Asaf Eckstein is assistant professor at Ono Academic College. This post is based on his recent paper; related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here); Horizontal Shareholding (discussed on the Forum here) and New Evidence, Proofs, and Legal Theories on Horizontal Shareholding (discussed on the Forum here), both by Einer Elhauge.
“Common ownership” describes a structure in which a small group of large institutional investors—such as BlackRock, Vanguard, State Street Advisors and Fidelity—have significant ownership in horizontal competitors. Between 1980 and 2012 common ownership rates increased dramatically. Since its rise in popularity, common ownership has become the topic of heated debate. A growing body of scholarship now criticizes the common ownership phenomenon, arguing that it causes corporations to compete less vigorously with each other, thereby harming consumers. Accordingly, many scholars now call for legal and regulatory intervention in order to limit common ownership levels. Furthermore, this criticism has spurred the Justice Department’s investigation of potential antitrust issues arising from common ownership. On the other side of the debate, many scholars argue that the dangers of common ownership on competition are overblown. These scholars conclude that there is no need for intervention.
