DOJ Antitrust Division Withdraws 1987 Business Review Letter for Proxy Adviser
Commentary by Steven Lofchie
The DOJ Antitrust Division withdrew a 1987 business review letter issued to proxy advisory firm Institutional Shareholder Services (“ISS”), stating the letter no longer reflects the proxy adviser's business practices or the division's view of them.
A business review letter is not a grant of immunity. As the division noted in announcing the withdrawal, such a letter states only its enforcement intention as of the date it is issued, and the division remains free to bring any action it later concludes that the public interest requires. The 1987 letter said only that the department had no current intention to sue. The division said the 1987 letter rested on an understanding that ISS would advise clients on voting rights for corporate governance issues, and that the letter expressly excluded services directed at corporate operations or activities. Corporate consulting that ISS now offers alongside its proxy voting services falls outside the letter's scope, the division said, adding that the original understanding may run contrary to the company's business model today.
The division did not announce a finding that ISS violated the antitrust laws, did not disclose an investigation, and imposed no remedy. The division said ISS, which it described as foreign-owned, wields enormous influence over corporate governance issues and policies through its proxy voting services. It said ISS and Glass Lewis & Co. together control more than 90 percent of the proxy advisory market, and that their clients' holdings represent a significant ownership stake in the largest publicly traded U.S. companies. That concentration, the division said, raises significant competition concerns, a point it gave as an additional ground for withdrawing the letter. Glass Lewis is not a subject of the withdrawal.
The division said proxy advising is not inherently problematic and that voting lawfully in accordance with advisory recommendations does not, standing alone, raise competition concerns. It said it remains committed to competition in the proxy advisory market and to reducing barriers to entry.
The withdrawal took effect immediately as of August 5, 2026.
Commentary
The SEC had a very uncharacteristic relationship with the proxy advisory firms during Gary Gensler's term as chair. In 2021, Mr. Gensler, of his own authority and without formal commission approval, killed regulations that were to come into effect in order to regulate proxy advisers. (See SEC Chair Gary Gensler Directs Staff to Reconsider Proxy Rule Changes; Republican Commissioners Dissent.) Reducing regulation is an act that was wholly unusual for Mr. Gensler, and he never explained why he took the actions that he did.