Red Lobster, the seafood chain whose cheddar biscuits and bottomless shrimp specials have long captivated the American palate and pocketbook, filed for Chapter 11 bankruptcy protection Sunday.

The behemoth of casual dining, which abruptly shuttered dozens of locations last week, has floundered in recent years, beset by managerial missteps, the impact of a sale to a private equity firm a decade ago and, most recently, its inability to bounce back after pandemic closures battered the restaurant industry.

In a court filing, the Orlando, Fla.-based company said it has more than 100,000 creditors and between $1 billion and $10 billion in estimated liabilities. The chain said it saw a net loss of $76 million during the last fiscal year alone.

“This restructuring is the best path forward for Red Lobster,” Chief Executive Jonathan Tibus said in a statement.

The chain said its remaining locations — about 580 across the U.S. and Canada, as well franchise locations in a handful of other countries — will operate as usual throughout the bankruptcy process.

Despite its dire situation, the chain painted itself in court papers as a diminished but still powerful company.

“Today, Red Lobster is the largest casual dining seafood chain in the United States,” the filing says — with “the largest” underlined for emphasis. The chain purchases 20% of all North American lobster tails sold, it said, and more than 15% of the world’s supply of rock lobster.

But the company acknowledged that its performance has deteriorated in recent years. In the bankruptcy filing, it says that the number of customers each year has dropped by nearly a third since 2019.

Several factors contributed to losses last year, the company said, including market forces, such as inflation, and above-market rates paid for rent at several locations.

For years, Red Lobster, which was founded in 1968 in Lakeland, Fla., was owned by Darden Restaurants, the company that owns Olive Garden and LongHorn Steakhouse. In 2014, Darden sold the chain to Golden Gate Capital, a San Francisco private equity firm, for more than $2 billion.

As part of that sale, Red Lobster agreed to spin off its real estate assets in a sale-leaseback transaction, requiring the chain to pay rent for locations it once owned. Last year, Red Lobster shelled out more than $190 million in lease obligations, according to the bankruptcy filing.

Another serious misstep: last year’s “Ultimate Endless Shrimp” promotion for $20.

During a presentation last year, Ludovic Garnier, chief financial officer of Thai Union Group, a seafood conglomerate that eventually took over the equity firm’s stake in Red Lobster, blamed the shrimp deal in large part for an operating loss of about $11 million during the third quarter.

Debtors are investigating the circumstances surrounding the promotion, bankruptcy records show.

While a single bungled promotion wouldn’t fell a company unless it was already teetering, the all-you-can-eat deal was a blunder, experts say.

Red Lobster launched the promotion as consumers were on the hunt for a good deal, said Jim Salera, a research analyst at Stephens who tracks the restaurant industry. Instead of accomplishing what the company had hoped for — enticing swaths of people who would buy pricey drinks, desserts and other add-on charges or those who would become brand loyalists — the promotion was viewed by many consumers as a challenge, Salera said.

“People were literally going in to just eat the endless shrimp and maybe a Diet Coke,” he said. “They’re really not engaging with the brand; they’re engaging with the price point.”

Exxon Mobil can’t say it wasn’t warned.

Having opted to continue its lawsuit against two activist investor groups even after they withdrew a shareholder proposal the company management opposed, the giant oil company had gotten flayed by shareholder advocates for its bullying.

Now the big shoe has dropped: CalPERS, the largest public pension fund in the nation, announced Monday that it will vote against all 12 Exxon Mobil board members, including CEO Darren Woods, at the May 29 annual meeting.

CalPERS says it’s acting because it judges the company’s campaign against the two investor groups to be “designed to punish” investors who “dared to speak truth to power.”

The pension fund says, “the repercussions of the lawsuit could be devastating….If ExxonMobil succeeds in silencing voices and upending the rules of shareholder democracy, what other subjects will the leaders of any company make off limits? Worker safety? Excessive executive compensation?”

The announcement is a major step up from the pension fund’s earlier comments about its intentions. Michael Cohen, the CalPERS chief operating investment officer, had earlier said only that the fund was considering voting against Woods.

Voting against the entire board and publicly urging other investors “to do the same,” appreciably raises the stakes for Exxon, at least theoretically. CalPERS — the California Public Employees’ Retirement System — is an institutional investor to be reckoned with. The $496-billion fund owns about $1 billion in Exxon Mobil shares.

Exxon Mobil’s lawsuit “is a real problem for us as share owners,” CalPERS CEO Marcie Frost said during a press conference Monday. “We believe that our voice matters, that we should be able to provide proxy solicitations asking the company to be more transparent in certain areas.”

Exxon called CalPERS’ action “a poor fiduciary decision.” The company said through a spokesperson, “It’s unclear why CalPERS is spending their time and energy defending the abuse of a shareholder process…Far from having a chilling effect on shareholder proposals, our efforts are intended to get clarity on the rules to foster an environment for open and meaningful shareholder dialogue. If anything, CalPERS’ vote against our entire board appears to be an attempt to ‘chill’ shareholder voices.”

As I reported last week, in February Exxon Mobil sued the U.S. investment firm Arjuna Capital and Netherlands-based green shareholder firm Follow This to keep a shareholder resolution they sponsored from appearing on the agenda of its annual meeting. The resolution was a plain-vanilla environmental proposal urging the company to work harder to reduce the greenhouse gas emissions of its products and to be more transparent about the impact of its business on the climate.

Days after the company sued, the shareholders, calculating their relative strength against the oil behemoth, withdrew the proposal and pledged not to refile it in the future. That rendered the lawsuit moot — but the company has refused to drop it.

What makes the lawsuit seem especially cynical is that the investors’ proposal, like all such proposals, are not binding on management — they’re advisory only. Moreover, as Frost pointed out, similar proposals in 2022 and 2023 failed to garner majority support from shareholders, winning only 10.5% of votes in 2022 and 27% last year.

“Exxon won,” Frost said.

It’s unlikely that CalPERS’ action will result in the board’s ouster. As CalPERS CEO Marcie Frost noted during a press conference Monday, no alternative slate of directors has been named for the upcoming annual meeting, so it would be “very difficult to say we’re turning over this board.”

But she said the fund’s vote is “more than symbolic” — it’s more about “sending the appropriate messages to this about their responsibilities in governance; if they don’t want to deal with governance they should step aside.”

Although CalPERS supported a slate of activist board members nominated in 2021— three of the four nominees won board seats — the fund said it is voting against the entire board because it is “allowing Chief Executive Officer Darren Woods to pursue a reckless and destructive effort.”

Frost said CalPERS isn’t contemplating taking a more aggressive action against Exxon Mobil, such as divesting its shares. “The problem with divestment when you’re CalPERS is that you completely lose your voice. The moment you don’t own shares, you can’t sign on to other owners’ proposals, you can’t take action to say we don’t believe that executive compensation is commensurate with the performance of the company.”

Exxon Mobil asserts in its lawsuit that the investment funds’ proposed resolution breached standards set forth by the Securities and Exchange Commission governing the propriety of such resolutions — it was related to “the company’s ordinary business operations” and closely resembled resolutions on similar topics that had failed to exceed threshold votes at the 2022 and 2023 annual meetings. Both standards allow a company to block a resolution from the meeting agenda, or proxy.

That may be so, but the conventional practice is for managements to seek approval from the SEC to exclude such resolutions by requesting what’s known as an agency “no action” letter.

CalPERS says that would have been “the better option” than a lawsuit. It’s not as though the SEC had set a high bar to issuing “no action” letters — the pension fund observes that the agency has approved two-thirds of those requests so far this year. Frost conjectured that, given the poor showing of similar proposals in the recent past, the SEC probably would have allowed the company to exclude the latest proposal from the annual meeting proxy.

Exxon Mobil’s rationale for continuing the lawsuit is that the proposal rules “must be enforced or the abuse by activists masquerading as shareholders will continue threatening the system.”

Frost questioned the company’s position. She described Exxon Mobil’s goal in the lawsuit as obtaining “clarity around the ordinary business” standard. But “to me it doesn’t feel like ‘clarity’; it feels like diminishment” of shareholder voices. As for the company’s insinuation that the system is broken, she said, “the system is working, if you use the system.”

As lawmakers and regulators in the U.S. consider policy born of their Big Tech concerns such as data privacy and artificial intelligence, they should carefully consider how such changes could end up trampling the small and midsize businesses that drive innovation and competition.

While policymakers may have Google and Facebook in mind, the actual policies could unintentionally create new regulatory burdens that could deter investment in smaller businesses and prevent new companies from emerging. For example, calls to end Section 230 — part of a 1996 law that protects internet companies from some lawsuits — portray it as a handout to Big Tech, when in practice it would mean new social media companies would face liability early on, making it more difficult to compete and discouraging them from carrying user-generated content that provides new opportunities or ways of connecting.

In this way, regulations that policymakers may think target Big Tech could ultimately serve the biggest companies by placing increasing burdens on potential competitors.

In the U.S., the government has generally taken a hands-off approach to the technology industry, keeping barriers to entry low and fostering entrepreneurship. Today’s leading companies were once small startups, and regulators’ light touch allowed them to flourish, creating benefits for consumers that could not have been predicted. The economy and consumers need this approach to continue so today’s startups have a chance as well.

We can see this theory play out in the real world. Europe has taken a significantly different approach to technology policy, which has stifled small businesses. For example, after a European privacy law, the General Data Protection Regulation, went into effect in 2018, investment in small and startup businesses decreased, largely out of concerns that small companies would struggle to comply with the new rules.

In the short run, such investment decreased by 36%, and large players gained market share in the advertising sector. One effect of the regulation, according to a National Bureau of Economic Research study, is a “lost generation” of innovation; smartphone app stores have added nearly one-third fewer applications.

To protect consumers from exploitation by Big Tech, some policymakers in the U.S. have been flirting with a more European approach. However, many proposed policy changes would increase compliance costs or liability burdens on newer and smaller players that might not be able to afford them. This includes state-level data privacy policy that risks creating a burdensome and costly patchwork as well as calls by senators to impose AI licensing.

Beyond issues that have compliance costs such as data privacy and AI, some critics of Big Tech have called for antitrust enforcement to protect small businesses from the “kill zone” — the window of time in which a growing startup is bought by a big company before it can become a rival to that company. These critics also call for changes that would potentially limit mergers or acquisitions.

But this approach creates a false dichotomy between “big” and “small” business that misunderstands the way the startup ecosystem works. This strategy could hurt small businesses in many ways. Some may want to grow into challengers, but others were created with the hope of being sold; investors in startups are often looking for the right moment for the company to be acquired so they can recoup their money. That’s valid too; this cycle leads to more investment and more innovation.

Blocking mergers and acquisitions could force small businesses to stay small, or, worse yet, it could push them out of business. Antitrust rules that are preoccupied with curbing Big Tech would end up hurting the industry, the economy and consumers.

We saw this play out recently when regulators blocked Amazon’s acquisition of IRobot. The result is most likely not renewed competition but that consumers will have fewer options as IRobot faces a dire financial situation and lays off workers. If further burdens to mergers and acquisitions and a shift away from the focus on consumers continue, this could become a more frequent phenomenon, to the detriment of both small businesses and consumers.

Small businesses and startups play an important role in the tech ecosystem and have flourished under the light touch of U.S. regulators. After decades of experience, allowing policy to be shaped by today’s enmity toward Big Tech would be a dangerous swerve and could have unintended consequences for startups and consumers.

Jennifer Huddleston is a senior fellow in technology policy at the Cato Institute and an adjunct professor at George Mason University’s Antonin Scalia Law School.