Posted by Social Science Research Network
Common Ownership: Solutions in Search of a Problem
By Keith Klovers (FTC) & Douglas H. Ginsburg (US Court of Appeals for the District of Columbia Circuit)
Some scholars have argued that common ownership, which refers to an investor’s simultaneous ownership of small stockholdings in several competing companies, is anticompetitive and prohibited by the U.S. antitrust laws. Proponents of this view target in particular large investment managers that administer actively managed and passive index mutual funds owned by individual investors, and some even call for the divestiture of trillions of dollars of equities. We believe the argument for antitrust enforcement against common ownership is misguided. First, proponents conflate management by investment managers and economic ownership by individual account holders and therefore incorrectly attribute allegedly anticompetitive conduct to the investment managers. Second, proponents substantially overstate the validity and strength of the existing empirical work purporting to show common ownership causes anticompetitive harm. Third, proponents overstate their legal case, both by relying upon inapplicable cases involving cross ownership – rather than common ownership – and by stretching the holdings of those cases. Shorn of puffery, proponents rely upon little more than the “plain meaning” of the statutes and the hotly contested empirical results. Fourth, at bottom propo
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