Liberal Antitrust Targets Amazon but Ignores the ESG Cartel

By Robert H. Bork Jr. October 02, 2023

The Federal Trade Commission ’s antitrust law against Amazon is cementing Chairwoman Lina Khan ’s reputation as someone who, when she sees big, sees red. Yet when Khan, who develops novel theories to launch antitrust actions against Big Tech companies, sees clear antitrust violations by big entities in other sectors, she fails to act.

That going after tech companies is a hobbyhorse of Khan is undeniable. Her antitrust lawsuit filed against Amazon on Tuesday follows the collapse of similar efforts to stop Microsoft’s acquisition of game-maker Activision Blizzard and Meta’s quest to acquire virtual-reality fitness programmer Within. These filings are stuffed with adjectives that portray tech companies as Snidely Whiplashes, the boomer cartoon villain with a long, black mustache. Only, in these instances, federal judges have repeatedly rejected Khan’s theories and left it to her to lament, “Curses, foiled again!”

Khan’s tendency to target bigness, however, is curiously absent when she is presented with an actual collusion of big, wealthy institutions that, until recently, were vocal and publicly proud of their efforts to engage in the restraint of trade in clear defiance of the Sherman Antitrust Act. This is the cartel of well-funded nongovernmental organizations, large investment companies, and proxy advisers that — under the banner of environmental, social, and governance priorities — have overtly acted to curtail and destroy oil and gas companies, legal businesses in the energy sector.

Consider one component of what is often called the “climate cartel,” including Institutional Shareholder Service, the world’s largest proxy advisory firm. Right behind it is Glass Lewis, the world’s second-largest proxy advisory firm. Together, these two funds form a duopoly that has contractual relationships with funds in the tens of trillions of dollars. They control about 97% of the entire proxy advisory market.

They certainly make good use of their position. Shareholder activists pay Glass Lewis for advice in running proxy campaigns against companies, while Glass Lewis advises institutional investors on ESG and “transparency.” ISS rates the ESG “performance” of companies and sells consulting services to corporations to defend themselves against those same proxy attacks.

Compare this to Amazon, which has only slightly larger than a one-third share of online retail sales and is just one of many players in U.S. retail overall. In the proxy advisory space, on the other hand, there are essentially two players symmetrically arranged to coerce companies into a funnel of never-ending business. This duopoly helps create the problem and then sells the solution. How is that not an antitrust violation?

Or, consider the role of BlackRock and other large asset managers that have labored to squeeze off investment in fossil fuels, working closely with NGOs that are now trying to defund natural gas exploration. At the heart of these efforts is Climate Action 100+, whose members include large investors that manage a total of $70 trillion in assets. If we analogize companies to rivers, this cartel is the real Amazon. The online retail company looks like the Hudson River by comparison.

For all its self-ennobling virtues, ESG has been a disservice to investors. In the last five years, ESG funds have underperformed the market 6.3% to 8.9%. Such practices not only violate antitrust law but also violate the legal requirement that fiduciaries obtain the best financial returns for their investors.

Meanwhile, large asset managers themselves continue to make big investments in oil and gas. What happens when you restrict a necessary commodity? You raise prices and raise profits. Is this environmentalism or is it diverting money from consumers at the pump, and the small investor at the computer, into the pockets of financiers?

Department of Justice antitrust chief Jonathan Kanter and Khan understand this matter. In a Senate hearing last year, Sen. Tom Cotton (R-AR) asked them about the antitrust implications of forcing companies to commit to net-zero emissions. The senator noted that coordinated conduct and “collusion to restrict supply is generally unlawful.”

Kanter replied that “when firms have substantial power and they use that power to achieve anticompetitive ends,” that is “actionable under the antitrust laws.” Khan answered that companies often come to her seeking an ESG exemption, “and we have to explain to them clearly that there is no such thing.”

One can believe that climate change is a real problem demanding policy solutions while doubting that the climate cartel’s environmental arbitrage and profits will reduce the Earth’s temperature by a smidgen. As Khan wrote, “Finding those solutions is often a job for legislators and other policy makers.”

Leave it to Congress and the president, then, to deal with climate policy. It is the responsibility of Kanter and Khan to live up to their declaration before the Senate and launch an investigation into ESG’s restraint of trade that harms consumers and investors alike.

Robert H. Bork Jr. is the president of the Antitrust Education Project.

Originally published at The Washington Examiner.