The Strategies of Anticompetitive Common Ownership

64 Pages Posted: 30 Jul 2018 Last revised: 22 Apr 2019

See all articles by C. Scott Hemphill

C. Scott Hemphill

New York University School of Law

Marcel Kahan

New York University School of Law; European Corporate Governance Institute

Date Written: March 2019


Scholars and antitrust enforcers have raised concern about the anticompetitive effects that may arise when institutional investors hold substantial stakes in competing firms. Empirical evidence reporting that common concentrated owners are associated with higher prices and lower output poses a sharp challenge to antitrust orthodoxy and corporate governance scholarship.

In this article, we undertake a systematic examination of the causal mechanisms that might link common ownership to anticompetitive effects. We consider whether each mechanism is tested by the existing empirical evidence, and whether it is plausible as employed by an institutional investor.

Our main conclusion is that most proposed mechanisms either lack significant empirical support or else are implausible. In particular, some widely discussed mechanisms are, in fact, not empirically tested. These non-tested mechanisms include strategies where common owners facilitate the formation of a cartel or where common owners, by being passive, fail to encourage firms to compete more aggressively. Moreover, institutional investors have only weak incentives to increase portfolio value, and therefore would not benefit from pursuing mechanisms that carry significant reputational or legal liability risks.

We also identify a new mechanism, which we call “selective omission,” that is both consistent with the evidence and plausibly employed by institutional investors. Looking ahead, our analysis supports a searching examination of the actions actually taken by common owners and firms — the who, where, when, and how predicted by the most plausible mechanisms.

Keywords: airlines, antitrust, common shareholding, common ownership, collusion, executive compensation, horizontal, HHI, institutional investors, MHHI, modified Herfindahl-Hirschman Index, shareholdings, Blackrock, Vanguard, State Street

JEL Classification: D21, D43, G11, G20, G23, G30, G32, G34, K21, K22, L10, L13, L21, L22, L40, L41

Suggested Citation

Hemphill, C. Scott and Kahan, Marcel, The Strategies of Anticompetitive Common Ownership (March 2019). Yale Law Journal, Forthcoming; NYU Law and Economics Research Paper No. 18-29; European Corporate Governance Institute (ECGI) - Law Working Paper No. 423/2018. Available at SSRN: or

C. Scott Hemphill (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Marcel Kahan

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6268 (Phone)
212-995-4341 (Fax)

European Corporate Governance Institute ( email )

B-1050 Brussels

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