Horizontal Shareholding: A Summary of the Argument

By Fiona M. Scott Morton

“Horizontal shareholding” occurs when one or more equity funds own shares of competitors operating in a concentrated product market. A growing body of empirical literature concludes that under these conditions market output in the product market is lower and prices higher than they would otherwise be. Successful private litigation under the Clayton Act would cause significant disruption to equity markets because of its inherent unpredictability, and might not eliminate most of the harms from common ownership. To minimize this disruption while achieving competitive conditions in oligopolistic markets, the DOJ and the FTC should take the lead by adopting a policy that balances harms from lack of competition with efficient functioning of institutional investors.

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