The Yale Law Journal

May 2018

Horizontal Shareholding and Antitrust Policy

Antitrust Law

abstract. “Horizontal shareholding” occurs when one or more equity funds own shares of competitors operating in a concentrated product market. For example, the four largest mutual fund companies might be large shareholders of all the major United States air carriers. A growing body of empirical literature concludes that under these conditions market prices are higher than they would otherwise be. We consider how the antitrust laws might be applied to this practice, identifying a theory of harm and how it matches the law, examining the issues that courts are likely to encounter, and attempting to anticipate litigation problems. While the current literature on horizontal shareholding does not offer a single robust explanation of how the price increase mechanism works, we show that the “effects” test expressed in the Clayton Act does not require proof of the precise mechanism. Further, Section 7’s “solely for investment” exception typically will not apply. We also briefly discuss special problems of private plaintiff challenges. Finally, we elaborate the two ways that efficiencies are relevant to analysis of such mergers.

authors. Fiona Scott Morton is the Theodore Nierenberg Professor of Economics, Yale School of Management. Herbert Hovenkamp is the James G. Dinan University Professor, University of Pennsylvania Law School and Wharton School, University of Pennsylvania..