Mere Common Ownership and the Antitrust Laws

“Common ownership,” also called “horizontal shareholding,” refers to a stock investor’s ownership of minority stakes in multiple competing firms. Recent empirical studies have purported to show that institutional investors’ common ownership reduces competition among commonly owned competitors. “Mere common ownership” is horizontal shareholding that is not accompanied by any sort of illicit agreement, such as a hub-and-spoke conspiracy, or the holding of a control-conferring stake. This Article considers the legality of mere common ownership under the U.S. antitrust laws. Prominent antitrust scholars and the leading treatise have concluded that mere common ownership that has the incidental effect of lessening market competition may violate both Section 7 of the Clayton Act and Section 1 of the Sherman Act. This Article, however, demonstrates otherwise. Competition-lessening instances of mere common ownership do not violate Section 7 of the Clayton Act because they fall within its “solely-for-investment” provision, which the scholars calling for condemnation have misinterpreted. Mere common ownership does not run afoul of Section 1 of the Sherman Act because it lacks the sort of agreement (contract, combination, or conspiracy) required for liability under that provision. From a social welfare standpoint, these legal outcomes are desirable. Condemning mere common ownership under the antitrust laws would likely entail significant costs, and the benefits such condemnation would secure are speculative. Accordingly, this Article argues courts and enforcers should not stretch the antitrust laws to condemn mere common ownership.