Has the antitrust arsenal run out of novel theories or weapons? Think again. Recent scholarship has come to challenge conventional wisdom with the latest target of antitrust imagination being institutional investors, including diversified index funds. New economic research suggests that common ownership of competing industrial firms by large institutional investors leads to potential anticompetitive effects in the form of increased concentration and prices that may be captured by a new generalized HHI measure and have thus far remained undetected under traditional tools and analysis. A number of mechanisms is said to support these anticompetitive effects such as voting, private engagement and compensation contracts. Reactions have been rapid and widespread. Antitrust enforcers started looking closer at certain industries as well as investigating the scope of their existing powers, while policy makers considered that this might be an area prone to future regulation. In the meantime, legal scholars have come forward with solutions to the purported antitrust problem. This essay aims to disentangle the complex issues surrounding common ownership by institutional investors, and suggest a holistic approach that brings together the corporate with the competition law aspects of the problem. Accordingly, the analysis first sheds light on the corporate governance dimensions (Part II). Next, it outlines the theories of harms that correspond to the distinct forms and levels of shareholder activism or passivity (Part III). It then revisits the existing legal and policy antitrust framework and compares the EU versus the U.S. experience (Part IV). Finally, it wraps up the discussion with some concluding remarks on the EU competition law outlook (Part V).
CORRADI, M. et TZANAKI, A. (2017). Active and Passive Institutional Investors and New Antitrust Challenges: Is EU Competition Law Ready? CPI Antitrust Chronicle, 1(3).