I’m not well-versed in antitrust law – nor do I want to be – but this recent FTC/DOJ Statement of Interest from the antitrust lawsuit filed by the State of Texas against BlackRock, State Street and Vanguard bears on shareholder engagement, particularly in the wake of Corp Fin’s recent updated Schedule 13G/D CDIs that I blogged about a few months ago. This is the first time that the antitrust regulators have addressed the issue of investors influencing companies in the corporate governance arena through guidance.
Cooley’s Beth Sasfai notes that the central thrust of the statement says that while traditional investment behaviors – like voting on governance or engaging to improve board oversight, etc. – are lawful, collective action of institutional asset managers can become anticompetitive. When institutional asset managers use influence in coordination across firms for anticompetitive results, it can violate antitrust laws – even without direct communication between all parties if participation is a knowing acceptance of a coordinated plan.
In the statement, climate coalitions is used as an example of how coordination can cross the antitrust line if it suppresses competition. The statement makes clear ESG motives don’t create an exemption from competition law. The FTC and DOJ ultimately argue that the allegations in the complaint (i.e., that each defendant took concrete steps to engage with the management of competing coal companies to obtain their commitment to limit carbon emissions by restricting coal production) can support antitrust liability.
It’s also notable that recently in the Texas v. BlackRock litigation, Judge Kernodle largely denied defendant’s motions to dismiss and held that the states had stated viable antitrust claims under Section 7 of the Clayton Act, Section 1 of the Sherman Act, and certain state laws by alleging the asset managers pressured coal companies to reduce output as a result of alleged commitments to two climate change initiatives (i.e. the Net Zero Asset Managers initiative and Climate Action 100+).
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