Common ownership: an EU perspective

Abstract

Abstract Recent antitrust scholarship has claimed that parallel investments by institutional investors in competing firms may harm competition. Proponents of this theory, dubbed ‘common ownership’, posit that harm may arise even with small shareholdings, particularly in oligopolistic markets. Although the debate has been focused on the U.S., the European Commission recently invoked common ownership as an ‘element of context’ in two merger decisions. This article examines common ownership through a European lens. A threshold issue will be whether levels of common ownership in Europe are comparable to those in the U.S.; the available evidence suggests they are not. We note a number of misconceptions about the asset management industry, putting in doubt core elements of the common ownership hypothesis. We review the academic debate in which the theory has been vigorously contested on both methodological and theoretical grounds. We review the battle between empirical studies claiming to demonstrate and to disprove common ownership effects. The article considers whether the theory is sufficiently robust to provide a basis for enforcement, and (if so) whether current European Union competition law tools could be used to that end. The European Commission’s invocation of common ownership is subjected to critical evaluation. We conclude that it is premature to draw any conclusions as to the reality of alleged common ownership concerns or to base enforcement efforts on them. Until a better understanding of the underlying facts and a broad academic consensus emerge, reform prescriptions that have been advanced are a solution in search of a problem—to say nothing of the conflicts that would arise with other rules governing asset management.