When the Trump administration announced a Department of Justice antitrust investigation of four car manufacturers – Ford, Honda, BMW, and Volkswagen – for cutting a legal compromise deal with California to produce cleaner cars, it rattled the auto industry. It also rattled White House priorities – most notably, supporting the fossil fuel industry – resulting in this cynical abuse of antitrust authority.
The voluntary agreement by these companies and California was great news for anyone interested in spending less money at the pump, breathing cleaner air, or combating climate change – but it was also a smart business move.
The automakers agreed to improve fuel economy by 3.7% annually from 2020-2026 after the Trump administration proposed freezing federal standards at 2020 levels and revoking California’s nearly 50-year old authority to set its own emission standards, as well as the 17 states who have aligned their standards with California’s. These states collectively compose 35% of U.S. vehicle sales, meaning Trump’s freeze would fragment the nation’s auto market, increasing costs for automakers.
The administration’s regulatory rollback is certain to be fiercely contested in courts for years. By signing on, the four automakers hope to avoid these disturbances to rules and market access for their products. States and federal government have the authority to work with partners and design voluntary initiatives to protect the health and safety of its citizens, and have been doing so for decades. Anti-trust laws are designed to prevent companies from fixing prices or supply, and there is no evidence that the four automakers have done anything other than seeking legal certainty with emissions standards compliance.
Automakers have cooperated with each other and government agencies for decades
Precedent exists for voluntary agreements between California or the U.S. Environmental Protection Agency and car manufacturers. In the late 1990’s, California repealed Zero Emissions Vehicle regulations and instead implemented bi-lateral, voluntary agreements with individual automakers. Similarly, in 1998 EPA worked with states and car manufacturers to implement a voluntary National Low Emitting Vehicles program across the nation.
Voluntary agreements with industry aren’t limited to Democratic administrations: The 2004 Smart Way Transport program was developed and led by my office at EPA under President George W. Bush. The voluntary market-based public-private partnership was developed between EPA and 15 companies (including Coca Cola Enterprises, CSX, FedEx, The Home Depot, Nike, Schneider, Yellow Roadway, and UPS) with the support of the American Trucking Association.
The Smart Way Transport program aimed to improve the freight sector’s energy and environmental efficiency by accelerating adoption of advanced technologies and operational strategies that reduce fuel consumption – cutting emissions and saving fleets money. The program now includes over 3,700 shippers and carriers of truck and rail freight, has saved $33.4 billion in fuel costs, and has prevented 119 million tons of air pollution. It has been adopted in Europe, China, and South America, and curiously none of the participating companies have ever faced DOJ anti-trust action.
All of these voluntary programs are a win-win for stakeholders that do not collude or violate antitrust laws. In my 32 years of experience at EPA, under five different presidents, the government has never punished companies interested in reducing or removing pollutants from their products and saving money. In fact, the Republicans were always strong advocates of such voluntary initiatives, in place of mandatory regulations.
The California-automaker agreement isn’t antitrust, it’s anti-Trump
So why is Trump’s administration using the DOJ’s antitrust authority to bully these companies now? It’s simple: The White House knows this deal is a threat to their deregulatory agenda.
If car manufacturers join California and the 17 states aligned with it, they help win lawsuits to safeguard stronger fuel standards and California’s authority to set emissions standards that are stronger than those set by the federal government. That state authority is enshrined in the Clean Air Act of 1970 which chartered the Nixon-created EPA to dramatically reduce pollution in the U.S. over nearly 50 years. And, Republicans historically prioritized the authority of states to do what is right for their populace.
Back in November 2016, days after the election, car companies did in fact ask Trump to weaken Obama-era fuel economy standards. But the White House didn’t respond with a revision of existing rules, but with a radical gutting of fuel economy regulations and greenhouse gas reductions. Further, the administration decided to attack California’s unique authority to set stronger emission standards.
The Trump administration’s proposal was so far-reaching that virtually every stakeholder from 17 major car companies, to the United Auto Workers, to third-party automotive suppliers, to cities and states publicly opposed it citing threats to U.S. vehicle manufacturing competitiveness and legal uncertainties in planning. Even the Trump administration’s own analysis predicted the rollback would cost Americans 60,000 jobs.
All of these stakeholders know that major auto markets like China, Europe, and Japan are demanding cars with increasingly higher fuel economy standards and lower pollution. Domestic automakers already need to invest in advanced technologies like electrification to succeed in the intensely competitive global marketplace; rolling back existing standards will only amplify this need.
U.S. consumers would also feel the financial impact of worse fuel economy when purchasing new cars. According to Energy Innovation analysis, the administration’s proposed rollback of Obama-era clean car standards will cost consumers $400 billion by 2050.
Big Oil is the only winner from Trump’s clean cars rollback
The only group that would benefit from the fuel economy standards freeze is Big Oil, whose primary concern is getting Americans to buy as much gasoline and diesel as possible. For them, the Trump proposal, which will increase U.S. gasoline consumption 7.6 billion barrels by 2035 and GHG emissions 10% by 2050, is a pretty sweet deal.
Aside from a give-away to fossil fuel industry – and possibly an obsession to destroy Obama-era accomplishments – DOJ’s investigation shows the weakness of the administration’s position. Four companies are now effectively siding with California and the states aligned with it. Other companies signing on would further strengthen California’s position in the legal challenges of the upcoming final fuel economy and GHG rule.
In short, the Trump administration has created a witch hunt with the aim of undermining the California deal and scaring other companies off from joining the deal. And we know Trump does not like losing.
Of all Trump’s efforts to roll back protections, DOJ’s efforts to intimidate companies for doing the right thing is the most disturbing. Companies want to produce cleaner cars that help public health, reduce consumer costs, and help them invest in advanced technologies to compete in the global marketplace. This is voluntary corporate responsibility and it should be applauded, not investigated.
While the antitrust case will never go to court because California and the auto manufacturers have done nothing illegal, it could cause the original four companies to cave to these tactics, and cause others like GM, Toyota, and Mercedes (which was reportedly contemplating joining the other companies) to reconsider signing onto the agreement.
The planet is burning. Climate change is the most extraordinary issue facing humanity. The U.S. transportation sector now produces more GHG emissions than any other sector. Companies have a moral responsibility to be on the right side of this dark environmental history that the Trump administration is writing.
Ford, VW, Honda, and BMW – as well as California – deserve credit for helping our nation remain on the right side of history. Others who are considering joining the pact must not cave in to trumped up intimidation.