11 states sue three largest institutional investors for anticompetitive trade practices

Eleven states, led by Texas, have sued the three largest institutional investors in the world for allegedly conspiring to buy coal company stocks to control the market, reduce competition and violate federal and state antitrust laws.

The lawsuit was filed in U.S. District Court for the Eastern District of Texas Tyler Division and demands a trial by jury. It names as defendants BlackRock, Inc., State Street Corporation, and Vanguard Group, Inc., which combined manage more than $26 trillion in assets.

The companies were sued for “acquiring substantial stockholdings in every significant publicly held coal producer in the United States” in order to gain “power to control the policies of the coal companies,” Texas Attorney General Ken Paxton said.

According to the 109-page brief, defendants own 30.43% of Peabody Energy, 34.19% of Arch Resources, 10.85% of NACCO Industries, 28.97% of CONSOL Energy, 29.7% of Alpha Metallurgical Resources, 24.94% of Vistra Energy, 8.3% of Hallador Energy, 31.62% of Warrior Met Coal and 32.87% of Black Hills Corporation.

Under the Biden administration, in the past four years, “America’s coal producers have been responding not to the price signals of the free market, but to the commands of Larry Fink, BlackRock’s chairman and CEO, and his fellow asset managers,” the brief states. “As demand for the electricity Americans need to heat their homes and power their businesses has gone up, the supply of the coal used to generate that electricity has been artificially depressed – and the price has skyrocketed. Defendants have reaped the rewards of higher returns, higher fees, and higher profits, while American consumers have paid the price in higher utility bills and higher costs.”

Consumer costs went up because the companies “weaponized” their shares to push through a so-called green energy agenda, including reducing coal output by more than half by 2030, the lawsuit alleges. In response, publicly traded coal producers reduced output and energy prices skyrocketed.

The companies advanced their policies primarily through two programs, the Climate Action 100 and Net Zero Asset Managers Initiative, signaling “their mutual intent to reduce the output of thermal coal, which predictably increased the cost of electricity for Americans” nationwide, Paxton said.

The firms also allegedly deceived thousands of investors “who elected to invest in non-ESG funds to maximize their profits,” Paxton said. “Yet these funds pursued ESG strategies notwithstanding the defendants’ representations to the contrary.” While they allegedly directly restrained competition among the companies whose shares they acquired, “their war on competition has consequences for the entire industry,” the brief states.

“Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” Paxton said. “Their conspiracy has harmed American energy production and hurt consumers. This is a stunning violation of state and federal law.”

The lawsuit alleges the companies’ actions violated the Clayton Act, which prohibits any acquisition of stock where “the effect of such acquisition may be substantially to lessen competition;” and the Sherman Antitrust Act of 1890, 15 U.S.C. § 1 in a conspiracy to restrain trade.

It also alleges the companies violated state antitrust laws of Texas, Montana and West Virginia; Blackrock also allegedly violated the Texas Business and Commerce Code by committing “false, deceptive, or misleading acts.”

It asks the court to rule that the companies violated the federal and state statutes, provide injunctive and equitable relief and prohibit them from engaging in such acts. It requests that civil fines be paid, including requiring Blackrock to pay $10,000 per violation.

Joining Paxton in the lawsuit are the attorneys general of Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia and Wyoming.

The Buzbee Law Firm and Cooper & Kirk are serving as outside counsel.

The companies have yet to issue a statement on the lawsuit.

The lawsuit follows one filed by 25 states led by Texas against the Biden administration asking the court to halt a federal ESG policy that could negatively impact the retirement savings of 152 million Americans.

It also comes after Texas has listed hundreds of companies and publicly traded investment funds, including Blackrock, on its divestment list for advancing ESG and anti-oil and natural gas policies.