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In December, asset management firms BlackRock, State Street and Vanguard were sued by a group of 12 Republican states, led by Texas, for allegedly breaking antitrust laws by reducing coal production and boosting electricity prices through their investments, in Texas et. al. v. BlackRock Inc., State Street Corp., and The Vanguard Group, the highest profile lawsuit yet against the beleaguered environmental, social and governance goals industry, seeking billions in damages.
Last week, the Federal Trade Commission and the Department of Justice filed a Statement of Interest in the multistate antitrust case against these asset management firms, which are the largest shareholders in all nine publicly listed U.S. coal companies, comprising half of U.S. coal output, according to the statement.
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The FTC and DOJ case, led by Texas Attorney General Ken Paxton, alleges that BlackRock, State Street, and Vanguard engaged in an anticompetitive conspiracy to drive down coal production as part of an industry-wide “Net Zero” initiative to further anti-coal ESG goals. The initiative is a coalition of top corporations who pledged to reach zero-carbon emissions by 2050.
In January, BlackRock quit Net Zero, after ongoing pushback against ESG investing following withdrawals from Morgan Stanley, Goldman Sachs and JP Morgan Chase. Shortly after, Net Zero suspended operations.
BlackRock, State Street, and Vanguard allegedly exercised their influence as shareholders in competing coal companies to push them to reduce industrywide coal output, according to the DOJ and FTC. “The multistate lawsuit alleges that these actions, along with the unlawful sharing of competitively sensitive information and other allegations, increased coal prices and forced American consumers to pay more for energy as part of an unlawful left-wing ideological scheme,” according to a statement from the FTC and DOJ.
“The President has declared a national energy emergency, and we need competition in coal production now more than ever,” said U.S. Assistant Attorney General Abigail A. Slater in a statement, referencing President Donald Trump’s Executive Orders, which declared a national energy emergency and called for an increase in domestic energy production, including coal.
President Trump “understands the importance of coal for our energy security and has vowed to fight left-wing ideologues who seek to make us weaker and poorer under the guise of ESG … the Federal Trade Commission carries out this administration’s mission to unleash American energy dominance, protect coal, and stop the left’s attempt to corrupt financial markets …,” said FTC Chairman Andrew Ferguson. “These companies allegedly blocked the production of American coal in the name of climate change scaremongering.”
In their joint statement, the FTC and DOJ urged the U.S. District Court for the Eastern District of Texas to reject the asset managers’ claims, citing multiple errors of law regarding the application of the nation’s federal antitrust laws to the actions of institutional shareholders in their role as common owners.
The Investment Company Institute, which represents investment fund companies, “is very troubled” by the statement of interest filed by the FTC and DOJ, according to a statement released last week.
“Fund investments are invaluable in providing capital formation for American coal, oil, and gas companies … billions of dollars are invested by asset managers today on behalf of their clients to make the US energy industry the best in the world both today and tomorrow, like President Trump wants, while giving American households a shot at the secure financial future that President Trump also wants them to have … The case the federal government is now weighing in on seeks to attack minority investors for decisions they believe are in the best interest of fund shareholders.”
Related: BlackRock, Vanguard, State Street sued by 11 GOP states, in ESG lawsuit
BlackRock has also released a statement, following the agencies’ filing: “The DOJ and FTC’s support for this baseless case undermines the Trump Administration’s goal of American energy independence … this case is trying to re-write antitrust law and is based on an absurd theory that coal companies conspired with their shareholders to reduce coal production. Forcing asset
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
