Common Ownership and Merger Control Enforcement

Abstract

Common ownership fundamentally upsets the well-settled merger enforcement ecosystem. Not only it challenges basic principles informing merger policy such as the presumed profitability of mergers for the merging firms and the merger-specificity of potential efficiencies but also it works against implementing tools and presumptions in merger practice such as concentration indices for screening out unproblematic from potentially harmful mergers. The incremental effect of a merger taking place in an environment of common ownership may be either smaller or larger by comparison to a counterfactual with no common ownership. The sign and size of the merger effect will depend on the relative post-merger stakes of the common shareholders in the merging firms vis-à-vis any stakes in non-merging rivals in the same industry and on the specific financial structure of the merger deal. Accordingly, merger enforcement should shift towards more fact-specific analysis and antitrust authorities may want to consider developing guidelines.

Keywords: common ownership, horizontal shareholding, merger control, antitrust, competition, institutional investors

JEL Classification: D21, D22, D43, D60, G23, G34, K21, L10, L13, L21, L22, L40, L41