The DOJ and FTC have filed a statement of interest setting out their position that antitrust safe harbors for passive investment do not protect the use of commonly managed stock in competitors to encourage market-wide reductions in output.
The agencies filed the statement in a lawsuit brought last year by a coalition of U.S. states—led by the Texas Attorney General—alleging that institutional asset managers used their management of stock in competing coal companies to induce reductions in output, leading to higher consumer energy prices.
It is the first formal statement by the agencies in federal court on the antitrust implications of common shareholdings.
In it, the agencies explain that antitrust laws allow most index fund investing as well as shareholder advocacy for better corporate governance.
However, they distinguish such "ordinary activity" from the alleged "coordinated use of the power of horizontal shareholdings to distort output and prices in energy markets."
Discussing the statement, the head of the Antitrust Division also argues that "social justifications" (such as climate and carbon reduction goals) are not a defense to anticompetitive conduct. She warns that the DOJ will "not hesitate to stand up against powerful financial firms that use Americans' retirement savings to harm competition under the guise of ESG."
While the lawsuit is playing out in the context of a declared national energy emergency, it has broader implications for investment in other industries as well as industry actions premised on "social justifications." We will keep you updated.
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