EU-US antitrust culture clash pushes global businesses to shun climate collaboration

12 July 2024
By Andrew Boyce

A United Nations-led alliance between the world’s largest insurers and reinsurers was supposed to be one of the most prominent examples of a global industry teaming up to tackle the climate crisis. Instead, it is emblematic of how mixed messages by antitrust regulators are scaring off environment-friendly cooperation in the EU.

The Net Zero Insurance Alliance formed in 2021 with eight of the world’s biggest insurers and reinsurers making a “groundbreaking” commitment to cut emissions from their underwriting portfolios by 2050. At its peak, the alliance had about 30 members.

The agreement collapsed, but not because of competition concerns in Europe, where the EU regulator and those in member states have released guidelines to support companies wanting to cooperate on sustainability initiatives.

Instead, the insurers became unnerved by political pressure in the US, where Republican lawmakers and attorneys general have taken aim at a string of agreements based around environmental, social and governance goals, characterizing them as a “cartel” and sending out subpoenas for documents.

Antitrust enforcers from states run by Democrats have shown an inclination to support companies to team up. But federal enforcers warn that antitrust laws don’t permit them to turn a blind eye to coordinated effects or illegal mergers.

That may explain why, one year on from the European Commission’s landmark guidelines on “sustainability agreements,” the regulator is still receiving few, if any, contacts on specific initiatives.

EU climate

As climate crisis warnings grow, companies across sectors ranging from chemicals to packaging have come under pressure to cooperate to roll out clean technology or otherwise reduce their environmental impact.

Many have acknowledged that they are deterred by antitrust rules prohibiting competitors from teaming up to restrict competition.

In a bid to address this concern, many competition regulators in Europe have over the past couple of years published guidelines the circumstances in which companies can legally team up.

The EU antitrust regulator published guidelines in June 2023 that explained that most “sustainability agreements” were unlikely to break EU rules. Others, the commission said, could be approved so long as they benefited consumers.

In the UK, the Competition and Markets Authority published its own guidance in October. Its guidelines were particularly radical in that they said enforcers would take a “more permissive approach” when assessing agreements designed to tackle climate change, by potentially allowing cooperation that doesn’t benefit direct consumers, but is positive for UK customers more broadly. That was necessary due to the “exceptional nature” of climate change.

The European Commission — and national authorities in the EU — have adopted an “open door” policy, inviting companies to come forward with specific projects for advice on whether they can go ahead.

It may therefore come as a surprise that the commission is still not receiving requests for guidance.

One reason lies in how many projects are local and have instead been submitted to national authorities. For example, in 2022 the Dutch Authority for Consumers and Markets, or ACM, gave the green light to plans by oil and gas majors Shell and TotalEnergies to collaborate to store carbon dioxide in old gas fields.

The same year, the ACM approved plans by Coca-Cola and other soft-drink suppliers to collectively phase out plastic handles on multipacks, and by an association of hundreds of garden centers to cease selling plants from growers that used illegal pesticides.

Just last week, the Dutch watchdog said it had no issues with nine makers of coffee capsules working together on improving recycling for used products.

In Germany, the Bundeskartellamt approved plans by the plant industry to replace disposable plastic trays for the transporting of potted plants with reusable ones.

In the UK, the CMA cleared plans by the national branch of the World Wide Fund for Nature for rival supermarkets to team up to reduce the environmental impact of their supply chains.

The Belgian Competition Authority approved a plan by retailers to promote fair wages in the banana sector. And last week, the French competition regulator published its first decision, allowing cooperation in the animal nutrition industry.

But that doesn’t explain the lack of large cross-border initiatives that could have a game-changing impact when it comes to the climate crisis.

US uncertainty

That is largely down to uncertainty about how agreements would be viewed in the US. What is a green light from enforcers in the EU actually worth, if there’s a risk of the agreement getting caught up in subpoenas and document requests across the Atlantic?

The Federal Trade Commission and the Department of Justice haven't released any formal guidelines on how they would view sustainability cooperation agreements.

At a conference in April, FTC head Lina Khan said it was “not the job of the US antitrust enforcers to create exemptions to the US laws.”

“We've made clear that there is no ESG exemption to the antitrust laws,” Khan said. “If there's interest or desire in the business community for those types of rules or exemptions, [we] really encourage people to engage with Congress on that.”

Critics say this situation is putting off even non-controversial initiatives that would raise no problems in Europe, but might be viewed in America as restricting consumer choice.

At a state level, Republican lawmakers have taken issue with several agreements, alleging they amounted to “climate cartels” harming consumers and driving up energy prices. For example, they sent a letter to asset-management giant BlackRock raising concerns over coordinated conduct with other financial institutions on climate change and other “leftist” policies.

The insurance case

Their opposition to the Net Zero Insurance Alliance ultimately forced it to scale back to a looser arrangement.

The alliance saw insurers and reinsurers including Allianz, Axa, Generali and Munich Re collectively agree to cut the emissions from their underwriting portfolios to net zero by 2050. Each agreed to set “science-based” targets to reduce emissions every five years, and to report on them annually.

They also agreed to engage with clients with greenhouse gas-intensive activities on “decarbonization strategies” and to advocate for environment-friendly government policies.

The alliance came amid growing scrutiny of insurance companies over the climate impact of the activities they underwrite — as well as growing awareness of insurance companies’ ability to encourage sustainable practices.

All along, the alliance saw itself as compliant with competition rules. Its signatories said they would refrain from disclosing sensitive information with each other and would be “particularly careful in not reporting information that may negatively affect competition.”

“From the outset, the NZIA has been clear that it and its members will comply with applicable laws, rules and regulations, including antitrust,” the alliance said in a statement last year.

In a submission to the UK's CMA in 2021, the alliance said that uncertainty about how the agreement could be viewed by enforcers led it to take a “very conservative approach” when drafting its commitments.

In the US, Republican lawmakers took a different view, writing to the insurers to voice concerns about their “commitments to collaborate with other insurers and asset owners in order to advance an activist climate agenda.”

This, they said, had led to “serious detrimental effects” on consumers, including higher insurance costs and higher gasoline prices.

After an exodus of most of its members, the alliance was recast in April as the Forum for Insurance Transition to Net Zero — known as FIT — a looser arrangement designed to accelerate “voluntary” climate action by the insurance industry. Unlike the Net Zero Insurance Alliance, FIT doesn't include any target setting.

The insurance alliance is the most high-profile project that has failed to move forward because of the position of US authorities and the fear of politically driven investigations, but other potential team-ups have failed to get off the drawing board, MLex understands.

As long as that threat remains, it seems the guidance that European regulators have worked so hard to give will be of limited international use.

Additional reporting by Khushita Vasant.

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