The Role of Non-Coordinated Effects in the Assessment of Minority Shareholdings

ZWeR, Journal of Competition Law, 2016, Forthcoming

14 Pages Posted: 5 Mar 2016 Last revised: 3 Aug 2016

See all articles by Frank P. Maier-Rigaud

Frank P. Maier-Rigaud

ABC economics; IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods

Ulrich Schwalbe

University of Hohenheim

Felix Forster

University of Warwick - Economics

Date Written: March 15, 2016

Abstract

Following the standard (acquisition of control) merger logic, merger control regimes have typically treated horizontal minority shareholdings as a matter of coordinated effects. As in a standard horizontal merger case, the transaction implies full control of the target firm and joint profit maximization post-merger, it is easy to see the acquisition of minority shares being analysed as a matter of information flows and influencing conduct. In that sense, competitive effects of shareholdings are not systematically different from a standard merger, although the effects of the shareholding are attenuated by the more limited degree of influence exerted by the minority shareholder. This has led to a focus on the acquired rights of minority shareholders in an effort to gauge the actual influence that such a shareholder may exert on the company. In other words, the focus has been on coordinated effects resulting from the influence of the minority shareholder to the detriment of a non-coordinated effects analysis. This article focusses on the non-coordinated effects of minority shareholdings in oligopolistic markets. It is demonstrated that minority shareholdings even when they fall below the usual thresholds can lead to a significant impediment of effective competition (SIEC) on a purely non-coordinated basis. This is particularly likely in a market with differentiated products, when a firm partially acquires shareholdings in its closest competitor and when the next best alternative products are only weak substitutes. While share thresholds may be a decent rough proxy for coordinated effects to the extent that they convey different degrees of direct influence, it is shown that such thresholds are much less meaningful in the context of non-coordinated effects as general market conditions and in particular closeness of competition, which is independent of the magnitude of the shares, becomes much more important.

Keywords: horizontal shareholdings, minority shareholdings, financial shareholdings, passive shareholdings, funds, UPP, GUPPI, coordinated effects, non-coordinated effects, unilateral effects, merger control, closeness of competition

JEL Classification: K21, L40, L50

Suggested Citation

Maier-Rigaud, Frank P. and Schwalbe, Ulrich and Forster, Felix, The Role of Non-Coordinated Effects in the Assessment of Minority Shareholdings (March 15, 2016). ZWeR, Journal of Competition Law, 2016, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2741584

Frank P. Maier-Rigaud (Contact Author)

ABC economics ( email )

Berlin, 10115
Germany
10115 (Fax)

HOME PAGE: http://www.ABCecon.com

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

Socle de la Grande Arche
1 Parvis de la Défense
Paris, La Défense Cedex, 92044
France

Ulrich Schwalbe

University of Hohenheim ( email )

Schloss Hohenheim
Stuttgart, 70593
Germany
+49 (0)711 45922992 (Phone)

Felix Forster

University of Warwick - Economics ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://https://www2.warwick.ac.uk/fac/soc/economics/staff/fforster/

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