What's Happening?
The U.S. Department of Justice's Antitrust Division has withdrawn a 1987 Business Review Letter issued to Institutional Shareholder Services (ISS), a major proxy advisory firm. This decision reflects changes in ISS's business practices, which now include
corporate consulting services not covered by the original letter. ISS, along with Glass, Lewis & Co., controls a significant portion of the proxy advisory market, influencing corporate governance decisions for many of the largest publicly traded companies in the U.S. The withdrawal of the letter indicates the Justice Department's concern over the concentration of market power and its potential impact on competition.
Why It's Important?
The withdrawal of the Business Review Letter underscores the Justice Department's commitment to maintaining competitive markets, particularly in industries with significant influence over corporate governance. Proxy advisory firms like ISS play a crucial role in advising shareholders on voting decisions, which can shape corporate policies and practices. The Justice Department's action signals increased scrutiny of market concentration and the potential for anticompetitive behavior. This move could lead to further regulatory actions aimed at ensuring fair competition and preventing market dominance by a few key players.
What's Next?
The Justice Department's decision may prompt ISS and other proxy advisory firms to reassess their business models and practices to ensure compliance with antitrust laws. Additionally, this action could lead to increased regulatory oversight of the proxy advisory industry, potentially resulting in new guidelines or regulations to address competition concerns. Stakeholders in the corporate governance sector will likely monitor these developments closely, as they could have significant implications for how proxy advisory services are provided and utilized.
