Prosocial Antitrust

68 Pages Posted: 11 Mar 2021 Last revised: 20 Jun 2023

Date Written: March 11, 2021

Abstract

Antitrust law is at the center of today’s public debate. It has even emerged as a rare unifying force, with bipartisan promises to combat the concentration of economic power. Meanwhile, the business community is grappling with mounting systematic risks arising from climate change, income inequality, and the COVID-19 pandemic. Unexpectedly, the
largest asset managers in the world find themselves on the front lines of these battles. Due to the rise of index investing, these “universal owners” manage portfolios that are so large and diversified, their holdings mirror the entire economy. Their diversification protects them against idiosyncratic risk, but greatly exposes them to systematic risks.

The universal owners are keenly aware of their exposure to these risks. They are turning to their portfolio companies and increasing demands on directors and managers to “serve a social purpose” and reduce their negative externalities. Public-regarding pronouncements from CEOs of Wall Street’s biggest firms ring hollow to many shareholder
primacy loyalists. But the skeptics downplay the economic logic underlying this paradigm shift—diversified shareholders do not want companies to externalize their negative impacts onto the rest of the investors’ portfolios.

Many companies are rising to the challenge and making bold commitments. Some are recognizing that, to overcome pervasive social and environmental challenges, they must collaborate with their competitors. This Article reveals that current antitrust law is a barrier to this collaboration and offers a policy proposal for aligning antitrust law with the
demands upon the prosocial corporation. The COVID-19 pandemic has reminded us that we are all interconnected. Climate change will continue to deepen that understanding. The problems we face are difficult, but they are not insurmountable. To solve them, however, antitrust law must empower more collaboration.

Keywords: Antitrust, Corporate Purpose, ESG, Corporate Governance, Systematic Risk, Corporate Sustainability

JEL Classification: K21, K22

Suggested Citation

Miazad, Amelia, Prosocial Antitrust (March 11, 2021). Hastings Law Journal, Hastings Law Journal, Vol. 73, No. 6, 2022, Available at SSRN: https://ssrn.com/abstract=3802194 or http://dx.doi.org/10.2139/ssrn.3802194

Amelia Miazad (Contact Author)

UC Davis School of Law ( email )

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