Abstract
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. While critical voices abound, EU and U.S. antitrust agencies closely follow these developments indicating an appetite to act. This article connects the common ownership debate to merger control and explores: i) the aims and scope of legal control as regards partial acquisitions in different jurisdictions; ii) the nature of potential competition effects arising from passive minority shareholding; and iii) the plausibility of common owners’ anticompetitive strategies from a corporate governance perspective. Drawing a distinction between “concentrated” and “diffuse” common ownership, it sheds light on the different supporting mechanisms and varying harm potential of each variety. “Passive influence” mechanisms characterizing “diffuse” common ownership may not only generate plausible and material competition concerns in given circumstances but present challenges for the effective jurisdictional and remedial design of merger law frameworks. Competition policy should stay current by explicitly recognizing these novel insights in enforcement practice and developing guidelines on how to treat common ownership cases in the future.
Highlights
Minority shareholdings have been on the regulatory agenda of competition authorities for some time
Rival firms that are formally separate entities as a matter of corporate form and are not part of the same business group based on majority corporate control (“single economic entity” doctrine) may still be interrelated due to structural links such as common minority shareholdings, debt holdings or interlocking directorates that could potentially influence their conduct even if these links do not give rise to a merger. 49
64 We focus on the case of a single common owner-controller of the merging firms for simplicity of exposition and for easier comparison to the attributes of the concentrated and diffuse varieties of common ownership
Summary
Minority shareholdings have been on the regulatory agenda of competition authorities for some time. Rival firms that are formally separate entities as a matter of corporate form and are not part of the same business group based on majority corporate control (“single economic entity” doctrine) may still be interrelated due to structural links such as Commenting on the U.S Dairy Farmers case, scholars have criticized the unilateral effects theory of harm based solely on competitive incentives and a diversion (cost-benefit) analysis as too open-ended, over-inclusive and not accounting for complicating real-world factors.
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