Eric Posner ‘Policy Implications of the Common Ownership Debate’ (2021) University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 922

The debate over common ownership has raised questions about what, if any, policy responses are appropriate when common owners reduce competition in product markets. This paper, available here, reviews the literature on policy responses and evaluates various reform proposals in light of recent empirical and theoretical developments. A first section frames the discussion. Common ownership theories of harm have attracted their fair share of criticisms. One group of criticisms centred around the question of “mechanism”: what was the mechanism with which institutional investors compelled portfolio firms to raise prices and reduce output? Moreover, some researchers have found statistical or anecdotal evidence that common ownership produces social benefits by internalising positive externalities across firms, like those that are due to research. Policymakers must therefore confront three questions. First, is the time ripe for intervention or should they wait for more academic work to create a larger consensus among independent academics about the empirical effects of common ownership? Second, if or when…

Einer Elhauge ‘How Horizontal Shareholding Harms Our Economy—And Why Antitrust Law Can Fix It’ (2020) 10 Harvard Business Law Review 10(2) 207

This article, available here, argues that new economic proofs and empirical evidence show that horizontal shareholding in concentrated markets often has anticompetitive effect. The piece also develops new legal theories for tackling the problem of horizontal shareholding. When horizontal shareholding has anticompetitive effects, it is illegal not only under Clayton Act §7, but also under Sherman Act §1. Anticompetitive horizontal shareholding also constitutes an illegal agreement or concerted practice under EU Treaty Article 101, as well as an abuse of collective dominance under Article 102. Part I describes how new proofs and empirical evidence have confirmed that high levels of horizontal shareholding in concentrated product markets can have anticompetitive effects, even when each individual horizontal shareholder has a minority stake. The last few years have seen a deluge of studies – involving economic modelling and empirical research – demonstrating how overlapping horizontal shareholding can lead to anticompetitive effect, even when each individual horizontal shareholder has a minority stake and without…

Anna Tzanaki ‘Varieties and Mechanisms of Common Ownership: A Calibration Exercise for Competition Policy’ (forthcoming)

Minority shareholdings have been on the regulatory agenda of competition authorities for some time. Recent empirical studies, however, draw attention to a new, thought provoking theory of harm: common ownership by institutional investors holding small, parallel equity positions in several competing firms within concentrated industries. The European Commission has already made use of the common ownership theory in its merger enforcement practice, while the US antitrust agencies have proposed amending their merger control reporting thresholds to account for aggregate institutional holdings. This paper, available here, reviews common ownership from the perspective of merger control. It starts with a novel distinction between two types of common ownership – ‘concentrated’, which broadly fits within existing concepts in merger control; and ‘diffuse’, which broadly encompasses the instances of common ownership that avoid merger scrutiny in jurisdictions that rely on control-based thresholds. It is this latter form of common ownership that preoccupies the contemporary debate, and falls through the gaps of competition law. The…