Minority shareholdings and interlocking directorates

Séminaire Droit et Économie organisé par Concurrences en partenariat avec Arnold & Porter et Charles River Associates.


Penelope Papandropoulos (DG Comp)

Approaching the issue from an economic perspective, one should start by describing horizontal and non-horizontal effects of minority shareholdings. In fact, an acquisition of financial interest and/or control rights in a company can change the competitive behaviour of both the acquirer and the acquired company, regardless of whether the companies are competitors or vertically related firms.

First, as regards horizontal unilateral effects of minority shareholdings, once can consider them to be very similar to those of full mergers. Namely, these effects consist mainly in the incentive of the acquiring firm to raise prices. Depending on whether the acquiring firm can influence the acquired competitor, the acquirer will either push the acquired competitor to increase prices or raise its own prices, reaping the benefits either from its own increased sales or those of its acquired competitor. As in full mergers, the strength of these effects will depend on the market position of the parties, whether they are close competitors, as well as other usual countervailing factors. Elements more specific to partial acquisition are the size of the financial interest acquired and whether it allows the acquirer to exert material influence on the target.

Photos © Emilie Gomez

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