Minority Shareholdings Under Antitrust Law: A Regulatory Gap?

Paul Lugard, Jan 10, 2012

It is hard to underestimate the importance of minority shareholdings in today’s economy. This applies to investments of private, non-financial institutions and institutional investors alike. Minority shareholdings, even between competing companies, are a widespread phenomenon in sectors as diverse as banking, insurance, energy, air travel, high-tech electronics, and automotive. The OECD estimates that in 2009 institutional investors alone managed financial assets in excess of $53 trillion including $22 trillion in equities in the OECD area. The European Private Equity and Venture Capital Association states that in 2007 approximately 5200 European companies received private equity investments.

In many cases the equity stakes that private equity investors receive for funding remain well below the threshold that ordinarily triggers antitrust concerns. In other cases investors have some limited influence to support the company at hand, and in yet other cases investors will seek influence that extends to the determination of the company’s strategic market conduct.

It has been firmly established that minority shareholdings that do not involve rights and means to confer the possibility of exercising “decisive influence” on a firm, and might at first glance appear innocuous, may, upon proper inspection and under specific circumstances, give rise to anticompetitive unilateral and coordinated effects. Interestingly, some economic research demonstrates that…

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