Judge in Texas moves forward with lawsuit against BlackRock, State Street, and Vanguard
In a significant development, a federal judge in Texas has allowed a multistate antitrust lawsuit to proceed against BlackRock, Vanguard Group, and State Street’s asset management branches. The lawsuit, led by Texas Attorney General Ken Paxton and joined by 11 other states, accuses these firms of engaging in anti-competitive behavior to manipulate the coal industry.
The allegations centre around the claim that these asset managers conspired to suppress U.S. coal production and drive up coal prices. The states argue that this collusion was achieved through the use of their large ownership stakes in major coal producers to collectively pressure companies to reduce output. This alleged activity is said to be part of their ESG (Environmental, Social, and Governance) investing initiatives.
While the judge denied most of the asset managers’ motions to dismiss the lawsuit, he noted that the states’ claims largely rely on circumstantial rather than direct evidence of a conspiracy. The companies deny any wrongdoing, asserting they are passive investors and denying collusion or conspiracy to restrain trade.
The case is the first significant antitrust action raising concerns about the impact of common ownership by large asset managers on competition in energy markets. The judge allowed the claims under federal antitrust laws and some state consumer protection statutes to proceed, but dismissed some state law claims.
The lawsuit alleges that collectively, BlackRock, Vanguard, and State Street hold significant shares (24–34%) in major U.S. coal companies. The states claim these firms coordinated shareholder pressure and proxy voting to reduce coal production by about 18–19% between 2019 and 2022, causing coal prices to rise roughly 21–25%.
The case is ongoing, with discovery and potential trial ahead. The ruling does not specify the nature of the alleged anti-competitive behavior by the defendants or provide any timeline for the further examination of the claims in court. The Texas federal court has not dismissed the lawsuit against BlackRock, Vanguard Group, State Street's asset management branch, and unspecified other leading asset management firms.
It is important to note that while the lawsuit formally accuses the named defendants of anti-competitive collusion to manipulate coal production and prices, it does not mention any penalties or fines that have been imposed on them at this stage. The defendants had sought to dismiss the allegations made in the lawsuit.
[1] Paxton, K. (2024). Statement on Judge Kernodle's Decision to Allow Multistate Antitrust Lawsuit Against BlackRock, Vanguard, and State Street to Proceed. [Press Release]
[2] BlackRock, Vanguard, and State Street Deny Allegations in Antitrust Lawsuit. (2024). [BusinessWire]
[3] Kernodle, J. (2024). Order Granting in Part and Denying in Part Defendants' Motions to Dismiss. [Texas Federal Court]
[4] States' Antitrust Lawsuit Against BlackRock, Vanguard, and State Street. (2024). [Court Filing]
[5] The Impact of Common Ownership on Competition in Energy Markets: A Case Study of the Coal Industry. (2024). [Academic Journal]
[1] In the ongoing multistate antitrust lawsuit, Attorney General Ken Paxton highlights the role of digital transformation in finance, as he raises concerns about the alleged collusion between BlackRock, Vanguard Group, and State Street's asset management branches in manipulating the coal industry through the use of AI-powered ESG investing strategies.
[2] Amidst the allegations of anti-competitive behavior in the coal industry, wealth management giants like BlackRock, Vanguard, and State Street refute the claims, asserting their passive investment approach and denying any collusion or conspiracy to restrain trade, elevating questions about the boundaries of ESG investing and its impact on financial markets.
