New York

The Global Antitrust Economics Conference - 2018

This third edition of the Global Antitrust Economics Conference was organized by Concurrences Review in collaboration with New York University Stern School of Business, in partnership with Axinn, Bates White, the Brattle Group, CRA, Cornerstone Research, Orrick, Qualcomm, and White & Case.

Opening Keynote Speech

Luke Froeb

In his opening statement, LUKE FROEB (Chief Economist, Antitrust Division – US Department of Justice) drew attention to the increasing complexity and importance of economic models and economic analysis in antitrust cases. The quality of case handling depends on antitrust lawyers being cognizant in economics so as to challenge the economists’ analysis with a view to improving their presentations and reports. It is thus crucial to teach lawyers to use and master economic tools in order to treat the evidence. Mr. Froeb addressed the counter-factual questions raised by antitrust on effects and consumer harm. The core difficulty is to draw inference about an unobserved state of the market. Explaining possible solutions, he referred to empirical metaphors from natural experiment and theoretical models to predict market counter-factual and cited two examples in antitrust and merger control. He explained the functioning of the website Competition Toolbox, which can help lawyers better understand economic models. The challenge is to provide a mapping from the evidence of a case to an opinion. These tools are teaching and learning tools. Models can allow to determine “what matters, why it matters and how much it matters”. For example, in merger control, the closeness of the merging parties, the mode of competition (price, quantity, bidding), the competition on the market and the anticipated loss of competition after the merger are important factors. Mr. Froeb presented these tools as a possibility to make the economic analysis more transparent, concluding that the aim is better advocacy in antitrust cases.



FRÉDÉRIC JENNY (Chair, OECD Competition Committee) chaired the first panel, which focused on antitrust issues raised by institutional shareholding. He observed that the research on the impact of institutional shareholding on the competitive situation of a relevant market has been controversial. Institutional shareholders may have shares in several competitors. There are empirical and theoretical foundations for competitive concerns. The principal theories of harm identified concern unilateral effects – where management would internalize the fact that their shareholders also have shares in other competitors and therefore be less competitively aggressive – and coordinated effects, i.e. an increase in the possibility of collusion. If these theories of harm can be supported by evidence, the next questions relate to the use of current antitrust rules and the potential new instruments which could be added to the “toolbox” to solve this issue.

NATHAN MILLER (Assistant Professor, Georgetown University) noted firstly that empirical research on common ownership is at an early stage, and secondly that some econometric challenges make it hard to draw statistical inferences about the impact of common ownership for economic outcomes. Relying on two recently published research papers –regarding notably the airlines industry and the cereal industry –, he discussed the consequence of an increase in MHHI on price and emphasized the difficulties linked to empirical data analysis. The interpretation of regression is not simple due to misspecification. Among the econometric challenges identified, the timing of effect is hard to grasp due to continuous increase of common ownership over time. It is important to note that not all empirical analyses use regression: some researchers have referred to the evidence that institutional investors, even when they are passive, tend to use their influence to advance their own interests for e.g. by voting against tough competition. Mr. Miller considered that both quantitated and qualitative evidence are important. Finally, if action is taken to address common ownership, it will best be motivated on theoretical considerations and qualitative evidence.

GLEN WEYL (Visiting Senior Research Scholar, Yale University) acknowledged that theory, rather than empirical evidence, is the main factor. Common ownership could represent a problem for competition if institutional investors have the incentive and ability to influence, as this combination is close to sufficient regarding the theories of harm considered from an economic point of view. Opposing arguments are based on various theories, for e.g. that companies are run solely by management and investors have very little or no control in governing corporations, or that investors do monitor management but choose to encourage competition. These theories seem to be weak. It is of primary importance for the DOJ to determine the workings of the economy and whether the impact of common ownership is destructive to competition.

ERIC GRANNON (Partner, White & Case) focused on the existing features of current antitrust law which can be used as safeguards against potential anticompetitive conduct, assuming that common ownership could pose a potential problem for competition. Section 1 of the Sherman Act is an important threshold. If a common investor of two competitors attempts to use their ownership to facilitate an anticompetitive agreement between these companies, such conduct will fall under the scope of the Sherman Act. A second safeguard is Section 8 of the Clayton Act which prohibits common management in competing companies. Under the Hart-Scott-Rodino (HSR) Act, U.S. regulators can use pre-merger review effectively: unlike the European Commission, U.S. antitrust laws require antitrust agencies to review acquisitions for minority stakes in the most significant companies. There is a narrow HSR reporting exemption for institutional investors, however, this applies when the transaction is made solely for the purposes of investment of 15% or less of the target’s securities and the acquirer does not intend to participate in the management of the target. Mr. Grannon also mentioned background safeguards outside antitrust law, such as fiduciary obligations. He considered that the theory on common ownership is getting ahead of the evidence of anticompetitive effects. Antitrust agencies have not enforced competition law in this area because there is no real evidence of anticompetitive harm arising from common ownership by institutional investors.

EDWARD ROCK (Professor, NYU School of Law) considered that the issue of whether existing antitrust laws are sufficient depends on the definition of the competitive challenges associated with common ownership. He stated that he does not find the econometric evidence or theoretical arguments for the anticompetitive unilateral effects of common ownership convincing. The crucial question to be dealt with by the DOJ is whether common ownership worsens the competitive situation, taking into account the fact that firms in concentrated markets have independent incentives and preferences for soft competition. If the market structure is anticompetitive, but common ownership does not worsen the situation, there would be no basis for action against it. As regards the possible “channels” by which common owners could influence management, leading to increased prices, several channels have been proposed in the literature: lobbying, compensation of management for maximizing industry profits, or the so-called “lazy owner” channel. These suggestions are controversial, each requires different, complicated mechanisms in order to be effective, and would demand different enforcement responses. According to Prof. Rock, potential coordinated effects should be more of a concern, and are more likely, than unilateral effects in relation to common ownership. The increasing concentration of shareholdings and communication between investors and firms could lead investors to play an organizing role in facilitating conspiracies among portfolio companies.

Finally, Glen WEYL shared a proposal currently in discussion: no investor who chooses to participate in corporate governance could have more than 1% ownership in several firms operating within an oligopoly. He emphasized the importance of definitions to implement this structural remedy, which he presented as relatively simple and easily monitored. Despite its disruptive effect on the industry – it would reduce diversification by 5% –, this solution would increase concentrated ownership and address competition issues. While Nathan MILLER supported this proposal, which he believed could help strengthening incentives for competition, Eric GRANNON and Edward ROCK were more skeptical. Mr. Grannon remarked that the US antitrust agencies have recently told the OECD that creating an across-the-board restriction on common ownership without sufficient evidence of anticompetitive effects could cause unintended costs on business and consumers by making it more difficult to diversify risk.



The second panel was chaired by SHERRY GLIED (Dean, NYU Wagner) who introduced the discussions by pointing to the recent shift in attention from concerns about the demand side of the healthcare system to concerns about the supply side. She cited an influential paper1 to question the functioning of the supply side with a view to explaining the main differences between the US healthcare system and the rest of the world, notably regarding the amounts paid for the same services.

MARTIN GAYNOR (Professor, Carnegie Mellon University) remarked the tremendous amount of consolidation in the healthcare sector. In the past years, consolidation has occurred regarding hospitals, health insurance and other areas. It consisted of horizontal consolidation as well as vertical acquisitions, such as the rapid acquisition of physician practices by hospitals – one out of three doctors is employed by hospitals and 44% of primary care services are in hospitals. The considerable number of mergers has allowed the gathering of much information on both anticompetitive effects and efficiencies. This data has confirmed that fewer potential competitors are linked to price increases. Consolidation, notably among hospitals, also leads to lower quality of care. Finally, innovation has been negatively impacted.

GEORGE ROZANSKI (Partner, Bates Whites) confirmed that the evidence has shown the implementation of anticompetitive mergers in the past years. One of the most complex questions in the health sector is defining the geographical market. Hospitals compete on prices but especially on non-price factors, such as the quality of care. Patient flow data did not allow the assessment of consumers’ response to changes: patients choose hospitals because they are convenient for them – close to their residence – unless they require special treatment. This means that patients do not travel in response to small changes in price, but primarily because they have a need for particular treatment. Consequently, patient flow data is not helpful in determining which hospitals are close substitutes or understanding the complications or likely effects of a merger.

BEAU BUFFIER (Chief, Antitrust Division – Office of the New York State Attorney General) considered the overall number of mergers to be an exogenous factor. He confirmed that the main focus is on the impact of consumers. There have been major price increases following some mergers in the health sector; however, theories of harm and market power are not sufficient to explain all of them. Mr. Buffier mentioned the issue of crossmarket effects. While some merging parties claim that their operation generate efficiencies, the DOJ is looking into new ways to investigate and challenge mergers when necessary. Even in seemingly competitive markets such as New York, concentration levels can be high. He also referred to the phenomenon of “creeping acquisitions”, i.e. acquisitions of physician groups over time which cannot necessarily be challenged but may increase concentration. Mr. Buffier confirmed that mergers should be apprehended differently across the health sector (labs, physician groups, hospitals, insurers etc.). While the activity used to be mainly horizontal consolidation, large transactions may combine for e.g. insurers with PBMs or retail pharmacy networks. Merging companies increasingly make efficiencies claims that they need these mergers in order to apply greater data analytics and have access to more complete medical records to provide better care.

During the following discussions, Martin GAYNOR cited the FTC decision on the horizontal aspect of the St Luke’s/St Alphonsus merger (2017). He also mentioned the sympathy of antitrust agencies towards the failing firm defense in the health sector. He stressed the bargaining power of insurers and the relatively low-price elasticity for insurers because medical prices are too high without insurance. He stated that evidence shows health insurance mergers provide surplus on the supply side which is not passed on to consumers. Supporting this statement, George ROZANSKI remarked that the main concern linked to consolidation on one side of the market is the exercise of monopoly power by buyers. He discussed the public policy issue of deciding to which side of the market surplus should be allocated, because it could lead to innovation on the supply side – assuming such benefits are passed on to the consumer, which is not certain – or direct consumer welfare on the demand side.

As regards possible solutions to address the competitive and wider price issues in the healthcare sector, Martin GAYNOR suggested price caps imposed by States and other approaches such as arbitration. He emphasized the importance of keeping barriers to entry as low as possible as once a company acquires a dominant or monopoly position, it will naturally attempt to secure it, for e.g. by imposing contractual clauses which could be questioned by antitrust agencies or state health commissioners. Competition policy in this sector and other sectors should be considered widely without depending only on antitrust agencies, but also on other public agencies. From an enforcement point of view, Beau BUFFIER specified that enforcers do not have the power or the will to impose a de-concentration movement in the health sector. However, exclusionary behavior and collusion – for e.g. non-compete agreements which constitute barriers to entry or expansion – constitute the main focus of antitrust law enforcers. Concerning vertical mergers, the potential exclusionary vertical effects of vertical mergers are one of the more recent issues. Mr. Buffier considered that the existing model of health services in the US requires changes. He recognized the developing movement towards experimentation, which involves interesting new types of transactions. These mergers have a role to play in shaking up the state of the market and controlling the run-away costs.

Lunch Keynote Speech

Jed Rakoff

JED RAKOFF (Judge, District Court for the Southern District of New York) dedicated his speech to the relationship between antitrust enforcement and income inequality, based on recent studies and practical examples. The richest 1% of US households have lire wealth than the entire remaining 90%. This high concentration of wealth is an increasing problem: the average income of the top 5% grew by 38% between 1990 and 2014, whereas the average income of the other 95% grew by less than 10% during that same period. Income inequality is becoming worse over time. Judge Rakoff also referred to a recent article in the NY Times about the shocking comparison between the pay of CEOs compared to that of their employees. The most common reason listed for this phenomenon is technology. The decrease in the number of employees in the US (and unionization) is indeed steady and considerable. Reference is also made to global competition against countries with lower paid workforce. However, some European countries which have experienced these same factors do not have such income inequality. In recent years, some economists have concluded that another material factor has been increased concentration, even oligopolization, among US industries and businesses. Concentration allows business to charge higher prices than they would on a competitive market – money is taken out of consumers’ pockets to benefit shareholders and managers. According to a 2018 study, half of all publicly listed companies have disappeared over the last 40 years. Today only 20 firms account for 20% of the revenue in GDP. Shareholding has also evolved and is now controlled by only a few companies. Antitrust enforcement by agencies and judges could be used as a safeguard against such concentration of wealth and power. However, US judges and the DOJ have shifted their focus in antitrust cases to narrower approaches. In 1966, the US Supreme Court blocked a merger between two supermarket chains in Los Angeles because the merging entity would have controlled 7.5% of the market, which was held to be a violation of Section 7 of the Clayton Act. Such decision would never be rendered nowadays: four grocers presently control over 50% of all grocery sales nation-wide, and a much higher percentage in some communities. Many studies have demonstrated that this concentration has been coupled with an increase in food prices. Judge Rakoff also presented examples from the healthcare sector – where it has been shown that hospitals almost always increase their post-merger prices –, the airlines industry, and banks – where the top 10 banks in the US now control over 50% of all banking assets. In the pharmaceutical sector, there has been misuse of patents otherwise legitimately obtained, for e.g. in pay-for-delay situations. The DOJ had no objection to the Delta/North-West merger in 2008 or the United Continental merger in 2010. Although antitrust enforcement by the DOJ and the courts has remained aggressive in the area of pure cartels, but not as regards mergers. The last merger to have been litigated was in 1979. The shift in the courts’ attitude was initiated by the Chicago Law and Economics School, which has a narrow view of what constitutes an antitrust violation. The DOJ has published a press release endorsing increased prosecution against individuals, which is indeed an effective deterrent. However, Judge Rakoff observed that there has not been any increase in antitrust enforcement and that there is no likelihood of such increase in the future. This serious problem leads to increased cost to consumers as well as income inequality



ROBERT SEAMANS (Professor, NYU Stern) chaired the third panel centered on innovation in high-tech industries. He introduced the main discussion topics: two-sided markets and platforms, as well as patents and standards. He noted that many believe that companies such as Facebook and Google are new kinds of monopolists. In the past years, Google has been involved in over 100 acquisitions. The impact of such developments

MICHAEL CRAGG (Chairman, The Brattle Group) explained that the most important factor for platforms is virtuous feedback on at least one side of the platform in order to generate a virtuous circle. There is a presumed assumption that platforms can have market power because of this virtuous circle because feedback effects create barriers to entry and reduce price elasticity. The issue is whether market power is being misused. As regards innovation, access to population is important, as shown by the Facebook/ WhatsApp merger which allowed Facebook to have access to more population. One of the concerns was that this could reduce innovation. The main issue is to determine whether there is a substitute ability between the merging parties and whether there is a complementarity. If there is complementarity, their merger could lead to more efficient innovation and both merging parties could benefit from pooling their resources towards innovation. However, there could also be spill-over effects whereby competitors will take advantage of their innovation, without innovating themselves. Mr. Cragg noted that distribution is crucial to innovators: will their product or service be used and gain in value? Start-ups face these questions and rely on acquisitions for funding and motivating their investments. There seems to be an offset between the reality of funding new ventures and the consequences on competition in the long term.

JOHN HARKRIDER (Partner, Axinn) underlined the necessity for enforcement agencies to be cautious towards innovative companies to protect innovation. Instead of focusing on their profit, they should assess their levels of innovation. There is a clear clash between old systems and new disruptive models. In fact, most of the competitive questions around Google, such as its conduct on the online advertising market, come from its own evolution rather than acquisitions of other businesses.

ROGER NOLL (Professor, Stanford University) considered that there should be no generalization from the models of Google and Facebook. The importance of data has increased in relation to innovation and influencing consumer behavior. On the solutions to encourage innovation, Mr. Noll emphasized the role of disruptive start-ups. The ability to sell innovative ideas or software to established firms such as Google or Facebook is crucial to motivate entrepreneurs. It should be considered part of the capital market and it is, according to him, an efficient way for big firms to maintain high levels of innovation.

KIRI GUPTA (Director, Economic Strategy, Qualcomm) mentioned a real gap between the understanding of technology and the assessment of mergers. European agencies, including the European Commission, have taken on handling effects of mergers on innovation. An “innovation theory of harm” is crystallizing in merger control, which provides for prohibiting mergers which harm innovation significantly. This theory of harm focuses on unilateral effects and generally argues that all mergers are bad for innovation. However, Ms. Gupta argued that the upstream market for innovation and the downstream product market should be distinguished. This distinction allows to recognize that different sets of competitors can compete on these different markets, for e.g. disruptive start-ups may compete only on the upstream market for innovation. Without good understanding of the technology in the relevant market, general theories are dangerous.

Responding to this argument, John HARKRIDER considered that technology is not different from other products. Across all industries, antitrust lawyers and enforcers need to learn about market functioning. For Mr. Harkrider, distinguishing technology removes antitrust tools and would be a mistake. He encouraged regulatory humility and thought that the US was on the right track, trying not to have preconceived ideas and to find market mechanisms to solve the identified problems.

As regards the competitive assessment of multi-sided platforms, Roger NOLL explained that an effective competition analysis needs to consider the various customer groups. He remarked that platforms have existed for a long time, such as magazines or radio channels. Therefore, the notion that entirely new antitrust perspectives are needed for online platforms is wrong according to him. The main specificity is that, while not ignoring the interactions between the various customer groups, the competition analysis needs to start with the group which was allegedly affected by the anticompetitive restraint. John HARKRIDER agreed with this idea, stating that market power on multi-sided markets should be assess by taking into account all sides, including when one or several of them provide services for free. It is critically important to look at both sides of a double-sided platform, because competition may be high on quality if not price.

Robert SEAMANS then oriented the discussions to patents and standards, particularly applied to the case of 5G (5th generation mobile networks). This new generation of networks will enable devices such as cars and smartphones to connect to each other. It represents great opportunities as well as great challenges. New regulatory obstacles will have to be addressed.

Kiri GUPTA predicted that existing challenges will become more important due to 5G. The fight between business models will become more vigorous and markets will become more polarized as the mobile communications industry has high levels of investment in R&D. There will be more effort to redefine FRANDs for the use of patents. Enforcers may impose more obligations on companies: for e.g. in the EU commitments have been imposed on licensors as well as licensees. These notions will have to be clarified. Ms. Gupta also noted that the success of standards will come from their attractiveness for hundreds of companies, while insisting on the risk of them being held hostage of certain interest groups. Finally, she emphasized that there will be a need for price differentiation.

Michael CRAGG considered that the issue with fast-evolving technology markets is the difficulty to define general rules about optimal investment without having knowledge of the components of the product. Given the nature of the market, where feedback is extremely important in developing a consumer base, attempts to develop the consumer base to the detriment of antitrust rules should be anticipated. However, Mr. Cragg believed that legal uncertainty would be a better solution than imposing regulatory burdens without fully understanding the functioning of the market or the future value of the product. He also evoked the policy question of allowing access to 5G when it mostly relies on very short-range connectivity.



SCOTT HEMPHILL (Professor, NYU School of Law) chaired the fourth and final panel of the conference, focused on the European and US approaches to monopolization and dominance. Mr. Hemphill noted that this topic is a subject of ongoing debate. The European Commission’s Google Shopping decision is being appealed before the EU courts. Facebook faces scrutiny in Germany for its data collection practices on third-party websites. Intel is in a long-running battle in Europe over market-share rebates, following a similar battle in the US. The purpose of the discussion was to present the views adopted on both sides of the Atlantic. Mr. Hemphill also mentioned the concerns expressed by some commentators on the topic of the intersection of dominance and big data in the antitrust paradigm. On the Google Shopping case, he commented that the FTC and the European Commission reached starkly different conclusions about Google’s practices, in particular the preferences and demotion practices.

RICHARD GILBERT (Professor, University of California) considered that the Commission’s approach was more mechanical and consisted of defining the market, assessing the dominant position and checking for the criteria of abuse. In the US, the analysis focused on consumer harm: if consumer harm is established, market definition comes later in the analysis. There are other differences in the two systems relating to regulatory and enforcement policies. EU law created an obligation for the dominant firm to treat competitors as it treats itself. The Commission may have been sensitive to the many complaints received against Google. In the US, competition enforcers seem to be more concerned about false positives. Mr. Gilbert also insisted on the fact that the market was dynamic, which was not taken into account. He considered that the Commission’s decision did not deal sufficiently with the question of harm to consumers.

CRISTINA CAFFARRA (Vice President & Head of European Competition Practice, CRA) recognized that the Google Shopping decision had been described as an example of the Commission’s “tech lash”. She considered that there is a culture and history of protecting competitors rather than the competitive process in the EU. However, she felt that the Google Shopping case was a standard vertical foreclosure case. The Commissions seeks to treat every case according to the model it established in the Microsoft case – which was validated by the EU Courts. Ms. Caffarra rejected the argument of a dynamic market: the investigators are able to take into account changes of circumstances in the course of the investigation, which usually lasts for a long period. She recognized that the Commission tends to define the market very narrowly in order to establish leverage from one market onto another differentiated market – this narrow market definition is unfortunate in her view.

JAMES TIERNEY (Partner, Orrick) also stressed that the difference in the assessment of facts and the divergence in inferences lead to different results. Google argued that it was trying to provide higher quality results for users; the Commission found that it was an intentionally rigged system. There is a higher burden on dominant firms not to harm competitors, or even protect them, under EU law in comparison with US law. The FTC decided not to bring a case against Google, possibly because product market definition was complex. Mr. Tierney considered that in the US it is not well perceived for public agencies to give directions to companies or tell them how they should design their algorithms. Therefore, US agencies are reluctant in this area. On the notion of regulatory humility, Mr. Tierney emphasized the fact that remedies can sometimes be worse than the harm: only when the agency has a good remedy to implement can it intervene and invest resources. Google has been fined by the Commission, but the remedies are still unclear, which is inefficient in his opinion. On the argument of a dynamic market, he emphasized the fact that circumstances change over the course of the investigation: for example, a new entrant – such as Amazon in the Google Shopping case – can change the market situation very quickly. If the harm disappears, an injunction would not be needed. In the EU, it would still be possible to impose a fine, unlike in the US.

JOSHUA WRIGHT (Professor, Global Antitrust Institute at Scalia Law School) underlined the US and EU enforcers’ different approaches to the economics of competition law. The theories of harm are similar, but the elements needed to substantiate the harm are very different. He considered it was likely that the FTC would have lost a Section 2 case against Google. The simplest explanation for the FTC’s decision not to bring a case was that there was no competitive harm in their view. He insisted on the importance of the role of economics in decision-making. Unlike the FTC, the Commission did not focus on the effects of the practices.

DOUGLAS MELAMED (Professor, Stanford Law School) was of the view that the differences between the US and the EU were institutional rather than legal. While the US system is decentralized, the EU system is more condensed around the Commission which acts as enforcer, prosecutor and decision-maker. According to him, judicial review is ineffective because it is lengthy and by the time the EU Courts review the decision, the fines have been paid and the conduct has stopped. The EU system is therefore not well-suited for regulatory humility.

To continue the discussion, Scott HEMPHILL referred to the investigation conducted by the German competition authority (the “BKA”) against Facebook, the main issue being the use of antitrust tools to address big data problems.

James TIERNEY found it regrettable that complainants can choose between different jurisdictions, some of them – including Germany and France – being more favorable than others. He asserted that Facebook’s conduct would not be challenged by antitrust agencies in the US as it concerns a privacy issue which is quite distinct from antitrust. The BKA was concerned by Facebook’s acquisition of WhatsApp, although it was authorized quickly in the US and without condition in the EU as well. This case is an indicated that there are important concerns around big data and firms such as Facebook. It could mean that a dominant firm violating privacy laws would also violation competition law.

Joshua WRIGHT highlighted the complementarities between antitrust and consumer protection. However, in practice there is an enforcement divide. There are also legal, cultural and constitutional obstacles to the integration of merger control and consumer protection, but the demand for this evolution is rising.

Douglas MELAMED also stressed that when consumer protection and competition become too intertwined, competition could start being used for purposes which it was not designed to serve, such as data protection – as the Facebook case in Germany demonstrates.

Finally, Cristina CAFFARRA emphasized the good reaction to the decision of the BKA in Europe. The Commission has encouraged the German agency to carry out its investigation, and the French competition authority is looking into similar practices. Ms. Caffarra insisted on the sense of crisis regarding data protection. Competition law should be used to address these important issues if there is a lack of better tools.

Closing Keynote Speech

Noah Joshua Phillips

NOAH PHILLIPS (Commissioner, US Federal Trade Commission) spoke about the issue of common ownership and gave his perspective on the related theories of harm identified in literature. He observed that the discussion about the antitrust implications of common ownership by institutional investors has moved very quickly as recent research has focused on its price effect and potential antitrust harm. Dramatic policy proposals followed and involved considerable impact on the market structure. In 2017 the OECD and European antitrust enforcers began putting common ownership theory in practice. In contrast, the US antitrust agencies have stated that they are not prepared to make any changes to their policies with respect to common ownership due to the lack of evidence of actual harm. According to Mr. Phillips, it is crucial to better understand the economic reality and make sound policy decisions. Further research concerning more sectors will be important to understand the effects of common ownership across the entire economy. So far scholars have identified no clear mechanism by which common ownership could cause lessening of competition or anticompetitive harm. The appearance remains unsettled. The fundamental claim underlying the common ownership debate is that managers, being conscious that large institutional shareholders also hold stock in competitors, will soften competition to benefit those shareholders.

However, this theory is rather non-intuitive and contradicts ancient and well-established concerns on the relationship between managers and shareholders, highlighted by Adam Smith in The Wealth of Nations and based on the assumption that managers do not tend to represent individual shareholders’ interests as devotedly as their own interests. Mr. Phillips was not convinced by the theory that managers would favor minority shareholders without further incentive. He also referred to recent research showing that institutional investors may in fact push executive compensation further away from industry performance. He also emphasized the fact that minority investors have been criticized for being too passive – not for exercising too much control over the managers. Experience runs counter to the theories of harm identified by some scholars in relation to common ownership. Mr. Phillips spoke about the potential consumer benefits offered by institutional investors: they allow millions of individuals to diversify their investments while limiting risks. Finally, he considered that dispersing shareholdings reduces ability and incentive to exercise control, which could include pressuring the firm to compete more aggressively. For all these reasons, Mr. Phillips agreed with the assessment by the US agencies and did not consider that there was sufficient ground for policy or enforcement changes with respect to common ownership.

Photos © Mick Leconte


  • New York University
  • New York University
  • Vanderbilt University
  • Stanford University
  • New York University
  • George Mason University (Fairfax)
  • Yale University (New Haven)
  • Orrick, Herrington & Sutcliffe (Washington)
  • Georgetown University (Washington D.C.)
  • CRA International (London)
  • White & Case (Washington)
  • University of California (Berkeley)
  • ESSEC Business School (Cergy)
  • New York University
  • Office of the New York State Attorney General (New York)
  • US Federal Trade Commission (FTC)
  • Bates White (Washington)
  • Carnegie Mellon University
  • New York University
  • United State District Court (New York)
  • Qualcomm (San Diego)
  • Axinn Veltrop & Harkrider (New York)
  • Stanford University
  • The Brattle Group (Toronto)