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US authorities have, for the first time, warned that institutional investors could breach federal antitrust laws if they use their holdings in competing companies to influence corporate strategy in ways that reduce competition.
The Department of Justice and the Federal Trade Commission on Thursday filed a brief in a Texas court arguing that US antitrust statutes do not protect the use of “commonly managed stock” in competing companies to distort market output and prices.
The authorities took the position in a case filed last year by Texas and other US states against BlackRock, State Street and Vanguard, alleging they illegally conspired to manipulate energy markets by pushing to slash coal production as part of their “green energy” policies.
“American consumers suffer when institutional asset managers use shareholdings in competing companies to orchestrate output reductions,” said Gail Slater, head of the DoJ’s antitrust division.
“We will not hesitate to stand up against powerful financial firms that use Americans’ retirement savings to harm competition under the guise of [environmental, social and governance framework].”
Concerns around common investor ownership of rival companies have been raised before, including during the Biden administration. But officials appointed by US President Donald Trump, who have embraced a tough antitrust approach, are now raising the issue to challenge “green” measures.
When announcing the filing on Thursday, Slater and Andrew Ferguson, the FTC chair, mentioned Trump’s push to boost domestic coal production.
“These companies allegedly blocked the production of American coal in the name of climate change scaremongering, all so they could take money out of the pockets of American consumers and put it in theirs,” said Ferguson.
State Street characterised the lawsuit as baseless and said the new filing from the DoJ and FTC did not change its view.
“State Street Global Advisors acts in the long-term financial interests of investors with a focus on enhancing shareholder value,” the company said.
Vanguard added that the suit brought by Texas “contorts the law in a way that will hurt individual investors”.
BlackRock said the case was attempting to rewrite antitrust law and was based on “an absurd theory that coal companies conspired with their shareholders to reduce coal production”.
The Investment Company Institute, a trade group representing asset managers, said in a statement it was “very troubled” by the filing.
“We’d remind [the DoJ and FTC] that asset managers do not own the underlying assets they invest in, and they acquire those assets for the ordinary investment exposures they provide,” it added. “Asset managers manage these assets on behalf of 120mn American retail investors and are legally required to manage them in those investors’ best interest.”
Coal production has been in decline since 2008, according to data from the US Energy Information Administration, long before the three investment behemoths embarked on an effort to reduce greenhouse gas emissions. Over the past two decades, many utilities have switched to natural gas and renewables including solar and wind production.
https://www.ft.com/content/e09daf44-d3db-4a94-b607-7c6d866780b6
