Common Ownership: Status Quo, Comparative Analysis, and Policy Proposals

The increasing institutionalisation and intermediation of investment have favoured two parallel developments: the (re-)concentration of corporate ownership in the hands of institutional investors, on the one hand, and growing levels of investment diversification, on the other. Against this background, it is increasingly likely that two or more, usually competing, companies will have one or more shareholder(s) in common. This phenomenon is referred to as ‘common ownership’. Recent and somewhat controversial empirical studies claim to have discovered a link between common ownership, corporate governance, and competition concerns. These studies have sparked an intense, multidisciplinary, and as yet unresolved debate. The debate spans the fields of finance, industrial organisation economics, corporate governance, and competition law. Some academics have even sounded a ‘call to arms’ to competition authorities and regulators, urging them either to enforce existing competition laws or to adopt novel strategies to address the alleged competition concerns.
Motivated by these ongoing academic and policy discussions, this thesis first examines the theoretical and empirical underpinnings of the common ownership claim. The gist of the argument is that indirect structural links can reduce the competitive incentives of common owners and portfolio companies. However, the theory leaves academics and practitioners wondering how common owners might affect market-level outcomes in practice, given a variety of transaction costs. The thesis presents and analyses the theorised mechanisms of corporate governance. It describes and compares the legal preconditions and limitations for common owners’ influence through corporate governance channels in the US and the EU. It then discusses the potential treatment of common ownership under existing US and EU competition laws. This is followed by a legal comparison of selected issues. Finally, the thesis examines proposed alternative means of addressing the alleged competition concerns and respective advantages and disadvantages.