Brattle economists Elaine Buckberg, Steven Herscovici, James Reitzes, and Branko Jovanovic have authored a Law360 article addressing claims from recent studies that competition is adversely affected when “institutional investors hold significant shares in multiple firms within a ‘concentrated’ industry.”
In the article, “Proposal to Remedy Horizontal Shareholding is Flawed,” the authors evaluate a proposed remedy that would allow investors to hold shares in one company in a concentrated industry, or limit their shareholdings to no more than one percent of the industry.
Furthermore, the authors believe the proposed remedy would place increased burdens on investors, financial advisers, and intermediaries; raise transaction costs; and possibly force funds to hold more short-term assets while impairing many households’ ability to accomplish long term financial goals.
The authors acknowledge that further research is needed to determine whether common ownership results in anticompetitive behavior in certain industries. However, even if that proves out, policy makers should seek a remedy that mitigates anticompetitive behavior while minimizing the costs associated with achieving efficiency-enhancing investment objectives. The proposed remedy does not meet those standards.
The full article can be downloaded using the link below.