Common Sense About Common Ownership

Article to be published in Concurrences Review N° 2-2018

George Mason Law & Economics Research Paper No. 18-09

32 Pages Posted: 27 Apr 2018

See all articles by Douglas H. Ginsburg

Douglas H. Ginsburg

George Mason University - Antonin Scalia Law School, Faculty; U.S. Court of Appeals for the District of Columbia Circuit

Keith Klovers

Wilson Sonsini Goodrich & Rosati

Date Written: April 27, 2018

Abstract

Some scholars have argued that the phenomenon known as common ownership, which refers to an investor's simultaneous ownership of small stockholdings in several competing companies, is anticompetitive and prohibited by the U.S. antitrust laws. These proponents target in particular large investment managers, such as those that administer actively managed and passive index mutual funds owned by individual investors, and call for the divestiture of trillions of dollars of equities.

We believe the argument for antitrust enforcement against common ownership is misguided. First, proponents conflate management by investment managers and economic ownership by individual account holders and therefore incorrectly attribute allegedly anticompetitive conduct to the investment managers. Second, proponents substantially overstate the validity and strength of the existing empirical work purporting to show common ownership causes anticompetitive harm. Third, proponents overstate their legal case, both by relying upon inapplicable cross ownership cases and by stretching the holdings of those cases. Shorn of puffery, proponents rely on little more than the "plain meaning" of the statutes and the hotly contested empirical results. Fourth, at bottom proponents concerns are with either conscious parallelism, which is not illegal, or anticompetitive conduct that, if proven, could be addressed using established antitrust doctrines applicable to hub-and-spoke conspiracies and the anticompetitive exchange of information.

Keywords: Antitrust, stock, common ownership, anticompetitive, conscious parallelism

JEL Classification: D21, D43, G20, G34, K21, K22, L10, L13, L22, L40, L41

Suggested Citation

Ginsburg, Douglas H. and Klovers, Keith, Common Sense About Common Ownership (April 27, 2018). Article to be published in Concurrences Review N° 2-2018, George Mason Law & Economics Research Paper No. 18-09, Available at SSRN: https://ssrn.com/abstract=3169847

Douglas H. Ginsburg

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

U.S. Court of Appeals for the District of Columbia Circuit ( email )

333 Constitution Ave NW
Room 5523
Washington, DC 20001
United States

Keith Klovers (Contact Author)

Wilson Sonsini Goodrich & Rosati ( email )

650 Page Mill Rd
Palo Alto, CA 94304-1050
United States

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