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Businesses around the globe are examining their supply chains to check whether their suppliers meet certain standards and comply with internal corporate social responsibility (CSR) policies and environmental, social and governance (ESG) goals. This is fueled by stricter regulation and increasing pressure from shareholders, investors, consumers, employees and other stakeholders. In the EU, for instance, the recently adopted Corporate Sustainability Due Diligence Directive now requires large EU companies (>1,000 employees and a global turnover of >€450 million) and non-EU companies doing significant business in the EU (EU-wide turnover of >€450 million) to identify and address actual or potential adverse human rights and environmental impacts in their supply chains.
Companies seeking to ensure their supply chains meet these goals increasingly collaborate to attain these objectives more efficiently. This is particularly relevant as most legislation (such as the EU Corporate Sustainability Due Diligence Directive) promotes this cooperation (including among competitors) to reach the goals. Such joint initiatives and collaboration may raise antitrust risks, especially when involving competitors, and many antitrust authorities are closely monitoring and increasingly scrutinizing these types of collaborations.
When engaging in joint initiatives and projects to advance a more sustainable, ethical and ESG-sensitive supply chain, companies must be aware that certain conduct can raise antitrust risks and constitute anticompetitive behavior:
- Disguised cartel conduct: Competitors must not engage in collaborations and sustainability agreements that restrict competition. High antitrust risks are agreements to fix prices, allocate markets or customers, rig bids, boycott competitors or limit output under the pretext of a pro-competitive justification to achieve a more sustainable or ethical supply chain.
- Information sharing: Any joint initiative with competitors to help assess (or address) supply chain issues raises antitrust risks where this involves sharing sensitive business information. Competitors must not exchange commercially sensitive information, including price, costs, production or capacity levels, business plans and strategy, employee wages, etc. Extra attention is warranted when competitors are active in concentrated markets where information exchanges have a higher potential to facilitate collusion and negatively affect competition in the market.
- Supply chain audits: Sharing results of a supplier audit with competitors can potentially raise antitrust concerns because some business audits may include commercially sensitive information. Discussions among competitors regarding any commercially sensitive information contained in audit results are prohibited, and any coordinated conduct based on those discussions could also raise antitrust concerns. Measures to mitigate antitrust risk include outsourcing or clean team arrangements with the appropriate non-disclosure and confidentiality safeguards.
- Businesses spend significant resources to manage global supply chain compliance requirements and assess whether their suppliers meet certain sustainability standards and other CSR and ESG goals
- Companies increasingly collaborate to meet these objectives efficiently
- Joint initiatives with competitors may raise antitrust risk; antitrust authorities worldwide monitor and scrutinize such collaboration
- Companies must be vigilant before engaging in joint initiatives and projects with competitors