Let's talk antitrust - Common ownership issues

Jay Modrall: Good afternoon Richard. There has been a lot of chattering over the past year or so about the so-called “hipster antitrust” issues that are under that general rubric. Could you give us a brief introduction on what “hipster antitrust” is and then we can move on to common ownership?

Richard Whish: Sure, it’s an interesting expression, but it addresses a well-known issue in competition policy generally which is: what is competition law for? And masses has been written about that over the years and fashions change and the pendulum swings, but of course most competition authorities for a long time now have believed that predominantly competition law is about maximising consumer welfare. And that means ultimately that you look at the effect of a transaction or of a practice on price and you ask yourself whether this is going to lead to consumers paying more. But there are people who have always argued that antitrust or competition policy should be concerned with other things: fairness, distribution of wealth, dispersal of economic and political power. And there seems to be something at the moment - there’s something in the air in the zeitgeist where a number of people are asking for these other values to be reintroduced into the analysis and then this is given rise to this expression that’s been coined recently “hipster antirust”.

Jay Modrall: Thank you. One of the issues that comes under that general rubric is common ownership, which unlike some of the other so-called “hipster antitrust” issues, is coming from heavyweights in the US not from the European side. Could you summarise a bit where the common ownership debate is going?

Richard Whish: Well, this is interesting this one, and I think there is something that merits careful reflection. To begin with of course, in Europe, we’ve had our own debate about whether minority shareholdings are something that should be investigated under the EU merger regulation and, so far, we haven’t gone anywhere with that and I suspect nothing is going to happen for some time if at all. But here, with common ownership what we’re addressing is the question of whether there are some sectors where there might be a number of investors with significant investments all of whom have interests in a number of people in that particular sector, in particular it might be a sector where there is strong oligopolistic characteristics to the market. And in those circumstances, could the common ownership of these shareholdings give rise to competition concerns?

Jay Modrall: What kind of remedies are being recommended for these concerns and to what extent do you think that antitrust authorities will actually take up these ideas?

Richard Whish: Let’s be clear about this. This is relatively new and I don’t think that anyone has got to position the final position on it yet and certainly we haven’t moved on to the stage of having to identify remedies. I can’t imagine that you would ever want to have legislation that caps the shareholding that institution investors can own for example that would be a crazy idea. But as you know, the OECD has had an interesting roundtable and there are quite a number of things published about this now and we do know that the European Commission in particular in Dow/DuPont when looking at the circumstances of the market did take into account common ownership considerations but we haven’t got to a position yet where there are formulated or recommended remedies to deal with the problem.

Jay Modrall: In Dow/ DuPont, indeed they looked quite closely at these issues and I think that the discussion was overtaken a bit by all the focus on innovation competition, but what do you think the focus on common ownership in Dow/DuPont implies for future merger cases?

Richard Whish: At the very least, I think one has to say this is something to take into consideration when you are mapping out a case in its early stages, what are the concerns that might be identified? Clearly, this is something now that’s on the radar but at the same time I don’t think one should get carried away with it, I think the circumstances of the Dow/DuPont market were very particular. It is a relatively concentrated market and with a whole series of characteristics that might give rise to competition concerns and then the common ownership was one feature of that market that obviously had a certain influence on the way in which the Commission analysed things.

Jay Modrall: Thank you, that’s a space we are going to have to watch and we may reconvene for another discussion in a year or so.