A Competition Law Analysis of Common Shareholdings

By Neil Campbell –  

An emerging economics literature has raised concerns that “common shareholdings” by institutional investors in multiple public companies may give rise to soft competition and the exercise of market power in concentrated oligopolies. However, it would be a mistake to try to address such concerns using merger control regimes. While competition laws which prohibit “competitor agreements” may provide a basis for dealing with explicit coordination between competitors that is facilitated by common institutional shareholders, the application of merger control laws to mergers involving two companies in an industry with significant common shareholdings or to the acquisition of common shareholding positions by institutional investors is unlikely to be effective and the costs would probably exceed the benefits.

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