Barak Orbach is Professor of Law at the University of Arizona James E. Rogers College of Law.
The COVID-19 pandemic created a race for the development of vaccines. On September 8, 2020, CEOs of nine major pharmaceutical companies signed a pledge promising not to file for regulatory approval or authorization of their experimental COVID-19 vaccines until their safety and efficacy are demonstrated through established scientific standards. Fearing that political pressures would compromise regulatory processes, the CEOs agreed to curb competition among their companies.
The companies’ commitments to “high ethical standards” and “sound scientific principles” are critically important to the success of public health policies and the long-term profitability of pharmaceutical companies. Agreements among competitors to defer competition, however, could be unlawful under U.S. antitrust laws and competition laws of other countries. Should the antitrust agencies investigate the nine companies and their CEOs? The devastating costs of the COVID-19 pandemic create powerful incentives to discount the virtues of antitrust enforcement.
The relationship between national emergencies and antitrust enforcement is an old antitrust theme that one of my recent papers examines. The United States partially suspended antitrust enforcement in three prior national crises: WWI, WWII, and the Great Depression. Approving the WWII suspension, President Franklin D. Roosevelt explained the rationale underlying the suspensions: “For unless [our effort to win the war] is successful, the antitrust laws, as indeed all American institutions, will become quite academic.”
Comment on the Proposed DOL Rule
More from: Brian Tomlinson, CECP
Brian Tomlinson is Director of Research, CEO Investor Forum at Chief Executives for Corporate Purpose (CECP). This post is based on a CECP comment letter submitted to the Department of Labor. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); Companies Should Maximize Shareholder Welfare Not Market Value by Oliver Hart and Luigi Zingales (discussed on the Forum here); and Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee by Max M. Schanzenbach and Robert H. Sitkoff (discussed on the Forum here).
Summary: The proposed rule is unnecessary and represents a confused understanding of ESG and its role in mainstream investment analysis. The rule overlooks and fails to address the volume of institutional investors (across segments and strategies) that are incorporating analysis of ESG issues into mainstream investment analysis, including buy, sell and hold decisions, upgrade and downgrade recommendations, and portfolio construction. The rule does not address the imperative of long-term value creation and the key insights ESG provides for assessing long-term corporate resilience.
The proposed rule demonstrates little awareness of the scale and seriousness of corporate America’s response to the long-term, ESG imperative, both at the issuer and industry-association level. Leading CEOs of corporate America want the capital markets to understand a corporation’s financial prospects and operational performance and acknowledge that this cannot happen without a meaningful understanding of an issuer’s financially material ESG issues and how those relate to and interact with long-term business strategy.
The proposed rule will impose direct costs on American retirees. The suggested “benefits” identified in the rule are unsubstantiated in the text of the rule and seem to rest on assertion only. At the same time, the rule seems likely to impose huge indirect costs on our capital markets by undermining innovation, discouraging the development of market-based solutions and the informed use of fiduciary discretion.
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