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Antitrust

Horizontal Shareholding

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Horizontal shareholdings exist when a common set of investors own significant shares in corporations that are horizontal competitors in a product market. Economic models show that substantial horizontal shareholdings are likely to anticompetitively raise prices when the owned businesses compete in a concentrated market. Recent empirical work not only confirms this prediction, but also reveals that such horizontal shareholdings are omnipresent in our economy. I show that such horizontal shareholdings can help explain fundamental economic puzzles, including why corporate executives are rewarded for industry performance rather than individual corporate performance alone, why corporations have not used recent high profits to expand output and employment, and why economic inequality has risen in recent decades. I also show that stock acquisitions that create anticompetitive horizontal shareholdings are illegal under current antitrust law, and I recommend antitrust enforcement actions to undo them and their adverse economic effects.

 


* Petrie Professor of Law, Harvard Law School. © 2016 Einer Elhauge. All rights reserved. I am grateful for summer research funding from Harvard Law School and for comments from Cindy Alexander, Joseph Angland, José Azar, Jonathan Baker, John Coates, Todd Collins, Allen Ferrell, Jesse Fried, Luke Froeb, Anthony Mariano, Doug Melamed, Mark Roe, Christopher Sagers, Steve Salop, David Schleicher, Martin Schmalz, Ganesh Sitaraman, Larry Summers, Isabel Tecu, Glen Weyl, David Zhang, and the participants in the Harvard Corporate Group Lunch.