It may be illegal for institutional investors to buy-and-hold large equity stakes in a less competitive industry with high market concentration.

Olivia London

2017-11-27 07:39:00 Mon ET

Is it anti-competitive and illegal for passive indexers and mutual funds to place large stock bets in specific industries with high market concentration? Harvard law professor Einer Elhauge suggests that it is illegal for a passive institutional investor to buy-and-hold large equity stakes in a less competitive industry with high concentration, such as the U.S. airlines industry with 4 or fewer key players. In contrast, passive indexers would be safe from antitrust concerns if most other institutional investors stop buying multiple public companies in a specific sector with high market concentration.

The basic rationale relates to the fact that if institutional investors such as index funds and mutual funds hold shares of multiple companies in a specific industry, these oligopolistic firms would tend to compete less vigorously with one another. When senior executives make business decisions in the best interests of their institutional investors, this logic suggests less fierce product market competition and greater price discrimination for consumers in addition to the private benefits of portfolio diversification. The net result would be more stable share prices and more favorable rents and returns to these passive indexers and mutual funds.

Although key critics may disagree with this novel thesis, it is quite controversial to judge whether it is legal for institutional investors to retain major equity stakes in oligopolistic firms in a given industry with high market concentration.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Platforms benefit from positive network effects, scale economies, and information cascades.

Rose Prince

2019-07-25 16:42:00 Thursday ET

Platforms benefit from positive network effects, scale economies, and information cascades.

Platforms benefit from positive network effects, scale economies, and information cascades. There are at least 2 major types of highly valuable platforms: i

+See More

Value investment strategies make investors wiser like water with core fundamental factor analysis.

Jacob Miramar

2018-04-17 12:38:00 Tuesday ET

Value investment strategies make investors wiser like water with core fundamental factor analysis.

Value investment strategies make investors wiser like water with core fundamental factor analysis. Value investors tend to buy stocks below their intrinsic

+See More

President Trump ramps up 25% tariffs on $200 billion Chinese imports soon after China backtracks on the Sino-U.S. trade agreement.

Rose Prince

2019-05-09 10:28:00 Thursday ET

President Trump ramps up 25% tariffs on $200 billion Chinese imports soon after China backtracks on the Sino-U.S. trade agreement.

President Trump ramps up 25% tariffs on $200 billion Chinese imports soon after China backtracks on the Sino-American trade agreement. U.S. trade envoy Robe

+See More

Bidenomics better balances fiscal deficits and government expenditures with new corporate and capital income tax hikes.

Apple Boston

2021-08-01 07:26:00 Sunday ET

Bidenomics better balances fiscal deficits and government expenditures with new corporate and capital income tax hikes.

The Biden administration launches economic reforms in fiscal and monetary stimulus, global trade, finance, and technology. President Joe Biden proposes s

+See More

Tech stock prices tumble due to Trump's criticism of Amazon's tax avoidance, Facebook data breach of trust, and Tesla autopilot incidence.

Dan Rochefort

2018-03-29 14:28:00 Thursday ET

Tech stock prices tumble due to Trump's criticism of Amazon's tax avoidance, Facebook data breach of trust, and Tesla autopilot incidence.

Share prices tumble for technology stocks due to Trump's criticism of Amazon's tax avoidance, Facebook user data breach of trust, and Tesla autopilo

+See More

With prescient clairvoyance, Bill Gates predicted the recent rise of Facebook and Netflix.

Monica McNeil

2017-02-07 07:47:00 Tuesday ET

With prescient clairvoyance, Bill Gates predicted the recent rise of Facebook and Netflix.

With prescient clairvoyance, Bill Gates predicted the recent sustainable rise of Netflix and Facebook during a Playboy interview back in 1994. He said th

+See More