The Justice Department's Antitrust Division withdrew a 1987 letter, signaling potential enforcement action against Institutional Shareholder Services (ISS). This change affects the regulatory framework surrounding proxy advisory market power. Companies relying on proxy advisory services are immediately affected, with the most significant practical consequence being potential changes in proxy voting recommendations. The division's stance on concentration of market power in the proxy advisory industry is now clearer.

Full News Breakdown

The Justice Department's Antitrust Division withdrew a 1987 letter, citing "significant competition concerns" about the concentration of proxy advisory market power.

• Primary Legal Issue: Concentration of proxy advisory market power

• Statutes Cited: Not specified

• Court: Not applicable

• Practical Outcome: Potential enforcement action against Institutional Shareholder Services

How Does This Affect You?

The Justice Department's action clarifies its stance on concentration of market power, creating a compliance obligation for companies relying on proxy advisory services. These companies may wish to review their proxy voting recommendations and consider potential changes due to antitrust enforcement. The shift means lawyers may find it useful to assess potential antitrust enforcement risks under Section 2 of the Sherman Act.

For Lawyers & Advocates

• Review of pending client matters involving proxy advisory services may reveal potential antitrust enforcement risks under Section 2 of the Sherman Act.

• Lawyers may consider drafting changes to proxy statements and voting recommendations to take into account potential new regulations.

• Clients may want to be advised on the potential impact of antitrust enforcement on their use of proxy advisory services, including potential implications for compliance with antitrust regulations.

• The use of the 1987 letter as precedent in advising clients on proxy advisory services may be reevaluated, considering the potential for changed regulatory interpretation.

• Companies' risk of non-compliance with antitrust regulations may be assessed, including the potential for enforcement action under the Securities Exchange Act of 1934.

For Law Students

The decision provides an opportunity to examine how courts review regulatory power, specifically in the context of monopolization under Section 2 of the Sherman Act. The core legal doctrine to focus on is the concept of concentration of market power and its implications for antitrust enforcement.
The decision is particularly relevant for the study of:

• Antitrust Law

• Securities Regulation

• Monopolization cases

• Regulatory compliance
  Comparison to United States v. Grinnell Corp. (1960) and Verizon Communications Inc. v. Law Offices of Curtis V. Trinko (2004) illuminates the doctrinal question of how courts interpret and apply Section 2 of the Sherman Act in cases involving concentration of market power.

For Businesses

Companies relying on proxy advisory services may want to consider potential changes in proxy voting recommendations due to antitrust enforcement. Boards of directors may find it useful to review their proxy voting policies and adjust them in light of potential changes in proxy advisory services. General Counsel may want to assess the potential implications of antitrust enforcement for their companies, including potential changes to internal documentation and filing processes. Companies may wish to review their disclosure requirements under the Securities Exchange Act of 1934.

Key Takeaways

• The Justice Department's Antitrust Division will consider enforcement action against companies with concentrated proxy advisory market power.

• Lawyers may find it useful to advise clients on potential changes in proxy advisory services due to antitrust enforcement.

• The Justice Department's Antitrust Division may take enforcement action against companies with concentrated proxy advisory market power, including under Section 2 of the Sherman Act.

• The Justice Department's Antitrust Division's upcoming actions regarding proxy advisory services may influence the development of proxy advisory market power regulations.

• Companies may wish to review their proxy voting policies and procedures before the next proxy season, taking into account potential new regulations.

Source: DOJ Pulls ISS Letter, Signals Possible Antitrust Enforcement