State AGs caution Financial Services Climate Group members about potential antitrust law violations.
Attorneys General Warn Net Zero Financial Service Providers Alliance of Potential Antitrust Violations
Attorneys general from 22 U.S. states have sent a letter to members of the Net Zero Financial Service Providers Alliance (NZFSPA), cautioning them about potential violations of state and federal antitrust laws. The letter, authored by Tennessee Attorney General Jonathan Skrmetti, emphasizes the importance of fair competition and the negative impact collusion can have on consumers.
The NZFSPA is a global alliance of accounting firms, rating agencies, stock exchanges, consultancies, and other service companies. Its members have pledged to align their services and products with the goal of achieving net zero greenhouse gas emissions by 2050 or sooner.
The NZFSPA is part of the UN-sponsored Glasgow Financial Alliance for Net Zero (GFANZ), which states that it is “a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy.” Other groups under the GFANZ umbrella include the Net Zero Asset Managers initiative (NZAMi), the Net Zero Banking Alliance (NZBA), the Net Zero Insurance Alliance (NZIA), and the Net Zero Asset Owners Alliance (NZAOA).
These alliances aim to align the entire global financial industry with the objective of reducing the production of oil, coal, and natural gas.
However, the issue these members face is that their collective action may be in violation of U.S. antitrust laws, including the Sherman Antitrust Act of 1890, which prohibits collusion among companies or industries. The “consumer welfare standard” in antitrust law also considers the harm caused to consumers through restricted competition or increased prices.
According to the state AGs’ letter, both federal and state laws broadly prohibit business competitors from engaging in concerted action that restrains trade or commerce.
“Accordingly, collective agreements to ‘restrict production, sales, or output’ are almost always illegal,” the AGs wrote. “Similarly, ‘an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power.’”
Similar letters were sent in May by 23 state AGs to 28 insurance companies that were members of the NZIA. Since the beginning of this year, half of the members of NZIA dropped out, in part over concerns about antitrust actions.
This effort was led by the attorneys general of Louisiana, Jeff Landry, and Utah’s Sean Reyes.
Vanguard, one of the world’s largest asset managers, dropped out of NZAM in December 2022.
“We’ve seen some companies when they realize that what seemed like a good idea and a noble cause was actually a potential antitrust violation, they’ve withdrawn from the alliances,” Mr. Skrmetti said.
“It’s been a long time since many of these companies have faced serious antitrust inquiries, and it may be that they just weren’t thinking in terms of potential exposure.”
“They think, ‘Hey, we’re helping the environment,’ but the way that this is structured, it’s really limiting consumer choice by moving a big part of the industry all in the exact same direction,” he said.
“Once they got a proper understanding of what they were doing, I think perhaps many of them decided it was not worth the risk.”
The AGs’ letter to members of the NZFSPA demands that they respond by Oct. 13 and provide detailed information about their commitments and communications related to the alliance.
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