FTC Wields Unique Tools for Antitrust Probe of Glass Lewis, ISS

The Federal Trade Commission’s broad authority to probe unfair competition uniquely positions the agency to investigate two dominant firms that guide shareholder voting at companies’ annual meetings, an ongoing target of conservatives.

Glass, Lewis & Co. and Institutional Shareholder Services Inc. are by far the biggest providers of advice to pension funds and other large investors on how to vote their shares. Republicans and business leaders have long said the proxy advisory firms’ recommendations have too much influence on shareholder voting and raised concerns about conflicts of interest.

The Trump administration is now throwing institutional power behind those complaints through the FTC, which is probing whether the firms breached US antitrust laws by guiding shareholders on how to vote on politically charged topics such as environmental and social issues.

The agency is empowered by Section 5 of FTC Act, which reaches beyond the antitrust-focused Sherman and Clayton acts, giving it broad authority to challenge various types of unfair conduct, subtle or emerging, that negatively impacts competition.

“The FTC’s enforcement mandate is more flexible and adaptable to deal with new commercial situations,” said William Kovacic, who was FTC chairman under President George W. Bush and is now a law professor at George Washington University. “The DOJ does not have a mandate like this.”

The FTC and Glass Lewis didn’t respond to requests for comment. ISS declined to comment on the investigation. Both firms have said they provide objective guidance that their customers can use—or ignore.

The investigation is consistent with FTC Chairman Andrew Ferguson’s responsiveness to the White House, said Stephen Calkins, professor at Wayne State University Law School and a former general counsel of the FTC under President Bill Clinton.

“Maybe he just raised his hand and said ‘I’m happy to do that,’” Calkins said. “It may simply be pleasing your masters up on Capitol Hill and checking the box that you’ve done an investigation.”

Long Backlash

Glass Lewis and ISS have faced criticism for years from executives and Republican lawmakers, with Elon Musk and Senate Banking Committee Chairman Tim Scott (S.C.) launching new attacks in recent months. Musk called the proxy advisory firms “corporate terrorists” in October, while Scott and other Republican senators started scrutinizing them over potential political bias and conflicts of interest in May. The White House also is reportedly considering an executive order to restrict proxy firms.

ISS and Glass Lewis have drawn “broad concern among conservatives,” said David Burton, a senior fellow at Heritage Foundation, who has urged the Trump administration to probe whether the firms violated antitrust law to dominate the proxy advice industry.

Burton made the pitch earlier in “ESG, DEI, and What to Do About Them,” a 2024 Heritage blueprint for government action against environmental, social, and governance issues and diversity, equity, and inclusion matters.

The report followed the group’s Project 2025, the widely adopted policy guide created for the Trump administration.

The Republican-led House Judiciary Committee also has been looking into potential antitrust law violations by ISS and Glass Lewis, launching its own investigation in March.

“Is there a violation? If not, there’s not,” Burton said. “That doesn’t necessarily mean everything they’re doing is great.”

Section 5 Power

Section 5 has been challenged by the business community over its broad scope—in the context of the Biden administration’s noncompete ban—but remains intact as one of the FTC’s broadest tools.

Under Section 5, the FTC can challenge unfair practices by filing a complaint in an administrative forum. The FTC can enforce consent decrees with businesses and other entities that engage in unfair practices that harm consumers—if defendant companies violate orders coming out of the administrative forum, the FTC can go to court to seek civil penalties.

“This is more likely being investigated under the Section 5 theory,” Robin Crauthers, an antitrust partner with McCarter & English LLP, said of the proxy services probe. “There’s enough smoke here. What we haven’t seen is the fire yet.”

Should the FTC’s probe proceed, the goal will be to find clear evidence of misconduct, Calkins said.

For instance, the agency might find clear evidence that one firm got on the phone with the other and said we are thinking of recommending that people vote in a specific way over a climate initiative and “it really would be great if you could make the same recommendation,” Calkins said.

That kind of thing would be a “smoking gun,” Calkins said, even if it’s not a classic antitrust violation. “A classic antitrust violation would be you’re raising prices or you’re lowering output. This would be a slightly novel claim.”

Besides using its expansive power, the FTC may have taken the reins because the DOJ has become “so politicized that judges are no longer giving it the kind of respect that it once had,” he said.

Calkins noted that the Justice Department is also under a lot of scrutiny with its indictment of former FBI Director James Comey and its case against New York Attorney General Letitia James.

Changing Business Practices

The aim of the FTC probe may be to simply draw attention to these firms and pressure them to adjust their own practices, Crauthers said.

Glass Lewis has already announced that it would no longer provide a single view on how investors can vote in 2027.

ISS could follow suit, although a spokesperson for the firm told Bloomberg Law it has no plans to do so.

Calkins added that the two firms could also defend themselves by saying “look, we are doing something that is entirely legal, and we’re not going to go off and agree to any kind of consent decree.”