On August 1, 2025, the U.S. District Court for the Eastern District of Texas denied a motion to dismiss federal antitrust claims against three large asset managers for allegedly conspiring to influence the companies in their portfolios to reduce the output of coal. The asset managers, BlackRock, Inc., State Street Corporation, and The Vanguard Group, Inc., were sued by a coalition of states led by Texas alleging that the asset managers – who were members of the NetZero Alliance – engaged in a coordinated effort to acquire significant holdings of stock in coal companies and use their stakes to pressure those companies to decrease coal production to meet greenhouse gas emissions reduction targets. Notably, as discussed in our May 2025 Advisory, the Federal Trade Commission and Department of Justice filed a Statement of Interest supporting the states' antitrust claims.
Although the case involves alleged collusion regarding environmental, social, and governance (ESG) efforts, the decision has broader implications for institutional investors. According to the court, horizontal shareholding – the practice of acquiring interests (usually through stock) in two or more firms operating in the same industry – may give rise to antitrust claims.
In a bid to dismiss the states' claim under the Clayton Act — which prohibits the acquisition of stock where the effect is substantially to lessen competition — the asset managers invoked the statute's safe harbor provision, which shields passive investors from antitrust liability. They argued that they had acquired the stock only for investment purposes and that the stock was not used to bring about a substantial lessening of competition.
The court ruled that the complaint had sufficiently alleged that the asset managers acquired stock of competing coal companies and used that stock to cast proxy votes to promote greenhouse gas emission reduction targets, and that the conduct resulted in the lessening of competition and a reduction of coal outputs. The court rejected the safe harbor argument, reasoning that the Clayton Act makes no allowances for institutional investors who substantially lessen competition through their proxy voting or through active engagement with their portfolio companies.
The states' claim under the Sherman Act — which prohibits agreements that restrain competition — was also allowed to proceed. The court concluded that although mere membership in an organization (the NetZero Alliance) does not turn the defendants into members of an antitrust conspiracy, the complaint plausibly alleged a conspiracy through the defendants' parallel conduct. The court cited to the defendants' actions: confirming their output reduction pledges publicly and engaging in campaigns to influence their portfolio companies to meet emissions reduction goals.
The court's ruling in this case makes clear that institutional investors may face antitrust risks when they own interests in competing companies in the same industry and use their interests — through proxy voting or direct advocacy — to promote certain policies (such as lowering greenhouse gas emissions) or otherwise influence the direction of those companies. Relatedly, and discussed in a July 2023 article authored by Arnold & Porter attorneys, institutional investors considering efforts to encourage companies to achieve ESG goals need to consider whether their acquisitions of stock are exempt from the Hart-Scott-Rodino Act under the "investment only" exemption.
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