Mere Common Ownership and the Antitrust Laws

50 Pages Posted: 4 Mar 2020

See all articles by Thomas A. Lambert

Thomas A. Lambert

University of Missouri - School of Law

Date Written: March 3, 2020

Abstract

Common ownership (also called horizontal shareholding) refers to a stock investor’s owner-ship of minority stakes in multiple competing firms. Recent empirical studies have purported to show that institutional investors’ common ownership reduces competition among commonly owned competitors. This Article considers the legality of “mere” common ownership—horizontal shareholding that is not accompanied by any sort of illicit agreement (e.g., a hub-and-spoke conspiracy) or the holding of control-conferring shares—under the U.S. antitrust laws. Prominent antitrust scholars and the leading treatise have concluded that mere common ownership that has the incidental effect of lessening market competition may violate both Clayton Act Section 7 and Sherman Act Section 1. This Article demonstrates otherwise. Competition-lessening instances of mere common ownership do not violate Section 7 because they fall within the provision’s “solely for investment” exemption, which the scholars calling for condemnation have misinterpreted. Mere common ownership does not run afoul of Section 1 because it lacks the sort of agreement (contract, combination, or conspiracy) required for liability under that provision. From a social welfare standpoint, these legal outcomes are desirable. Condemning mere common ownership under the antitrust laws would likely entail significant marginal costs, while the marginal benefits such condemnation would secure are speculative. Accordingly, courts and enforcers should not, on the current empirical record, stretch the antitrust laws to condemn mere common ownership.

Keywords: antitrust, horizontal, common ownership, institutional, Sherman Act, Clayton Act, competition, anti-competitive, shareholder

JEL Classification: D40, D42, G18, G23, G38, K21

Suggested Citation

Lambert, Thomas Andrew, Mere Common Ownership and the Antitrust Laws (March 3, 2020). University of Missouri School of Law Legal Studies Research Paper No. 2020-09, Available at SSRN: https://ssrn.com/abstract=3548301

Thomas Andrew Lambert (Contact Author)

University of Missouri - School of Law ( email )

Missouri Avenue & Conley Avenue
Columbia, MO MO 65211
United States

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