Federal antitrust enforcers are now turning their attention to Wall Street’s biggest fund managers, raising concerns that their coordinated influence over fossil fuel producers may illegally suppress competition. The Justice Department and Federal Trade Commission have filed a landmark statement warning that when firms like BlackRock, Vanguard and State Street own shares in multiple competitors, it could cross the legal threshold for antitrust liability.
The case, originally brought by Texas Attorney General Ken Paxton and joined by other Republican-led states, centers on the idea of "common ownership", a rising worry in regulatory and academic circles. The lawsuit argues that these asset managers used their shareholder power to push climate-friendly agendas that led coal companies to limit production, artificially driving up prices.Also read:
Trump signs orders to expand coal power, invoking AI boom
Common ownership has long lingered on the regulatory fringe, but now it has been thrust into the legal spotlight. The FTC and DOJ explicitly state that reducing carbon emissions is no more a valid legal defense than price fixing among airlines. In their filing, regulators argue that if asset managers pressured coal firms to cut output to meet environmental goals, that could amount to illegal coordination.
The stakes are high. From 2020 to 2022, BlackRock, Vanguard and State Street collectively held between 8 and 34 per cent of all shares in publicly traded US coal companies, entities that together produce nearly half the nation’s coal. According to the DOJ and FTC, such overlap in ownership enables undue influence that could undermine healthy competition.
In response, the firms have denied any antitrust violation. Vanguard stated that the lawsuit "contorts the law in a way that will hurt individual investors." State Street called the state-level allegations baseless, adding that the federal government’s involvement doesn't change that assessment. BlackRock has repeatedly claimed its environmental actions are incidental and passive, not coercive.
Also read:
Bond market jitters: Weak demand raises US debt alarm
The court battle unfolds against the backdrop of a political realignment over environmental, social and governance (ESG) investing. Once a liberal cause, ESG has become a target for Republicans, especially with Trump-supporting coal states now mounting legal challenges. The lawsuit aligns with recent executive orders from President Trump aimed at reviving coal production and export.
The growing influence of large fund managers in corporate governance has fueled academic and political concern. Harvard Law professor Einer Elhauge, whose research underpins the DOJ's theory, said the case highlights how calls for emission cuts can morph into output reductions. His studies link common ownership in industries like airlines and banking with higher consumer prices.
Despite denials, asset managers have long been aware of the scrutiny. BlackRock has questioned the validity of academic claims and pulled out of the Net Zero Asset Managers Initiative in 2024. Vanguard left the group in 2022. Both actions hint at concern over legal liability and public perception.
While the DOJ and FTC insist they aren’t condemning all index investing or fund management, they are drawing a firm line. The warning is clear: when common ownership evolves into coordinated action, antitrust laws will come into play. This signals a new frontier in how financial markets are policed, especially when shareholder activism intersects with public policy.
Also read: Trump’s influence on the Federal Reserve: Risks and realities
Whether or not the states' lawsuit succeeds, the filing by federal regulators has opened the door to future antitrust cases rooted in environmental policy and shareholder influence. With Congress already probing the role of trade associations like the Net Zero Asset Managers group, the next chapter in the ESG debate may be written in court.
Common ownership refers to the practice of large institutional investors like BlackRock, Vanguard, and State Street holding significant shares in multiple competing companies within the same industry. Regulators warn that this could lead to reduced market competition, as these investors may influence business decisions in ways that violate antitrust laws.
The lawsuit claims that the asset managers used their influence to promote environmental, social, and governance (ESG) goals, specifically, pushing coal companies to lower emissions. According to regulators, if these climate policies resulted in reduced output, it could be viewed as anti-competitive behavior under US antitrust laws.
The DOJ and FTC argue that if asset managers coordinated shareholder actions across competing coal companies, such as voting on climate measures or influencing production decisions, it could amount to illegal collusion. This marks the first time federal enforcers have publicly endorsed this antitrust theory against common ownership.
This case may set a precedent for how far institutional investors can go in shaping corporate behavior through shareholder influence. While regulators clarify they are not targeting index investing, they signal that coordinated ESG actions influencing market output could face increased legal scrutiny moving forward.
