Africa, the Americas and Europe and overseeing matters that included international corruption and antitrust cartel offenses that entangled the largest global banks and their key executives.

Author

Audrey van Duyn is an associate in Baker McKenzie's Antitrust & Competition Practice Group in New York. She advises clients on all aspects of antitrust law in connection with investigations by US and foreign competition authorities, follow-on civil actions, and compliance. Prior to joining the Firm, Audrey was a litigation associate at a large national law firm where she assisted with a variety of civil, criminal, and regulatory matters. During law school, Audrey interned for Judge Nicholas G. Garaufis of the US District Court for the Eastern District of New York and for Judge Paul G. Gardephe of the US District Court for the Southern District of New York. She worked as a research assistant for Professor Daniel J. Capra and focused on evidence and criminal procedure. She was also a member of the Fordham Moot Court and the Fordham Urban Law Journal.

Author

Natalie Flores is currently the regional knowledge attorney for North America and Latin America in the Global Antitrust & Competition Group in the Firm's Mexico City Office. She has over ten years of experience as an attorney, and manages and executes regional and global legal content projects, training and client initiatives for the Competition Group within the context of the Firm's knowledge strategy across the region. Natalie oversees all regional knowledge for the antitrust and competition group for the Americas, including develop thought leadership, client training, and publications, amongst other antitrust initiatives for the region, and advises a diverse range of industry clients in multijurisdictional competition matters. She has experience in competition litigation, specifically class action. She is an active member of the Firm's various industry groups, with a focus in the Energy, Mining & Infrastructure group of Baker McKenzie. Natalie is on the Board for Mujeres en Energías Renovables (Women in Renewable Energy) en México (MERM), an association dedicated to promoting the development of women in renewable energy, and concentrates on advocating for renewables and the empowerment of women in the sector.

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