Case 6:24-cv-00437-JDK
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Case 6:24-cv-00437-JDK
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
STATE OF TEXAS, et. al.,
Plaintiffs,
v.
Civil Action No. 6:24-cv-00437-JDK
BLACKROCK, INC.,
STATE STREET CORP.,
THE VANGUARD GROUP, INC.,
Defendants.
STATEMENT OF INTEREST OF THE FEDERAL TRADE COMMISSION AND
THE UNITED STATES OF AMERICA
CLARKE T. EDWARDS
Acting Director, Office of Policy Planning
ABIGAIL A. SLATER
Assistant Attorney General
DANIEL GUARNERA
Director, Bureau of Competition
ROGER P. ALFORD
Principal Deputy Assistant Attorney General
ANUPAMA SAWKAR
Act. Deputy Director, Office of Policy Planning
MARK H. HAMER
WILLIAM RINNER
Deputy Assistant Attorneys General
KELSE MOEN
Deputy Director, Bureau of Competition
WILLIAM ADKINSON
Attorney Advisor, Office of Policy Planning
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Telephone: 202-779-6023
Facsimile: 202-326-2326
CA Bar No. 270936
E-mail: asawkar@ftc.gov
Attorneys for the Federal Trade Commission
DAVID B. LAWRENCE
Policy Director
ALICE A. WANG
G. CHARLES BELLER
Counsels to the Assistant Attorney General
U.S. Department of Justice,
Antitrust Division
950 Pennsylvania Avenue, NW
Washington, DC 20530
Telephone: 202-532-4698
Facsimile: 202-514-0306
CT Bar No. 430642
E-mail: david.lawrence@usdoj.gov
Attorneys for the United States of America
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TABLE OF CONTENTS
INTEREST OF THE UNITED STATES ........................................................................................ 1
BACKGROUND ............................................................................................................................ 4
ARGUMENT .................................................................................................................................. 6
I. Defendants and Amici Misstate the Legal Standards for Assessing Liability Under Section
7 of the Clayton Act and Distort the Risks Those Standards Pose to Procompetitive Asset
Manager Behavior. ...................................................................................................................... 6
A. Defendants Improperly Expand the Narrow “Solely for Investment” Exception to
Section 7 Liability. .................................................................................................................. 8
B. The Clayton Act Prohibits the Anticompetitive Use of Minority Interest Acquisitions to
Substantially Lessen Competition......................................................................................... 13
C. The Clayton Act’s Prohibition on the Anticompetitive Use of Stock Does Not Prevent
Typical Asset Manager Behavior. ......................................................................................... 17
II. Defendants Argue for Improper Limitations on Section 1 of the Sherman Act................. 21
A. Accepting an Offer to Participate in a Joint Plan Can Demonstrate Concerted Action. 21
B. Anticompetitive Output Restraint Can Occur Even If Overall Output Increases. ......... 26
CONCLUSION ............................................................................................................................. 27
CERTIFICATE OF SERVICE ...................................................................................................... 28
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TABLE OF AUTHORITIES
Page(s)
Cases:
American Needle, Inc. v. NFL,
560 U.S. 183 (2010) ...................................................................................................... 21, 25, 26
Anaconda Co. v. Crane Co.,
411 F. Supp. 1210 (S.D.N.Y. 1975) ...........................................................................................11
Associated Press v. United States,
326 U.S. 1 (1945) ...................................................................................................................... 26
Brown Shoe Co. v. United States,
370 U.S. 294 (1962) .................................................................................................................... 6
Burnet v. Clark,
287 U.S. 410 (1932) .................................................................................................................. 13
California v. American Stores Co.,
495 U.S. 271 (1990) .................................................................................................................... 6
Carbone v. Brown University,
621 F. Supp. 3d 878 (N.D. Ill. 2022) ........................................................................................ 10
Chicago Professional Sports Ltd. Partnership v. NBA,
961 F.2d 667 (7th Cir. 1992) ..................................................................................................... 10
Crane Co. v. Harsco Corp.,
509 F. Supp. 115 (D. Del. 1981) ................................................................................................11
Denver & Rio Grande Western Railroad Co. v. United States,
387 U.S. 485 (1967) .................................................................................................................. 14
Eastman Kodak Co. v. Image Technical Services, Inc.,
504 U.S. 451 (1992) .................................................................................................................. 12
FDA v. Brown & Williamson Tobacco Corp.,
529 U.S. 120 (2000) .................................................................................................................... 9
FTC v. Cement Institute
333 U.S. 683 (1948) .................................................................................................................. 22
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FTC v. Peabody Energy Corp.,
492 F. Supp. 3d 865 (E.D. Mo. 2020) ......................................................................................... 1
FTC v. Superior Court Trial Lawyers Ass’n,
493 U.S. 411 (1990) .................................................................................................................... 3
Gainesville Utilities Department v. Florida Power & Light Co.,
573 F.2d 292 (5th Cir. 1978) ..................................................................................................... 23
Giboney v. Empire Storage & Ice Co.,
336 U.S. 490 (1949) .................................................................................................................. 25
Group Life & Health Insurance Co. v. Royal Drug Co.,
440 U.S. 205 (1979) .................................................................................................................. 10
In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation,
714 F. Supp. 3d 65 (E.D.N.Y. 2024) ......................................................................................... 26
In re Insurance Brokerage Antitrust Litigation,
618 F.3d 300 (3d Cir. 2010) ...................................................................................................... 23
In the Matter of TC Group,
No. 61-0197, 2007 WL 293866 (MSNET Jan. 24, 2007) ......................................................... 16
Interstate Circuit v. United States,
306 U.S. 208 (1939) ................................................................................................ 21, 22, 23, 24
Leocal v. Ashcroft,
543 U.S. 1 (2004) ...................................................................................................................... 12
North Carolina State Board of Dental Examiners v. FTC,
574 U.S. 494 (2015) .................................................................................................................... 6
North Texas Specialty Physicians v. FTC,
528 F.3d 346 (5th Cir. 2008) ..................................................................................................... 24
NCAA v. Board of Regents of the University of Oklahoma,
468 U.S. 85 (1984) .................................................................................................................... 25
NYNEX Corp. v. Discon, Inc.,
525 U.S. 128 (1998) .................................................................................................................. 20
Ohio v. American Express Co.,
585 U.S. 529 (2018) .................................................................................................................. 26
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PLS.Com, LLC v. National Ass’n of Realtors,
32 F.4th 824 (9th Cir. 2022) ...................................................................................................... 23
Summit Health, Ltd. v. Pinhas,
500 U.S. 322 (1991) ............................................................................................................ 24, 25
Toys “R” Us, Inc. v. FTC,
221 F.3d 928 (7th Cir. 2000) ..................................................................................................... 23
United States v. Apple, Inc.,
791 F.3d 290 (2d Cir. 2015) ...................................................................................................... 23
United States v. AT&T, Inc.,
916 F.3d 1029 (2019) .................................................................................................................. 7
United States v. Baker Hughes,
908 F.2d 981 (D.C. Cir 1990) ..................................................................................................... 7
United States v. Bestfoods,
524 U.S. 51 (1998) .................................................................................................................... 13
United States v. Cleveland Trust Co.,
513 F.2d 633 (6th Cir. 1975) ..................................................................................................... 15
United States v. Cleveland Trust Co.,
392 F. Supp. 699 (N.D. Ohio 1974) .................................................................................... 15, 16
United States v. Dairy Farmers of American, Inc.,
426 F.3d 850 (6th Cir. 2005) ..................................................................................................... 14
United States v. E.I. Du Pont De Nemours and Company,
353 U.S. 586 (1957) ............................................................................................ 9, 10, 13, 14, 16
United States v. Foley,
598 F.2d 1323 (4th Cir. 1979) ............................................................................................. 23, 24
United States v. General Dynamics Corp.,
415 U.S. 486 (1974) .................................................................................................................... 7
United States v. ITT Continental Baking Co.,
420 U.S. 223 (1975) .................................................................................................................. 16
United States v. Masonite Corp.,
316 U.S. 265 (1942) ...................................................................................................... 22, 23, 24
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United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001)..................................................................................................... 20
United States v. MMR Corp. (LA),
907 F.2d 489 (5th Cir. 1990) ..................................................................................................... 23
United States v. Paramount Pictures, Inc.,
334 U.S. 131 (1948) .................................................................................................................. 23
United States v. Philadelphia National Bank,
374 U.S. 321 (1963) .................................................................................................................. 25
United States v. Tracinda Investment Corp.,
477 F. Supp. 1093 (C.D. Cal. 1979).................................................................................8, 10, 11
Statutes:
15 U.S.C. § 1 ................................................................................................................................. 21
15 U.S.C. § 18 ........................................................................................................... 8, 9, 10, 13, 15
28 U.S.C. § 517 ............................................................................................................................... 1
Other Authorities:
Executive Order No. 14,156,
90 Fed. Reg. 8433 (Jan. 29, 2025) .............................................................................................. 2
Executive Order No. 14,261,
90 Fed. Reg. 15517 (Apr. 8, 2025) ............................................................................................. 2
Federal Trade Commission, Hearings on Competition and Consumer Protection in the 21 st
Century: FTC hearing #8: Common Ownership (Dec. 6, 2018), https://www.ftc.gov/newsevents/events/2018/12/ftc-hearing-8-common-ownership ....................................................... 17
Phillip E. Areeda & Herbert Hovenkamp, ANTITRUST LAW (4th ed. 2016) ........................... 10, 18
Securities and Exchange Commission, Compliance and Disclosure Interpretations, Exchange
Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting,
Question 103.11 and Question 103.12 (February 11, 2025), https://www.sec.gov/rulesregulations/staff-guidance/compliance-disclosure-interpretations/exchange-act-sections-13d13g-regulation-13d-g-beneficial-ownership-reporting ............................................................. 15
U.S. Department of Justice and Federal Trade Commission,
MERGER GUIDELINES (2023) ................................................................................................. 7, 14
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INTEREST OF THE UNITED STATES
The Federal Trade Commission (“FTC” or “Commission”) and the United States
through the U.S. Department of Justice respectfully submit this Statement of Interest
pursuant to 28 U.S.C. § 517, which permits the Attorney General to direct any officer of the
Department of Justice “to attend to the interests of the United States in a suit pending in the
United States.” The FTC and the Antitrust Division of the U.S. Department of Justice
(collectively, the “Agencies”) enforce the federal antitrust laws, including Section 1 of the
Sherman Act, 15 U.S.C. § 1, and Section 7 of the Clayton Act, 15 U.S.C. § 18.1
The Agencies have interests here in ensuring the correct application of the antitrust
laws, including in America’s energy markets. Doing so protects Americans from
anticompetitive behavior that reduces the production of domestic energy, raises energy
prices for consumers and businesses, and undermines America’s energy dominance. 2 It also
preserves competition for capital investments, providing Americans with broader and more
efficient investment options. There should be no confusion: the antitrust laws allow passive
fund investing, they allow shareholder advocacy for better corporate governance, and they
allow active investing that doesn’t harm competition. As discussed below, however, this case
1
The Department of Justice also consulted with the Securities and Exchange Commission in the
preparation of this brief in order to ensure that it reflects the interests of the United States.
2
The Commission has recent experience in the products and markets at issue in this case, having
secured a federal court injunction to prevent a joint venture between Arch Resources and
Peabody Energy, the two largest coal companies in the markets Plaintiffs allege were harmed by
Defendants’ conduct. See FTC v. Peabody Energy Corp., 492 F. Supp. 3d 865, 901–02 (E.D. Mo.
2020).
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alleges much more—the coordinated use of the power of horizontal shareholdings 3 to distort
output and prices in energy markets.
The President has declared a national energy emergency. See Exec. Order No.
14,156, 90 Fed. Reg. 8433 (Jan. 29, 2025). Coal is vital to America’s energy security and
provides a reliable, cost-effective source of energy to support growing electrical demand for
artificial intelligence and a resurgence in domestic manufacturing. See Exec. Order No.
14,261, 90 Fed. Reg. 15517 (Apr. 8, 2025). Competition in coal markets incentivizes
companies to produce as much coal as the market demands. 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. This case is not about ordinary activity by
asset managers such as passive index investing or even procompetitive activism. As alleged,
the holders of large quantities of stock in competing companies agreed to use those
shareholdings to reduce the output of U.S. coal to increase profits at the expense of
American consumers and businesses. This case is about precisely the sort of conduct,
3
The Complaint uses both “institutional investor” and “asset manager.” See, e.g., Am. Compl.
¶¶ 2, 8–9. Although there are distinctions between the two types of financial firms, this statement
of interest uses the term “asset manager” throughout. Asset managers, such as Defendants,
typically manage funds that hold stock on behalf of beneficial owners. As alleged in the
Complaint, “Defendants, and their subsidiaries and affiliates, acting by and through the funds,
trusts, and other investment vehicles that they manage and control, have acquired substantial
shareholdings in . . . America’s publicly-held coal companies.” Id. ¶ 20. Accordingly, this
statement refers to Defendants’ “shareholdings” or “ownership” (or similar) in connection with
the alleged exercise of stock owned directly by Defendants or managed on behalf of third-party
beneficial owners.
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including concerted efforts to reduce output, which have long been condemned under the
antitrust laws.
A coalition of States alleges that large institutional asset managers used their
substantial shareholdings in competing coal companies to influence the management of
those companies to reduce the output of U.S. coal production below competitive levels,
thereby increasing energy prices paid by American consumers and businesses, while
generating supra-competitive profits for those investors. Am. Compl. ¶¶ 113–191, ECF No.
50. The State Plaintiffs claim Defendants BlackRock, State Street, and Vanguard conspired
to reduce output in part to advance their associational commitments to climate goals and
carbon reduction. Id. ¶¶ 152–54, 232–243. The State Plaintiffs further claim that
Defendants, who manage hundreds of billions of dollars in coal-companies’ stock,
economically benefitted from this conduct as profits soared. See Am. Compl. ¶¶ 152–53,
232–243; Pls’ Br. In Opp’n to Defs.’ Mot. to Dismiss at 48, ECF No. 88. That this conduct
may have furthered Defendants’ climate objectives is not a defense under the antitrust laws
because “social justifications proffered for [a] restraint of trade . . . do not make it any less
unlawful.” FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 424 (1990). Carbon
reduction is no more a defense to the conduct alleged here than it would be to price fixing
among airlines that reduced the number of carbon-emitting flights.
The Agencies recognize that asset managers serve a crucial role in America’s worldleading capital markets. The antitrust laws provide ample room for ordinary investment and
corporate governance activity. This case, however, alleges not merely typical investor
behavior, but the active, anticompetitive use of common shareholdings to reduce the
production of American coal to the detriment of American consumers and businesses. There
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are large and consequential differences between passive investing in broad-based indices
and voting, buying or selling (or implicitly threatening to vote, buy or sell) specific stocks
unless companies behave less competitively. See Am. Compl. ¶ 136. Similarly, advocating
that companies have good governance structures and processes is different from pushing for
specific operational or strategic decisions that reduce a company’s competitive intensity.
The law has long recognized these distinctions, and Defendants are alleged to have flouted
them. Courts also must take great care to ensure that asset managers do not use their
shareholdings in competing companies to engage in anticompetitive conduct that deprives
firms of the capital needed to invest and expand.
This Statement of Interest explains the proper application of the antitrust laws to
Plaintiffs’ allegations, while also protecting the important role of investment and robust
corporate governance to capital formation and economic growth. Specifically, it addresses:
(1) the scope of the passive investor exemption under the Clayton Act, (2) the Clayton Act’s
concern with anticompetitive use of stock, (3) the Sherman Act’s concern with
anticompetitive coordination, and (4) how output can be suppressed below competitive
levels even when output appears to be rising. In deciding these motions, the Agencies urge
the Court to reject Defendants’ multiple errors of law.
BACKGROUND
The Complaint alleges that Defendants are three of the largest institutional asset
managers in the world, each with trillions of dollars in assets under management. The
Defendants are also three of the largest shareholders in all nine publicly held coal companies in
the United States. Am. Compl. ¶ 20. Together, these competing companies produce nearly half of
all U.S. coal, including 63 percent of South Powder River Basin coal. Id. ¶¶ 18, 100, 105. Each
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Defendant has acquired and maintained significant stakes in each of the nine direct competitors
through regular share purchases. Id. ¶¶ 21–57. Defendant BlackRock is the largest shareholder in
six of the nine competing coal companies—with shares ranging from fourteen to sixteen percent
in each firm—and is the second largest in the rest. Id. ¶ 20, Table 1. Collectively, Defendants
own between 24 and 34 percent of seven of the nine coal companies, with smaller shares in the
remaining two. Id. ¶¶ 4, 20.
The Complaint alleges that each Defendant publicly committed to use their common
shareholdings in the coal companies to reduce carbon emissions by joining the Net Zero Asset
Managers Initiative, which required members to pursue “decarbonisation goals” to reach net zero
emissions by 2050 for all assets under their management. Am. Compl. ¶¶ 129–130. Plaintiffs
allege that pursuant to this initiative, each Defendant took concrete steps to engage with the
management of competing coal companies to obtain their commitment to limit carbon emissions
by restricting the production of coal within the United States. Id. ¶¶ 150, 152–182. In addition,
Defendants BlackRock and State Street for a time were members of Climate Action 100+, “an
unprecedented global investor engagement initiative” committed to influencing corporate
policies and actions, including compliance with specific coal output reduction goals. Id. ¶¶ 117–
128. Defendants’ actions allegedly resulted in industry-wide restrictions in coal output, even
during periods of high prices, while at the same time increasing market-wide profits. Id. ¶¶ 152–
154, 232–243. Plaintiffs allege that Defendants violated Section 1 of the Sherman Act by
agreeing with one another to (1) use their shares to coerce coal companies to implement a
coordinated reduction in coal output, and (2) share timely, competitively sensitive information to
ensure that the coal companies complied with output reduction targets. Id. ¶¶ 253–263.
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Plaintiffs also allege that Defendants’ acquisition, holding, and use of their shares in
competing coal companies has substantially lessened competition in violation of Section 7 of the
Clayton Act. Am. Compl. ¶¶ 250–252. The breadth and depth of Defendants’ holdings in
competing coal companies allegedly gave them the access and ability to engage with
management that ordinary shareholders do not possess. Id. ¶¶ 89–112. Where engagement was
not sufficient to achieve their output restriction goals, Defendants allegedly voted against or
withheld votes in favor of management, or threatened other actions such as divesting assets. Id.
¶¶ 152–191. According to the Complaint, these actions increased coal prices above competitive
levels, leading American consumers to “pa[y] the price in higher utility bills and higher costs”
while, at the same time, Defendants “reaped the rewards of higher returns, higher fees, and
higher profits” on their holdings in coal companies. Id. ¶ 1.
ARGUMENT
I.
Defendants and Amici Misstate the Legal Standards for Assessing Liability
Under Section 7 of the Clayton Act and Distort the Risks Those Standards Pose
to Procompetitive Asset Manager Behavior.
Antitrust law “is a central safeguard for the Nation’s free market structures.” N. C. State
Bd. of Dental Examin’rs v. FTC, 574 U.S. 494, 502 (2015). Section 7 of the Clayton Act in
particular was designed to prohibit stock acquisitions that may result in a substantial lessening of
competition and was “directed primarily at the development of holding companies and at the
secret acquisition of competitors through the purchase of all or parts of such competitors’ stock.”
Brown Shoe Co. v. United States, 370 U.S. 294, 313–14 (1962).
Section 7 provides an “expansive definition of antitrust liability,” California v. Am. Stores
Co., 495 U.S. 271, 284 (1990), enabling courts to tailor their analysis to the many competitive
environments—and competitive risks—across our diverse economy. While many merger cases
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begin with a focus on “statistics about the change in market concentration,” plaintiffs can also
instead satisfy their initial burden with any other “fact-specific showing” of illegality. United
States v. AT&T, Inc., 916 F.3d 1029, 1032 (D.C. Cir. 2019); see U.S. Dep’t of Just. and Fed.
Trade Comm’n, MERGER GUIDELINES § 1 at p. 4 (2023) (“2023 MERGER GUIDELINES”) (“Merger
review is ultimately a fact-specific exercise.”). Under the burden-shifting framework developed
by the courts, if the plaintiff makes an initial showing “based on a fact-specific analysis,” then
the court should consider whether “other pertinent factors . . . mandate[] a conclusion” that the
law was not violated. 2023 MERGER GUIDELINES § 3 (quoting United States v. Gen. Dynamics
Corp., 415 U.S. 486, 498 (1974) and United States v. Baker Hughes, 908 F.2d 981, 990 (D.C.
Cir. 1990)). This analytical approach applies whatever the fact-specific basis plaintiffs present
for demonstrating a violation.
In this case, Plaintiffs allege that Defendants accumulated shares in competing coal
companies and used those shares to restrict the production of coal on an industry-wide basis,
causing higher prices for consumers and industry at a time when inflation was already pushing
prices upward. Defendants allegedly benefitted from higher returns on their stock holdings in
coal companies, which were able to achieve supra-competitive profits by decreasing output and
increasing prices. E.g., Am. Compl. ¶ 1 (alleging Defendants reaped “higher returns, higher fees,
and higher profits”). Defendants and amici argue this conduct is irrelevant, however, because the
Section 7 “solely for investment” exception forbids examining how ostensibly passive, minority
investors used their shareholdings at all. This interpretation is incorrect. Section 7 preserves the
important role of asset managers while also permitting courts to protect markets from
anticompetitive conduct. As explained below, Defendants attempt to mask allegations of illegal,
anticompetitive behavior behind the veil of passive investing and good governance principles.
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The allegations, however, go beyond governance to matters of business strategy and
management. Defendants also claim that enforcing the law will adversely impact the important
role asset managers play in our economy. To the contrary, passive fund investing can thrive
without adopting these errors of law.
A. Defendants Improperly Expand the Narrow “Solely for Investment”
Exception to Section 7 Liability.
Defendants overstate the protections under Section 7 for acquisitions made “solely for
investment,” incorrectly claiming the statutory exception “gives bright-line protection to passive
minority investors, without subjecting them to further analysis.” Defs.’ Joint Mot. to Dismiss
Counts I-XVI and XVIII of the Am. Compl. and Req. for Oral Arg. at 25, 27, ECF No. 64
(“Defs.’ Joint Mot. to Dismiss”). That exception reads in full:
This section shall not apply to persons purchasing such stock solely for investment and
not using the same by voting or otherwise to bring about, or in attempting to bring about,
the substantial lessening of competition.
15 U.S.C. § 18. Thus, by its express terms, this exemption only applies when a defendant both
(1) purchases stock “solely for investment” and (2) does not use or attempt to use the stock to
harm competition. 15 U.S.C. § 18; see United States v. Tracinda Inv. Corp., 477 F. Supp. 1093,
1099 (C.D. Cal. 1979) (the “statute and the cases . . . support a 2-pronged test”). Accordingly,
even initially passive investors can take themselves out of the exception by using or attempting
to use their stock investments in multiple competitors to harm competition.
Section 7 thus creates a provisional carve-out for purchases made “solely for investment”
that can be lost depending on how investors use those investments. As relevant here, Section 7’s
central text prohibits a stock acquisition where, in any relevant market, “the effect of such
acquisition . . . or of the use of such stock by the voting or granting of proxies or otherwise[] may
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be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18
(emphasis added). In the next statutory paragraph, the exception explains that Section 7 is not
violated when someone purchases stock “solely for investment and [is] not using the same by
voting or otherwise” to harm or attempt to harm competition. 15 U.S.C. § 18 (emphasis added).
These two statutory provisions must be read together. “[A] reviewing court should not
confine itself to examining a particular statutory provision in isolation. The meaning—or
ambiguity—of certain words or phrases may only become evident when placed in context.” FDA
v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000). A person may violate Section
7 when the requisite effect on competition arises from either (i) the acquisition itself, or (ii) the
later use of acquired assets or stock. The “solely for investment” exception removes the statute’s
scrutiny of the effect of the acquisition itself: If a defendant made an acquisition that was solely
for investment purposes at the time the acquisition was completed, courts may not analyze the
effect of that acquisition itself on competition. But, contrary to Defendants’ claim, a defendant
does not enjoy absolute or perpetual immunity from Section 7 no matter how they behave after
the acquisition. A person may violate Section 7 by using, or attempting to use, the acquired stock
to cause anticompetitive effects. Accordingly, as the Supreme Court explained in United States v.
E.I. du Pont de Nemours & Co., “[a]cquisitions solely for investment are excepted, but only if,
and so long as, the stock is not used by voting or otherwise to bring about, or in attempting to
bring about, the substantial lessening of competition.” 353 U.S. 586, 589 (1957) (emphasis
added). “Even when the purchase is solely for investment, the plain language of § 7 contemplates
an action at any time the stock is used to bring about, or in attempting to bring about, the
substantial lessening of competition.” Id. at 597–98.
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By removing Section 7 liability for the acquisition of assets “solely for investment,” the
exception can be read as an “exemption” from Section 7 liability. Tracinda, 477 F. Supp. at 1098.
And as with all express exemptions from the antitrust laws, it must be “narrowly construed.”
Grp. Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 231 (1979) (“that exemptions from
the antitrust laws are to be narrowly construed . . . applies with equal force to express statutory
exemptions”); Chicago Pro. Sports Ltd. P’ship v. NBA, 961 F.2d 667, 671–72 (7th Cir. 1992)
(“courts read exceptions to the antitrust laws narrowly, with beady eyes and green eyeshades”);
cf. Carbone v. Brown Univ., 621 F. Supp. 3d 878, 883, 888 (N.D. Ill. 2022) (noting that “courts
are required to strictly construe Sherman Act exemptions,” including the erstwhile “568
Exemption” for universities awarding need-based financial aid). Defendants flout this principle,
however, stretching both prongs of the exception well beyond their plain text, let alone a narrow
construction of them.
i.
Defendants Misread “Solely”
Defendants misstate the requirement for an investment to be deemed made “solely for
investment.” 15 U.S.C § 18. Ignoring the plain meaning of “solely,” they contend that this prong
is met “when [the acquirer] seeks to earn a financial return from dividends or appreciation, rather
than to control the company’s day-to-day affairs.” Defs.’ Joint Mot. to Dismiss at 25. But such a
financial purpose in acquiring stock is not sufficient for investors to avoid liability “where an
apparently legitimate investment motive is accompanied by another motive.” See Phillip E.
Areeda & Herbert Hovenkamp, ANTITRUST LAW, ¶ 1204d (4th ed. 2016) (collecting cases); du
Pont, 353 U.S. at 601–602. Accordingly, investments made to leverage holdings in competitors
to harm the competitive process by shaping market-wide behavior are not solely for investment.
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Relatedly, Defendants argue that they can satisfy the “solely for investment” prong if they
did not intend to control the coal companies’ internal affairs. Defs.’ Joint Mot. to Dismiss at 25–
27. But the lack of an intent to control is not dispositive; an investment is not “solely for
investment” if an investor has an intent to use stock “to influence significantly or control
management of the target firm.” Crane Co. v. Harsco Corp., 509 F. Supp. 115, 122–23 (D. Del.
1981) (emphasis added); see also In the Matter of Golden Grain Macaroni Co., 78 F.T.C. 63, 73
(F.T.C. Jan 18, 1971). Thus, an acquisition is not made “solely for investment” if the acquirer
intends to use shares to exercise an anticompetitive influence over competing firms, which in
turn causes downstream anticompetitive effects such as output reductions.
Defendants’ cases are inapposite. Defs.’ Joint Mot. to Dismiss at 26. In denying a
preliminary injunction, the Anaconda court relied heavily on a court-enforceable stipulation that
the acquirer would “not attempt to use the stock or any influence gained thereby to lessen
competition.”4 Anaconda Co. v. Crane Co., 411 F. Supp. 1210, 1217–19 (S.D.N.Y. 1975). And in
Tracinda, the court’s analysis focused on an intent to control because the plaintiff there took the
position “that defendants purchased this stock for control as opposed to investment.” 477 F.
Supp. at 1099 n.6. The Tracinda court nonetheless expressly recognized that “investment or
control” were not “the only two possible purposes” for purchasing stock and that du Pont found
the exception inapplicable when stock is used for commercial gain “based upon du Pont’s use of
its General Motors stock position to remain a major supplier to General Motors.” Id. In this case,
Plaintiff States allege that Defendants used their collective stock holdings to coordinate output
4
The court further observed that “[i]t may well develop at trial that [the acquirer] has
noninvestment motives not known to this Court or that Crane is attempting to use its shares to
lessen competition.” Anaconda, 411 F. Supp. at 1219. Granting Defendants’ motion to dismiss
would deny Plaintiffs such an opportunity.
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reductions among competing coal companies on an industry-wide basis, which led to supracompetitive profits that yielded higher investment returns.
ii.
Defendants Misread “Using”
Relying on a deportation case, Defendants assert that the term “using” in the “solely for
investment” exception requires voting or some similar act. See Defs.’ Joint Mot. to Dismiss at
28–30 (quoting Leocal v. Ashcroft, 543 U.S. 1, 9 (2004), which construed “use . . . physical
force” to exclude “negligent or merely accidental conduct”). But the Clayton Act’s language is
not limited to affirmative use of shares by voting. Indeed, it broadly precludes “using the [shares]
by voting or otherwise” to injure competition. 15. U.S.C § 18 (emphasis added). Partial
ownership interests in competing firms can increase an investor’s ability and incentive to
influence competing companies’ conduct. Thus, an investor violates Section 7 when it uses its
holdings in competing firms, by voting or otherwise, to injure competition.
Defendants note that courts have often declined to apply the exception where minority
shareholders used the shares to control or influence a “competitor, customer or supplier.” Defs.’
Joint Mot. to Dismiss 29. But the second prong of the exception is not limited to acquisitions by
competitors, customers, or suppliers, nor has any court indicated such a limitation. Rather,
“[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are
generally disfavored in antitrust law.” Eastman Kodak Co. v. Image Technical Services, Inc., 504
U.S. 451, 466-67 (1992). In reality, although competitors and market-adjacent participants are
often the entities with the financial incentive and ability to exert anticompetitive influence, a
single entity with holdings in multiple competitors can engage in similar anticompetitive
behavior. Thus, blanket antitrust immunity for non-controlling investment activity is supported
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neither by the text nor policy of Section 7, and there is no legitimate reason to depart from the
plain meaning of “solely for investment” or “using” when construing Section 7.
B. The Clayton Act Prohibits the Anticompetitive Use of Minority Interest
Acquisitions to Substantially Lessen Competition.
A plaintiff can satisfy its initial burden with a showing that horizontal shareholdings
purchased solely for investment were in fact used to cause a substantial lessening of competition
in one or more relevant markets. As discussed above, the statutory text establishes liability when
“the effect of . . . the use of such stock by voting or granting of proxies or otherwise, may be
substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18 (emphasis
added). And the exception discussed above reinforces this approach. Accordingly, plaintiffs state
a Section 7 claim against even an initially passive investor when they plausibly allege that the
investor ceased to operate passively and affirmatively used horizontal shareholdings to cause a
substantial lessening of competition.5
Although most Section 7 cases prospectively analyze the reasonably probable future
effects—what may later occur—a claim focused on the use of stock examines what has occurred
and should incorporate evidence of post-acquisition behavior and effect. The Supreme Court
noted this distinction in du Pont, recognizing that Section 7 is most often used prospectively, but
5
To be clear, parent companies and investors are generally not responsible for the acts of their
subsidiaries or investments. See, e.g., United States v. Bestfoods, 524 U.S. 51, 61 (1998) (“a
corporation and its stockholders are generally to be treated as separate entities”) (citing Burnet v.
Clark, 287 U.S. 410, 415 (1932)). The Section 7 claim here does not suggest parental liability for
a violation of the law committed by its investments absent a showing of direct control and
involvement sufficient to pierce the corporate veil. Rather, it alleges a Section 7 violation by
Defendants themselves deriving from their acquisition and anticompetitive use of horizontal
shareholdings. For the same reason, Plaintiffs’ allegations, if proven, would not necessarily
demonstrate liability on behalf of the coal companies who Defendants allegedly induced to lower
output.
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also that a suit may be brought “at any time when a threat of the prohibited effects is evident.”
353 U.S. at 597–98; see p. 8–10, supra (discussing du Pont).
In claiming that Plaintiffs’ allegations fail as a matter of law, Defendants raise a trio of
arguments that misstate or misunderstand the Clayton Act. First, Defendants are wrong to
suggest that the Clayton Act addresses only the acquisition or use of controlling stakes. Denver
& Rio Grande W. R.R. Co. v. United States, 387 U.S. 485, 501 (1967) (“A company need not
acquire control of another company in order to violate the Clayton Act.”); see also 2023 MERGER
GUIDELINES § 2.11 (“Partial acquisitions that do not result in control may nevertheless present
significant competitive concerns.”). Du Pont held that the acquisition of a minority stake may
violate Section 7. 353 U.S. at 592. The size of the ownership interest need only be sufficient to
exert an anticompetitive influence on the acquired company’s decision-making. Id. For example,
the du Pont Court found that a 23 percent holding was sufficient for du Pont to exercise an
anticompetitive influence over General Motors’ purchasing decisions, noting that “the potency of
the influence” was enhanced due to diffusion of remaining shares. 353 U.S. at 605–07 & n.36;
see also Denver, 387 U.S. at 504 (20 percent acquisition raised serious Section 7 concerns where
there was “likely to be immediate and continuing cooperation between the companies”). When a
partial owner can leverage its holding to control or influence business decisions at competing
businesses, the relationship can substantially lessen competition. See United States v. Dairy
Farmers of Am., 426 F.3d 850, 862 (6th Cir. 2005); see also 2023 MERGER GUIDELINES § 2.11
(partial equity holdings can raise competitive concerns by “giving the partial owner the ability to
influence the competitive conduct of the [partly owned] firm”). Whether an investor actually
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used its minority stakes in competing companies to influence their businesses’ decisions in a way
that injured competition is a factual question. 6
Second, Defendants incorrectly suggest that the Section 7 claim must be dismissed
because they are institutional asset managers that neither participate in a relevant coal market nor
control any company that participates in one. Defs.’ Joint Mot. to Dismiss 39. Defendants stress
that Section 7 actions challenging partial stock holdings generally involve “a partial acquisition
of a competitor,” id. at 39, or the exercise of “influence on a competitor, customer or supplier,”
id. at 36. This line of argumentation is a misdirection. Plaintiffs, in fact, do allege that the
Defendants managed substantial shares of stock in competing firms, and used those
shareholdings to exercise “influence on” business decisions of multiple “competitor[s]” Id. at 36;
Am. Compl. ¶¶ 4–5.
Section 7 also expressly applies to anticompetitive acquisitions by any “person.” 15
U.S.C. § 18. As a result, the Agencies have challenged partial stock acquisitions by different
types of investors that threatened anticompetitive effects. In United States v. Cleveland Trust Co.,
the Department of Justice sued a bank which held minority shares of 27 and 14 percent in
competing companies through various fiduciary accounts. 392 F. Supp. 699, 701 (N.D. Ohio
1974) aff’d, 513 F.2d 633 (6th Cir. 1975). While the court dismissed the Section 7 claim as moot
after one of the companies sold its competing operations, it did not question the validity of the
6
Cf. SEC, Compliance and Disclosure Interpretations, Exchange Act Sections 13(d) and 13(g)
and Regulation 13D-G Beneficial Ownership Reporting, Question 103.11 and Question 103.12
(February 11, 2025), https://www.sec.gov/rules-regulations/staff-guidance/compliancedisclosure-interpretations/exchange-act-sections-13d-13g-regulation-13d-g-beneficialownership-reporting (discussing differences between HSR passive investor exemption and 13G
requirements, and explaining that “[t]he determination of whether a shareholder acquired or is
holding the subject securities with a purpose or effect of ‘changing or influencing’ control of the
issuer is based on all relevant facts and circumstances”).
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Section 7 claim and even noted that the dismissal “will not prevent the Government from
challenging other possibly analogous situations resulting from defendant’s trust activity.” Id. at
708. And In the Matter of TC Group involved private equity firms Carlyle and Riverstone, which
jointly held a 50 percent interest in Magellan. No. 61-0197, 2007 WL 293866 at *29 (MSNET
Jan. 24, 2007). The FTC challenged their proposed acquisition of a 22.6 percent interest in
Kinder Morgan, a company that competed with Magellan, because the acquisition would “have
the effect of combining the two companies through partial common ownership.” Id. (Analysis of
Proposed Agreement Containing Consent Orders to Aid Public Comment). The competitive
concerns were resolved through a consent decree which, inter alia, prohibited Carlyle and
Riverstone “from exerting control or influence over Magellan as long as they hold an interest in
or can influence KMI.” Id. at 4–5.
Third, Defendants erroneously contend that Plaintiffs’ Complaint is insufficient because it
fails to identify “particular stock ‘acquisitions,’” and “link [those acquisitions] to competitive
harm.” Defs.’ Joint Mot. to Dismiss 37–38. Defendants misstate the inquiry required. Section 7’s
prohibitions extend to all situations in which stock holdings that resulted from stock acquisitions
are wielded in an unlawful manner. See United States v. ITT Cont’l Baking Co., 420 U.S. 223,
240 (1975) (“‘acquisition’ as used in § 7 of the Act means holding as well as obtaining assets”);
du Pont, 353 U.S. at 597. The alleged anticompetitive effects need not be “link[ed]” to any
discrete, single stock transaction; they are linked to Defendants’ alleged use of the stock they had
accumulated in competing coal companies. To plead a Section 7 claim, it is sufficient to allege
that Defendants accumulated shares in competing coal companies and used those shares to push
for reduction in the production of coal, causing substantial harm to competition.
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C. The Clayton Act’s Prohibition on the Anticompetitive Use of Stock Does
Not Prevent Typical Asset Manager Behavior.
Asset managers play an invaluable role in the American economy. For example, index
fund investing brings the benefits of market access to millions of Americans, and even passive
asset managers play a critical role in corporate governance matters by conferring with directors
and management on best practices for governance structures and oversight processes. And active
investors, who are permitted broad latitude to force managerial and operational changes at
individual companies, instill discipline and drive performance. The Clayton Act allows these
beneficial practices.
The Agencies underscored the importance of protecting the critical role of asset managers
in a 2017 U.S. Submission on Common Ownership to the Organization for Economic Cooperation and Development (“U.S. OECD Submission”) and a subsequent conference. 7 The
Submission discussed academic literature advocating for broad restrictions on institutional
investors’ and asset managers’ ability to invest in competing companies. U.S. OECD Submission
¶¶ 11–14. The Submission recognized the limitations of “general relationships suggested by
academic papers” and cautioned against adopting such proposals absent “compelling evidence of
the anticompetitive effects of common ownership by institutional investors in concentrated
industries.” U.S. OECD Submission, ¶¶ 3, 15. It also cautioned against creating across-the-board
limitations on common ownership given the potential for “unintended real-world costs on
7
The Commission examined both the competitive concerns raised by common ownership and
the potential for enforcement to interfere with the procompetitive activities of institutional
investors and asset managers in a workshop. Fed. Trade Comm’n, Hearings on Competition and
Consumer Protection in the 21st Century: FTC hearing #8: Common Ownership (Dec. 6, 2018),
https://www.ftc.gov/news-events/events/2018/12/ftc-hearing-8-common-ownership.
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businesses and consumers by making it more difficult to diversify risk.” Id. ¶ 15. The Agencies
reaffirm that submission and the importance of index investing and corporate governance.
But the importance of index investing does not protect institutional investors and asset
managers that act to use their shares in fact to stifle competition among their commonly held
companies. Rather, the U.S. OECD Submission noted that the Agencies would consider
enforcement actions against institutional investors and asset managers “where sufficient evidence
exists that the effect of particular acquisitions may be substantially to lessen competition.” Id. ¶
15. This scrutiny is what the Clayton Act demands. “No general warrant exists for treating an
institutional investor differently from other investors, and particularly not if the institutional
investor votes its shares or otherwise seeks to influence a corporation’s decision making.” Phillip
E. Areeda & Herbert Hovenkamp, ANTITRUST LAW, ¶ 1204b (4th ed. 2016).
Defendants and amici are also wrong to suggest that permitting the Section 7 claim here
to proceed to discovery “would threaten the viability of index-based investing.” Defs.’ Joint Mot.
to Dismiss 32; see also Br. of Amicus Curiae the Securities Industry and Financial Markets
Association in Supp. of Defs.’ Joint Mot. to Dismiss 7, ECF No. 74–1 (hereinafter “SIFMA
Br.”); Br. of Amicus Curiae Investment Company Institute in Supp. of Defs.’ Joint Motion to
Dismiss 23, ECF No. 76 (hereinafter “ICI Br.”). For several reasons, the Clayton Act’s
longstanding prohibitions on the use of horizontal shareholding to lessen competition should
pose no barrier to institutional investing and asset management activities.
First, passive investors fall squarely within Section 7’s exemption unless they cease to be
passive and instead affirmatively use their stock to reduce rivalry among their commonly held
assets. Asset managers that lack control may avail themselves of the “solely for investment”
exemption if they use their investment holdings and market status to influence or change
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governance structures and processes—for example, by conferring with the officers and directors
on board size, compensation polices and public reporting practices—and such ordinary course
conduct typically does not approach the theory of liability presented here. And asset managers
that do not avail themselves of the passive exemption are free to seek to control or influence the
strategic and day-to-day management and operation of an individual company. This brief focuses
on a limited category of the use of multiple investment holdings: holders of competing
companies that discourage competition among their investments in a manner that results in harm
to consumers or businesses. The Agencies do not assert a position as to when an investor’s
acquisition of stock in competing firms alone—without evidence of subsequent anticompetitive
use—would implicate Section 7. As explained in the U.S. OECD Submission, any enforcement
or policy effort restricting merely the acquisition of investment assets would need to consider
carefully the countervailing impacts on capital flows for competition in the relevant
markets. U.S. OECD Submission ¶¶ 3, 15.
Second, Plaintiffs’ theory implicates only those anticompetitive uses of holdings that in
fact cause anticompetitive effects—such as facilitating parallel output reductions among
competing coal companies, driving up Americans’ energy prices. Most asset manager behavior
will not affect market output, prices, quality, or other indicia of competition. Moreover,
improving corporate governance often is competitively neutral or procompetitive, so uses of
stock to improve the oversight and reporting practices generally benefits consumers and would
not implicate the Clayton Act. In contrast, Plaintiffs allege that Defendants economically
benefitted from using their substantial shares in competing coal companies to pressure the
management of those companies to institute output-reduction targets “to advance climate goals,”
Am. Compl. ¶¶ 1, 4, 8, and to adopt disclosure policies that would permit Defendants to monitor
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compliance with those reduction targets. Id. ¶ 94. These allegations, if true, could provide a basis
for finding that these shareholder activities—as opposed to the mere acquisitions of the shares—
caused a substantial lessening of competition in violation of Section 7.
Third, even asset manager activity that leads to output reductions or price increases does
not violate the antitrust laws unless those reductions or increases are caused by harm to
competition. Subject to applicable securities laws, an institutional investor or asset manager
could advocate in favor of the business in which it owns or manages stock to exit one market in
favor of another, more profitable market. It could even pressure the management of the firm to
undertake such a transition. That transition would reduce output in the first market in service of
achieving higher profits in another. But this advocacy and pressure would not violate the antitrust
laws unless it resulted from a consummate reduction in competition—for example, if the investor
also held shares in the company’s competitor and thus would benefit from a rival’s market exit.
As such, antitrust plaintiffs must “allege and prove harm . . . to the competitive process, i.e., to
competition itself.” NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998); see also United
States v. Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001) (to be anticompetitive, the act “must
harm the competitive process and thereby harm consumers”). Investor behavior motivated solely
by the desire to improve an investment’s value through competition on the merits does not
implicate the Clayton Act.8
8
Amici suggest that the threat of a broad remedial order would also impose serious harms. ICI
Br. 21, ECF No. 76; see also SIFMA Br. 15, ECF No. 74–1. These concerns are irrelevant to the
motion to dismiss because remedies are available that avoid implicating amici’s concerns. These
concerns are also premature—the appropriate scope of relief will be addressed later in the
proceeding if a violation is found.
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But that is not what Plaintiffs allege here. Plaintiffs allege that Defendants agreed to use
their combined shares in competing coal companies to reduce production of coal in the United
States, thereby driving down output and driving up prices. Am. Compl. ¶¶ 129–150. Plaintiffs
further allege that Defendants in fact used their stakes in the competing companies to coerce the
management of those companies to reduce production, purportedly in service of an “ESG
agenda.” Id. ¶¶ 155–191. This horizontal conduct allegedly drove up prices for consumers and
businesses. That is precisely the sort of anticompetitive behavior the antitrust laws are designed
to prevent.
II.
Defendants Argue for Improper Limitations on Section 1 of the Sherman Act.
Section 1 of the Sherman Act prohibits every “contract,” “combination,” or “conspiracy”
that unreasonably restrains trade. 15 U.S.C. § 1. A claim under Section 1 has two primary
elements: (1) a “contract, combination, conspiracy”—i.e., “concerted action”; (2) that
“unreasonably restrains trade.” Am. Needle, Inc. v. NFL, 560 U.S. 183, 186 (2010). Defendants
take a cribbed view of both elements.
A. Accepting an Offer to Participate in a Joint Plan Can Demonstrate
Concerted Action.
Concerted action encompasses any arrangement that “deprives the marketplace of
independent centers of decisionmaking” and “thus of actual or potential competition.” Am.
Needle, 560 U.S. at 195. Defendants argue that Plaintiffs have not plausibly alleged an
agreement either directly or through circumstantial evidence. See Joint Mot. to Dismiss at 9–19.
But Plaintiffs argue they can establish concerted action under Interstate Circuit v. United States,
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306 U.S. 208 (1939), see Pls.’ Br. In Opp’n to Mot. to Dismiss at 39, ECF No. 88 (“Pls.’
Opp’n”), which is well-established precedent.
In Interstate Circuit, a manager of two movie theater companies sent identical letters to
eight major national film distributors, mentioning in the letter that the same letter was being sent
to all of them and asking the distributors to impose certain restrictions on secondary runs of
certain films. The distributors responded by imposing the restrictions. Id. at 217–18. Although
the Court first inferred the existence of an express agreement, it emphasized that such an express
agreement was “not a prerequisite to [finding] an unlawful conspiracy.” 306 U.S. at 226
(emphasis added). The Court explained that “acceptance by competitors, without previous
agreement, of an invitation to participate in a plan . . . is sufficient to establish an unlawful
conspiracy under the Sherman Act.” Id. at 227. Plaintiffs allege that is what took place here. Pls.’
Opp’n at 39–41.
This second way of showing concerted action under Interstate Circuit focuses on the
nature of the invitation—i.e., whether it contemplates concerted action—and competitors’
responsive actions demonstrating acceptance of the invitation: “It was enough that, knowing that
concerted action was contemplated and invited, the distributors gave their adherence to the
scheme and participated in it.” 306 U.S. at 226–27; see also FTC v. Cement Inst., 333 U.S. 683,
716 n.17 (1948) (explaining that it is sufficient “if there is evidence that persons, with knowledge
that concerted action was contemplated and invited, give adherence to and then participate in a
scheme”).
The Supreme Court applied this same approach in United States v. Masonite Corp., 316
U.S. 265, 274–76 (1942). It held that the “circumstances surrounding the making of [bilateral
settlement contracts],” including that each competitor was “aware” that “its contract was not an
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isolated transaction but part of a larger arrangement,” left “no room for doubt that all had an
awareness of the general scope and purpose of the undertaking” sufficient to establish a broader,
single conspiracy. Id. Put simply, “[i]t is enough that a concert of action is contemplated and that
the defendants conformed to the arrangement.” United States v. Paramount Pictures, Inc., 334
U.S. 131, 142 (1948).
Many courts of appeals, including the Fifth Circuit, have applied Interstate Circuit. For
instance, in Gainesville Utilities Department v. Florida Power & Light Co., 573 F.2d 292 (5th
Cir. 1978), the Fifth Circuit pointed to evidence of a “continuous exchange of letters between
high executives” that showed “hopeful, if not expected, reciprocity” and led to “inferences [that]
are irresistible” that concerted action was both contemplated and invited. Id. at 301; see also
United States v. MMR Corp. (LA), 907 F.2d 489, 495 (5th Cir. 1990) (“It is enough that the
government shows that the defendants accepted an invitation to join in a conspiracy whose object
was unlawfully restraining trade.”). Other circuit courts have repeatedly applied similar analyses
under Interstate Circuit.9
The Fourth Circuit’s decision in United States v. Foley, 598 F.2d 1323 (4th Cir. 1979), is
instructive. In Foley, the Fourth Circuit applied Interstate Circuit to uphold price-fixing
9
See, e.g., In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 331-32 (3d Cir. 2010) (considering
whether, under Interstate Circuit, defendants’ decisions “presuppose concerted action”);
PLS.Com, LLC v. Nat’l Ass’n of Realtors, 32 F.4th 824, 843 (9th Cir. 2022) (“All that PLS must
allege is that [the defendant] adhered to a common scheme.”) (citing Interstate Circuit, 306 U.S.
at 227); Toys “R” Us, Inc. v. FTC, 221 F.3d 928, 935-36 (7th Cir. 2000) (citing Interstate Circuit
and inferring agreement among competitors in part “from the nature of the proposals [made by
an intermediary], from the manner in which they were made,” and “from the substantial
unanimity of action taken”); see also United States v. Apple, Inc., 791 F.3d 290, 316 (2d Cir.
2015) (“Apple understood that its proposed Contracts were attractive to the Publisher Defendants
only if they collectively shifted their relationships with Amazon to an agency model—which
Apple knew would result in higher consumer-facing ebook prices.”).
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convictions in a case where competitors raised prices after a host announced to his competitor
guests that, although he “did not care what the others did,” he planned to increase prices. Id. at
1331–32. Each of the individual defendants at the dinner also subsequently “expressed an
intention or gave the impression that his firm would adopt a similar change.” Id. at 1332.
In Foley, the defendants made their commitments at the same dinner, but that fact is not
necessary under Interstate Circuit. “It is elementary that an unlawful conspiracy may be and
often is formed without simultaneous action or agreement on the part of the conspirators.”
Interstate Circuit, 306 U.S. at 227. Indeed, in Masonite, “the District Court found that, in
negotiating and entering into the first agreements, each appellee, other than Masonite, acted
independently of the others, negotiated only with Masonite, desired the agreement regardless of
the action that might be taken by any of the others, did not require as a condition of its
acceptance that Masonite make such an agreement with any of the others, and had no discussions
with any of the others.” 316 U.S. at 274–75. But “as the arrangement continued, each became
familiar with its purpose and scope” and through their actions over the course of the year, the
record “le[ft] no room for doubt that all had an awareness of the general scope and purpose of the
undertaking,” which sufficed to establish concerted action under Section 1. Id. at 275. The scope
of permissible inferences from sequential public commitments that discuss industry-wide output
reduction targets depends on their nature and surrounding facts and circumstances, which cannot
readily be determined on the pleadings.
Further, it is irrelevant to the existence of concerted action that the alleged agreements at
issue in this case focus on “climate” issues. In “a civil action under the Sherman Act, liability
may be established by proof of either an unlawful purpose or an anticompetitive effect.” N. Tex.
Specialty Physicians v. FTC, 528 F.3d 346, 355 (5th Cir. 2008) (quoting Summit Health, Ltd. v.
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Pinhas, 500 U.S. 322, 331 (1991)) (emphasis added). Indeed, it is “well settled that good motives
will not validate an otherwise anticompetitive practice.” NCAA v. Bd. of Regents of Univ. of
Okla., 468 U.S. 85, 101 n.23 (1984); see also Giboney v. Empire Storage & Ice Co., 336 U.S.
490, 496 (1949) (“More than thirty years ago this Court said, . . . ‘It is too late in the day to assert
against statutes which forbid combinations of competing companies that a particular combination
was induced by good intentions.’” (citation omitted)). 10 Plaintiffs have alleged that the NetZero
Asset Managers Initiative and Climate Action 100+ initiative set forth a “common strategy” for
influencing corporate behavior in the energy industry, including “‘alignment metrics’ that set
specific target reductions for coal production.” Am. Compl. ¶¶ 115–117, 119, 130. Plaintiffs have
further alleged that “[b]y the end of 2021, . . . Defendants had committed to [this] common
strategy of ‘engaging’ with management of competing firms in the coal industry to obtain their
commitment to reduce carbon emissions substantially and requiring those firms to disclose their
compliance with those commitments,” id. ¶ 150, and that Defendants’ agreement is memorialized
in their public commitments to join the climate-change organizations’ initiatives, public
documents stating these organizations’ goals, and Defendants’ public commitments to align their
own investment engagement activities with these goals. Id. ¶ 4; id. ¶¶ 116, 129–131 (Net Zero
Asset Managers Initiative); id. ¶¶ 116–17, 119, 125–28 (Climate Action 100+). Such a common
corporate engagement plan creating restrictions on the portfolio companies’ separate and
competing businesses could satisfy the concerted-action element by “depriv[ing] the marketplace
of independent centers of decisionmaking” and “thus of actual or potential competition.” Am.
10
Nor can good intentions provide a defense to a violation of Section 7. See United States v.
Philadelphia Nat’l Bank, 374 U.S. 321, 371 (1963) (a merger violating Section 7 “is not saved
because, on some ultimate reckoning of social or economic debits and credits, it may be deemed
beneficial”).
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Needle Inc. v. NFL, 560 U.S. 183, 195 (2010) (citation omitted). Nor does it matter that the
common plan was allegedly effectuated through their joint participation in the Net Zero Asset
Managers Initiative and Climate Action 100+. Cf. Associated Press v. United States, 326 U.S. 1,
19 (1945) (“[A]rrangements or combinations designed to stifle competition cannot be immunized
by adopting a membership device accomplishing that purpose.”).
B. Anticompetitive Output Restraint Can Occur Even If Overall Output
Increases.
Defendants are also incorrect that, even if there were an agreement, Plaintiffs fail to
allege harm to competition because “coal production rose during” the alleged agreement. Defs.’
Joint Mot. to Dismiss at 19; but see Pls.’ Opp’n at 50–51 (disputing the analysis of production
output). Even assuming, arguendo, that output did increase overall, an agreement that restricts
output growth would be anticompetitive. In “establishing anticompetitive effect,” “[o]utput,
prices, and quality are compared to the levels that might be observed but for the challenged
restraints (a hypothetical scenario often referred to as the ‘but-for world’).” In re Payment Card
Interchange Fee and Merch. Disc. Antitrust Litig., 714 F. Supp. 3d 65, 83 (E.D.N.Y. 2024)
(citing Ohio v. Am. Express, 585 U.S. 529, 547–48 (2018)). Therefore, the relevant question is
not whether coal production rose, but whether production was lower than it would have been
without Defendants’ alleged agreement. If coal output grew more slowly due to Defendants’
conduct while, at the same time, profits for these coal companies rose, then Defendants’ restraint
harmed competition.
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CONCLUSION
In deciding the motions to dismiss, the Court should reject Defendant’s misstatements of
law.
Dated: May 22, 2025
Respectfully submitted,
/s/ Anupama Sawkar
/s/ David B. Lawrence
CLARKE T. EDWARDS
Acting Director, Office of Policy Planning
ABIGAIL A. SLATER
Assistant Attorney General
DANIEL GUARNERA
Director, Bureau of Competition
ROGER P. ALFORD
Principal Deputy Assistant Attorney General
ANUPAMA SAWKAR
Act. Deputy Director, Office of Policy Planning
MARK H. HAMER
WILLIAM RINNER
Deputy Assistant Attorneys General
KELSE MOEN
Deputy Director, Bureau of Competition
DAVID B. LAWRENCE
Policy Director
WILLIAM ADKINSON
Attorney Advisor, Office of Policy Planning
ALICE A. WANG
G. CHARLES BELLER
Counsels to the Assistant Attorney General
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Telephone: 202-779-6023
Facsimile: 202-326-2326
CA Bar No. 270936
E-mail: asawkar@ftc.gov
U.S. Department of Justice,
Antitrust Division
950 Pennsylvania Avenue, NW
Washington, DC 20530
Telephone: 202-532-4698
Facsimile: 202-514-0306
CT Bar No. 430642
E-mail: david.lawrence@usdoj.gov
Attorneys for the Federal Trade Commission
Attorneys for the United States of America
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CERTIFICATE OF SERVICE
I hereby certify that on May 22, 2025, I caused the foregoing to be filed through this
Court’s CM/ECF filer system, which will serve a notice of electronic filing on all registered
users, including counsel for all parties.
/s/ David B. Lawrence
28
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