Institutional Investors and the Antitrust Risks of Common Ownership

During the last years, particularly in the United States, there has been a prolific academic debate on the possession by institutional investors and asset management companies of the caliber of BlackRock, State Street, or Vanguard (i.e., the Big Three) of minority shareholdings in a plethora of firms active within the same industries and allegedly competing in the same relevant markets. This phenomenon has led to the emergence of the novel theory of harm of “common ownership”. Under an antitrust standpoint, the common ownership theory assumes that institutional shareholders having minority stakes in competing firms have both the incentive and the ability coordinate the commercial strategies of their portfolio companies or induce them to refrain from competing since that would increase the minority shareholders’ overall portfolio value. As a consequence, common ownership is causally linked to a distortion of competitive dynamics in the markets where the partially owned firms are active. However, as I will make clear, the common ownership theory raises a number of questions and it should be looked at with caution in light of the prejudice that an incorrect antitrust assessment may have over the activities of financial institutions. In this context, my dissertation will start by differentiating common ownership to other corporate governance structures which may create links among competing firms and be problematic from a competition law angle (in primis, interlocking directorates). This exercise aims at identifying the distinctive traits of common ownership and at evaluating the degree of antitrust risk that is effectively attached to common ownership (Chapter I). On the basis of this preliminary analysis, I will then analyze the main features and activities of financial investors to assess whether in the studies carried out so far on common ownership in the U.S. airline, banking, and pharmaceutical industries any gap may be found (Chapter II). To strengthen my analysis and disentangle the various antitrust criticisms that common ownership is claimed to raise, I will then look at the regulatory frameworks in which financial investors operate and I will evaluate to which extent those rules already reduce the perceived antitrust risks (Chapter III). While in the first part of my dissertation I will start by looking at the U.S. framework, where common ownership has been observed more prominently, I will then also assess the EU context and look at the approach suggested so far by the EU practitioners in connection with minority shareholding and, more recently, with common ownership (Chapter IV). This comparative approach aims at comparing the two legal systems and at identifying potential solutions to the alleged competition law risks that common ownership is claimed to raise, should they ever materialize. In conclusion, I will clarify why, in my opinion, the existing antitrust toolbox is fit for purpose to tackle the alleged (even potential) anticompetitive risks raised by common ownership. As I will note, this approach balances the public interest to the protection of competitive markets and the private interests of the major financial investors in continuing diversifying their investments in various firms, on the assumption that limiting such activity through either new antitrust rules or additional regulatory bans could have a detrimental impact on a plethora of third-party stakeholders and it could hence negatively affect the general economic interest.