On the heels of the federal antitrust probe that Dave wrote about earlier this month, the Florida Attorney General also has now announced an enforcement action against ISS and Glass Lewis – alleging violation of state consumer protection and antitrust laws. Here’s more detail about the complaint, as summarized by the AG’s announcement:

The lawsuit outlines how ISS and Glass Lewis—who together control almost the entire proxy-advisory industry—assured investors, pension funds, and Florida’s more than one million retirement participants that their recommendations were objective and evidence-based. Instead, the firms allegedly injected controversial environmental, social, and governance (ESG) demands into nearly every voting recommendation they delivered, pressuring companies to adopt race- and gender-based quota policies, ideological climate mandates, and other directives that expose businesses to legal and financial risk. The complaint alleges that the two firms did not simply arrive at these positions independently—they acted in lockstep, standardized their products, and denied consumers any meaningful alternative in a market they dominate.

The lawsuit asserts that Florida’s consumers, businesses, and retirees were misled about the nature and purpose of these recommendations, many of which are untethered from traditional financial analysis. The complaint also alleges that ISS and Glass Lewis made material omissions, pushing corporate actions that could violate federal law while claiming that their guidance supported good governance and regulatory compliance.

The Florida Attorney General had announced an investigation into ISS and Glass Lewis earlier this year, and this litigation adds to the challenges that ISS and Glass Lewis have filed in Texas against a state law that would make it difficult for them to provide “non-financial” recommendations. Earlier this year, the proxy advisors won a court battle against the SEC’s attempt at regulating them on the basis of their recommendations being a “solicitation.” But when it comes to that traditional business model, it currently looks like they might be losing the war.

– Liz Dunshee