Common Ownership: Solutions in Search of a Problem
Forthcoming in "Frédéric Jenny: Standing Up for Convergence and Relevance in Antitrust, Liber Amicorum - Vol. II," Nicolas Charbit et al, ed. (2019)
36 Pages Posted: 7 Nov 2018 Last revised: 14 Nov 2018
Date Written: November 6, 2018
Some scholars have argued that 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. Proponents of this view target in particular large investment managers that administer actively managed and passive index mutual funds owned by individual investors, and some even 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 cases involving cross ownership – rather than common ownership – and by stretching the holdings of those cases. Shorn of puffery, proponents rely upon 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 unlawful, or anticompetitive conduct that, if proven, could be addressed using established antitrust doctrines applicable to hub-and-spoke conspiracies and to the anticompetitive exchange of information. All the participants in the debate over common ownership are indebted to Frederic Jenny who, with his usual perspicacity, put common ownership on the agenda of the OECD Competition Committee's December 2017 Meeting, thereby assuring a robust debate in the community of competition scholars.
Keywords: antitrust, competition, mutual fund, investor, Sherman Act, Clayton Act, investment manager, investment management, stock ownership, conscious parallelism
JEL Classification: D21, D43, G20, G32, G34, K21, K22, L4, L10, L13, L22, L40, L41
Suggested Citation: Suggested Citation