Brazilian anti-trust probe sets ‘dangerous precedent’ for corporate sustainability alliances, say experts
Competition lawyers say investigation into soy moratorium suggests US anti-trust playbook is spreading
Concerns are mounting that the use of anti-trust law to clamp down on the private sector’s sustainability efforts is spreading beyond the US.
Brazil’s competition authority, CADE, sought earlier this month to suspend a long-standing pact among companies not to buy soybeans from deforested land in the Amazon rainforest.
Signatories to the Soy Moratorium, which dates back to 2006, include major trade associations and dozens of companies, such as Cargill, Cofco, Bunge and Louis Dreyfus.
But, after complaints by government committees and industry, CADE suspended the initiative and began an investigation into whether it constitutes “an anticompetitive agreement among competitors, which harms soy exports”.
The concerns centre on whether the Soy Moratorium functions as a buyers’ cartel, enabling big companies to issue joint ultimatums to suppliers about the terms on which they will purchase their goods.
On Tuesday, a federal court told CADE that its “immediate dismantling” of the Soy Moratorium was not legitimate, describing the behaviour as “monocratic”, “disproportionate” and “premature”.
But the saga has alarmed some legal experts, who worry it may be a sign of things to come.
Simon Holmes, a competition lawyer of 30 years and co-chair of the International Chamber of Commerce’s sustainability and competition taskforce, says competition law has always been a source of anxiety for firms when it comes to sustainability collaborations.
“It’s not that [successful] complaints have been brought,” he says. “It’s that companies have a fear, usually unjustified, that they might get into trouble.”
In many jurisdictions, including the UK, EU, China, Japan, Australia and South Korea, competition authorities have issued guidance to reassure firms that they can work together to further sustainability goals in most instances.
That’s not the case in the US, though.
“Not only have they not [provided] any such comforting guidance, but Republican states are actively going in the opposite direction,” says Holmes, “using these laws in a politically motivated way against [sustainability] initiatives”.
He’s referring to allegations by some US lawmakers that the world’s biggest climate collaborations flout national antitrust rules.
The accusations have prompted an exodus from finance-sector coalitions over the past two years: just this week, the UN-backed Net Zero Banking Alliance opened a vote on whether it should sidestep the attacks by getting rid of all its members and becoming simply a provider of guidance.
The Net Zero Insurance Alliance was disbanded completely last year, after its members were issued with legal warnings over their involvement; and the investor equivalent is currently suspended while it works out what to do about similar threats.
While the clampdown in the US centres on concerns that financial institutions will act in concert to stop financing the fossil fuel industry, Florida’s attorney general recently used the similar legal arguments to go after the Science Based Targets initiative and CDP – neither of which have members.
Although it’s unclear whether CADE’s investigation in Brazil is being conducted on similar political grounds, anti-trust lawyer Maurits Dolmans says it “clearly isn’t excludable”.
“Since the basis of the investigation is legally and economically wrong, the only other explanations are either that they’re badly advised, it’s political, or there are hidden facts not mentioned in the file,” he tells REP.
Dolmans adds that CADE’s attempt to suspend the Soy Moratorium and question its legitimacy sets “a dangerous precedent” for similar initiatives elsewhere in the world.
CADE did not respond to a request for comment.