Last week, The New York Times featured an op-ed regarding an antitrust issue of concern to our Firm and colleagues. Eminem legal scholars and economists discuss the possible antitrust implications of cross-ownership in horizontal competitors by large institutional shareholders. The authors posit that cross-ownership can lead to higher prices and lower wages and offer some reasons that a Trump Administration antitrust policy might favor stepped up scrutiny in this area.
Earlier this year, THE MOGIN LAW FIRM published two articles about the Department of Justice’s lawsuit against ValueAct Capital for violating the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (“HSR”), which ultimately resulted in an $11 million settlement. As described in our first article, Are Investment Funds’ Cross-Shareholdings Anti-Competitive?, under the Clayton Act, interlocking directorates are prohibited, and the DOJ charged that ValueAct Capital had attempted to violate that law by failing to report investments in in two horizontal competitors. Our follow-up article, ValueAct Update: Department of Justice Negotiates Record Settlement For HSR Violations, noted that “The ValueAct action marks the rare situation in which federal antitrust agencies have sought enforcement for cross-ownership within a single market, but serves as an indicator of times to come in light of the current trend of institution investment in concentrated industries.” The Times piece opines that if the incoming administration tries to prohibit large institutional investors from cross-ownership among horizontal competitors, as indicated previously, we could theoretically see a rise in living standards, as well as a more diverse and competitive American market.
It remains to be seen if there will be enhanced enforcement in this area and whether such enforcement might change the competitive landscape of competition in America. As a firm with a long history devoted to protecting competition for market participants and recent entrants, we hope for more robust enforcement in this area. After all, it was such cross-ownership by large institutional shareholders, including activist investors, that led to one of the first high profile antitrust prosecutions in American history when the Morgan and Harriman trusts tried, albeit with less subtly than practiced today, to do the same when the Theodore Roosevelt administration was finding their sea legs.
Click here to read the New York Times op-ed.
The Mogin Law Firm, P.C. specializes in representing businesses, entrepreneurs, consumers and investors in antitrust, unfair competition and complex business litigation. We have participated in some of the largest antitrust cases in the United States and are frequently requested by other law firms and often consult with law firms engaged in antitrust cases. To learn more about The Mogin Law Firm, P.C., please click here.