The Federal Trade Commission is throwing its weight behind a high-profile federal lawsuit led by 12 Republican-led states accusing three of the world’s largest asset managers—BlackRock, State Street, and Vanguard—of artificially constricting the coal market in violation of U.S. antitrust laws, the Washington Free Beacon has learned.
The filing in the case is a remarkable move that represents the first time the Trump administration has waded directly into an issue or case related to environmental, social, and governance (ESG) policies. Led by powerful asset managers and banks, the ESG movement broadly calls for investors to pull money away from traditional energy industries, like coal and oil, and divert it to green energy industries in the fight against global warming.
“Competition in coal markets incentivizes companies to produce as much coal as the market demands,” the FTC stated in its Thursday brief. “Allowing the marketplace to freely determine the intersection of supply and demand is thus critical to America’s energy security and economic dynamism.”
“This case is about alleged anticompetitive conduct that increased energy prices for ordinary American consumers and businesses,” it continued.
The case dates back to November when Texas attorney general Ken Paxton filed a complaint alongside 11 other states, accusing defendants of violating century-old antitrust laws by collectively acquiring substantial ownership stakes in every major coal company in the country before using their newfound influence to pressure the industry to adopt climate goals like cutting coal output in half by 2030.
Paxton said those actions have contributed to rising electricity prices. Coal-fired power currently generates less than 15 percent of the nation’s total electricity, down from the 33 percent it generated a decade ago, according to federal data. In that same time period, the average price of electricity has steadily increased.
In its brief Thursday, filed in the District Court for the Eastern District of Texas, the FTC made clear its interest in protecting Americans from anticompetitive behavior that “reduces the production of domestic energy, raises energy prices for consumers and businesses, and undermines America’s energy dominance.”
The brief clarified that antitrust laws allow for passive fund investing and that the federal government does not intend to argue otherwise. The case, however, is about the coordinated use of the power to distort output and prices in energy markets, the commission wrote.
Paxton’s complaint alleged that BlackRock, State Street, and Vanguard ultimately deceived thousands of investors “who elected to invest in non-ESG funds to maximize their profits” but whose money was used to pursue ESG strategies.
“The President has declared a national energy emergency, and we need competition in coal production now more than ever to help fuel American energy dominance,” Abigail Slater, the assistant attorney general for the Justice Department’s antitrust division, said in a statement. “American consumers suffer when institutional asset managers use shareholdings in competing companies to orchestrate output reductions.”
Texas’s complaint accuses defendants of violating the Sherman Act and Clayton Act. Alabama, Arkansas, Indiana, Iowa, Kansas, Louisiana, Missouri, Montana, Nebraska, West Virginia, and Wyoming joined as plaintiffs.
“This is great news for the case and for the country because it helps validate the arguments that Ken Paxton’s office and the other states have been making,” Will Hild, the executive director of watchdog group Consumers Research and a prominent critic of ESG policies, said in an interview. “What I really hope to see coming out of this is these companies acknowledging that they messed up and figuring out how they’re going to make it right for American consumers in these states and then promising never to do it again,” he continued. “But I think the pressure is really building in a monumental way.”
BlackRock, State Street, and Vanguard did not immediately respond to requests for comment.
The court is expected to rule on the defendants’ motion to dismiss in the coming weeks. A hearing on the motion is slated for early June.
Critics of the ESG movement say it seeks to improperly boost politically favored green industries that aren’t profitable at the expense of more profitable energy industries. In doing so, they argue, ESG policies harm American investors—asset managers that have a legally-mandated fiduciary duty to promote the wellbeing of clients whose money they manage.
Citing those arguments, several GOP states like Texas and lawmakers have taken action to block ESG policies nationwide. “Woke corporations are collectively adopting and imposing progressive policy goals that American consumers do not want or do not need,” Rep. Jim Jordan (R., Ohio), the chairman of the House Judiciary Committee, said in 2022 after he launched a sweeping antitrust investigation into Wall Street over ESG.
ESG efforts proliferated on Wall Street in recent years, with major financial institutions, including the defendants in Texas’s case, joining large net zero coalitions designed to marshal initiatives pushing public companies to reduce their carbon emissions. And the Biden administration itself introduced ESG-related policies at the Securities and Exchange Commission and Department of Labor.
President Donald Trump’s electoral victory, however, dealt a crippling blow to the ESG movement and, as a result, Wall Street largely backtracked from its previous efforts. For example, the Net Zero Asset Managers Initiative, a high-profile international coalition whose membership included some of the world’s largest banks, suspended operations in January after BlackRock withdrew for unspecified legal reasons.
Texas referenced the Net Zero Asset Managers Initiative in its November lawsuit, alleging that it was used by defendants to push their ESG objectives.
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