How Horizontal Shareholding Harms Our Economy - And Why Antitrust Law Can Fix It

88 Pages Posted: 23 Dec 2018 Last revised: 10 Apr 2020

Date Written: April 9, 2020


Empirical evidence that horizontal shareholding has created anticompetitive effects in airline and banking markets have produced calls for antitrust enforcement. In response, others have critiqued the airline and banking studies and argued that antitrust law cannot tackle any anticompetitive effects from horizontal shareholding. I show that new economic proofs and empirical evidence, ranging far beyond the airline and banking studies, show that horizontal shareholding in concentrated markets often has anticompetitive effects. I also provide new analysis demonstrating that critiques of the airline and banking market-level studies either conflict with the evidence or, when taken into account, increase the estimated adverse price effects from horizontal shareholding. Finally, I provide new legal theories for tackling the problem of horizontal shareholding. I show that when horizontal shareholding has anticompetitive effects, it is illegal not only under Clayton Act §7, but also under Sherman Act §1. In fact, the historic trusts that were the core target of antitrust law were horizontal shareholders. I further show that anticompetitive horizontal shareholding also constitutes an illegal agreement or concerted practice under EU Treaty Article 101, as well as an abuse of collective dominance under Article 102. I conclude by showing that horizontal shareholding not only lessens the market concentration that traditional merger law can tolerate, but also means that what otherwise seem like non-horizontal mergers should often be treated as horizontal. Those implications for traditional merger analysis become even stronger if we fail to tackle horizontal shareholding directly.

Keywords: antitrust, horizontal, shareholdings, institutional investors, economic inequality, executive compensation, common shareholding, common ownership, HHI, MHHI, Herfindal-Hirschman Index, airline, Piketty, stock acquisition, anticompetitive, passive investor

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

Suggested Citation

Elhauge, Einer R., How Horizontal Shareholding Harms Our Economy - And Why Antitrust Law Can Fix It (April 9, 2020). Harvard Business Law Review, Forthcoming, Available at SSRN: or

Einer R. Elhauge (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

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