Common Ownership and Minority Shareholding at the Intersection of Competition and Corporate Law: Looking Through the Past to Return to the Future?
Corradi and Nowag (eds.), The Intersections between Competition Law and Corporate Law and Finance (Cambridge University Press, 2021)
28 Pages Posted:
Date Written: September 10, 2020
Common ownership is the talk of the town in antitrust land. Surrounded by mystery and noise, the competitive implications of rival firms being partially owned and controlled by a small set of overlapping owners are both fascinating and hotly contested. The fascination comes from the fact that the source of potential harm may be minority shareholder control in a setting of widely held companies . At the same time, skepticism among academics and policymakers abounds. Most notably, critics wonder about the quantum and mechanics of common owners’ influence driving any pro- or anticompetitive effects while it is often stressed that the antitrust analysis of common ownership is clearly distinguishable from that of cross-shareholding links between competitors. A comprehensive account of partial ownership, capturing the incentives of both individual and institutional investors and the competition dynamics of both cross- and common shareholding, is notoriously missing . Yet, the spirited debate between antitrust and corporate law and economics scholars centers on whether this “knowledge gap” is material, set to be filled by better understanding and experience as a matter of course or whether it is a fictional problem and an empty inquiry that is theoretically implausible and empirically unrealistic to unfold.
Against this backdrop, this chapter aims to illuminate some of the latent connecting points in this debate, by looking back into the past and then fast forward into the future. Part II provides relevant background on the two-sided history of regulating shareholding acquisitions under corporate and competition laws. Part III illustrates antitrust’s embeddedness in pre-existing corporate laws and forms, documenting the early unity and progressive quiet disconnect of the two fields in regulating ownership structures and intercorporate links. Part IV presents the contemporary common ownership (hypo)thesis and the distinct challenges and opportunities that it poses for both antitrust and corporate law. Part V develops a working taxonomy of (minority) shareholding types and their (partial) control characteristics from a competition law analytical perspective, with particular emphasis on commonly thought passive and diversified investment holdings. Part VII concludes with an urge to competition and corporate governance and finance policymakers for harmonic progression in seeking regulatory solutions to address common ownership and offers a quantum theory of the corporate property “atom”, drawing cautionary tales about the dynamic and ambiguous qualities of minority common shareholding for antitrust enforcers.
Keywords: Common ownership, horizontal shareholding, minority shareholding, passive investment, portfolio diversification, institutional investors, index funds, corporate governance, agency costs, theory of the firm, competition, antitrust, corporate law, competition law
JEL Classification: D21, D43, G11, G20, G23, G30, G32, G34, K21, K22, L10, L13, L21, L22, L40, L41, O16
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