Antitrust and Socially Responsible Collaboration: A Chilling Combination?

• DOI: http://doi.org/10.1111/ablj.12073
• Author: Inara Scott
• Date: 01 March 2016
• Published date: 01 March 2016

Antitrust and Socially Responsible

Collaboration: A Chilling

Combination?

Inara Scott*

INTRODUCTION

A review of recent literature in the field of sustainable and socially

responsible business practices reveals that companies are increasingly

considering collaboration as a means of solving intractable global prob-

lems.

1

Business entities concerned about human rights and labor prac-

tices are collaborating with other businesses, government agencies, and

nongovernmental organizations (NGOs) on certifications and standards

at shared factories and facilities.

2

To save costs and reduce

*Assistant Professor, College of Business, Oregon State University. The author wishes to

thank Joel Reschly for his invaluable research assistance.

1

See, e.g., ANDREW S. WINSTON,THE BIG PIVOT:RADICALLY PRACTICAL STRATEGIES FOR A HOT-

TER,SCARCER,AND MORE OPEN WORLD 11, 211–26 (2014) (discussing a need for new prac-

tices, including increasing collaboration, in order to address key business concerns); Ram

Nidumolu et al., The Collaboration Imperative,H

ARV.BUS.REV., Apr. 2014, at 77 (analyzing the

most effective models for sustainability collaborations); Simon Mainwaring, Why Business Col-

laboration Is Necessary in a Socially Sustainable World,M

ASHABLE (June 9, 2011), http://www.

mashable.com/2011/06/09/business-collaboration-sustainability/; Mari€

ette M. Van Huijstee

et al., Partnerships for Sustainable Development: A Review of Current Literature,4E

NVTL.SCI.75,

75 (2007) (reviewing literature and defining partnership as collaborations between actors

from “two or more spheres of society (state, market and civil society)”); see generally ERIC

LOWITT,THE COLLABORATION ECONOMY:HOW TO MEET BUSINESS,SOCIAL,AND ENVIRONMENTAL

NEEDS AND GAIN COMPETITIVE ADVANTAGE 1–2, 5–7 (2013) (describing the need to transition to

an economy built on collaboration across sectors and businesses).

2

One example is the Fair Factories Clearinghouse, a nonprofit organization that helps

businesses utilizing common factories to share audits and other information, and imple-

ment corrective action. See The FFC Mission, FAIR FACTORIES CLEARINGHOUSE, http://www.

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American Business Law Journal V

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Volume 53, Issue 1, 97–144, Spring 2016

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environmental impacts, the most ardent of competitors have agreed to

share facilities and other assets, like less than full delivery trucks,

3

as

well as engage in joint research and development.

4

Competitors in

resource-intensive commodity markets, including those in the coffee

and lumber industries, have collaborated on environmental certification

standards for production and even have engaged in harvest share

agreements to reduce overharvest and waste.

5

fairfactories.org/Home/Our-Vision-Mission (last visited Sept. 28, 2015); Major Apparel

Brands and Manufacturers Aim to Advance Global Factory Conditions Using New Collaborative

Approach to Compliance Audits,B

US.WIRE (June 19, 2012, 09:17 AM), http://www.business-

wire. com/news/home/20120619006040/en/Major-Apparel-Brands-Manufacturers-Aim-Advance-

Global. Another approach is for businesses to seek certification under common standards

such as the SA-8000 or the ISO 14000, or to adopt voluntary industry standards. See MARC

J. EPSTEIN,MAKING SUSTAINABILITY WORK:BEST PRACTICES IN MANAGING AND MEASURING COR-

PORATE SOCIAL,ENVIRONMENTAL,AND ECONOMIC IMPACTS 72–78 (2008); see also Mark Anner,

Corporate Social Responsibility and Freedom of Association Rights: The Precarious Quest for Legiti-

macy and Control in Global Supply Chains,40P

OL.&SOC’Y609, 609 (2012) (arguing that cor-

porate governance programs influenced by corporations are more likely to consider wage

and hour violations, and less likely to emphasize workers’ rights to organize); Adelle Black-

ett, Global Governance, Legal Pluralism and the Decentered State: A Labor Law Critique of Codes

of Corporate Conduct,8I

ND.J.GLOBAL LEGAL STUD. 401, 413–17, nn.38–39 (2001) (describ-

ing coordinated efforts by multinational enterprises to monitor and enforce minimum

labor standards, including Social Accountability International’s SA-8000 code).

3

Nestl

e, PepsiCo, STEF, BABM and TRI-VIZOR were recently honored for creating a

mechanism to share space in less than full truck loads to retail distribution centers. In this

arrangement, TRI-VIZOR served as a neutral facilitator for the collaboration between

competitors. See Press Release, STEF, Nestl

e, PepsiCo, TRI-VIZOR, and BABM Win CO3

Award (July 15, 2014), http://www.stef.com/our-group/press-space/press-release/stef-nestle-

pepsico-tri-vizor-and-babm-win-co3-award/ (follow “Download PDF File” hyperlink); see

also Innovation,C

OLLABORATIVE CONCEPTS FOR CO-MODALITY, http://www.co3-project.eu/innova-

tion/ (last visited Sept. 28, 2015) (describing horizontal collaboration innovations).

4

Antitrust policy has historically recognized innovation as a policy goal and rarely prose-

cuted joint research and development projects. See Robert Pitofsky, Antitrust and Intellectual

Property: Unresolved Issues at the Heart of the New Economy,16B

ERKLEY TECH. L.J. 535, 544–

45 (2001) (arguing generally that intellectual property rights have been interpreted too

broadly, permitting anticompetitive restrictions on licensing). For a description of a variety

of joint research projects, see infra Part I.B.3.

5

For an in-depth discussion of the development of sustainability standards in coffee mar-

kets, see BENOIT DAVIRON &STEFANO PONTE,THE COFFEE PARADOX:GLOBAL MARKETS,COM-

MODITY TRADE AND THE ELUSIVE PROMISE OF DEVELOPMENT 164–203 (2005). For a description

of the Forest Stewardship Council, see infra note 36 and accompanying text. The problem

of conservation in fisheries and the use of market share divisions are discussed in Part

III.A.3.

98 Vol. 53 / American Business Law Journal

Section 1 of the Sherman Antitrust Act broadly prohibits “[e]very con-

tract, combination ... or conspiracy, in restraint of trade or commerce,”

6

leaving all of these collaborations potentially vulnerable to challenge.

7

However, the very breadth of this century-old statutory language has

forced courts to engage in an evolving analysis of what behavior should

and should not be prohibited.

8

Seemingly unambiguous language pro-

hibiting agreements among competitors may, in fact, not stand as a bar-

rier to certain types of arrangements.

9

The purpose of this article is to

determine the outer limits courts have placed upon such agreements

and to assess the potentially chilling effect of antitrust law on socially

responsible collaboration. Based on this analysis, this article seeks to

determine if statutory changes are needed to allow for the type of

socially responsible collaboration in which businesses are seeking to

6

15 U.S.C. § 1 (2012) [hereinafter Sherman Act].

7

A number of other statutory provisions potentially apply to business collaborations. Sec-

tion 2 of the Sherman Act applies to monopolization and attempted monopolization. See

15 U.S.C. § 2 (2012). The Clayton Act contains specific provisions relating to price discrim-

ination, exclusionary practices, and corporate mergers. See 15 U.S.C. §§ 12–13(a), 14, 18

(2012). The Federal Trade Commission Act prohibits “unfair methods of competition” as

well as “unfair or deceptive acts or practices.” 15 U.S.C. § 45 (2012). The scope of this arti-

cle, however, is explicitly limited to section 1 of the Sherman Act, which refers to restraints

on trade.

8

Decades of literature surround the interpretation of the Sherman Act’s broad prohibition

on restraints of trade. See, e.g., Richard A. Posner, The Chicago School of Antitrust Analysis,

127 U. PA.L.REV. 925, 925–45 (1979) (chronicling the development of the Chicago and

Harvard Schools of antitrust analysis and concluding that the approaches had largely con-

verged); William E. Kovacic & Carl Shapiro, Antitrust Policy: A Century of Economic and Legal

Thinking,14J.E

CON.PERSP. 43, 44–59 (2000) (surveying the “evolution of thinking about

competition since 1890 as reflected by major antitrust decisions and research in industrial

organization”).

9

See infra Part III.B (describing practices unlikely to raise antitrust concerns). The poten-

tial flexibility of antitrust law has led some to conclude that application of the Sherman Act

should not be an impediment to social and environmental collaboration. See, e.g., Sarah

Rackoff, Note, Room Enough for the Do-Gooders: Corporate Social Accountability and the Sherman

Act,80S.C

AL.L.REV. 1037, 1038 (2007) (arguing generally that “current antitrust law

provides sufficient space for companies to address social and environmental issues without

running afoul of the law”). But cf. Christine A. Varney, Antitrust Immunities,89O

R.L.REV.

775, 778 (2011) (“I would be hard-pressed to find a single example where a firm refrained

from clearly procompetitive unilateral or joint conduct because the antitrust laws apply.”).

In contrast, this article argues that per se prohibitions on price fixing, group boycotts, out-

put limitations, and market divisions do in fact have a chilling effect on potentially highly

beneficial socially responsible collaboration. See infra Part III.A.

2016 / Antitrust and Collaboration 99