November 7, 2019 – The C.D. Howe Institute Competition Policy Council addressed potential competition concerns arising from minority “common ownership” positions across competing companies, at a recent meeting. These involve mergers where a shareholder holds a minority ownership in multiple competitors operating in the same product and geographic markets.
With the growth of institutional investors’ role in equity markets, competition authorities are increasingly attuned to the potential competition concerns from common ownership.
A concern is that common ownership could affect product market outcomes by reducing the incentive of a firm to compete as it seeks to maximize returns for investors who also invest in its competitors.
The issue is also timely since the Canadian Competition Bureau (the Bureau) has adopted draft template merger review questions that require merging parties to identify minority shareholdings above 10 percent that they hold in any competitor in the relevant market. As well, merging parties are required to identify minority shareholdings above 10 percent in any competitor in the relevant market held directly or indirectly by any entity that has a 10 percent or greater interest in one of the merging parties.
The consensus of the Competition Policy Council is that the Bureau would validly examine common ownership where the relevant market is already characterized by market power or in markets that exhibit oligopolistic tendencies.
Council members agreed that 10 percent of voting rights is an appropriate threshold for possible significant interest, however they emphasized that passive common ownership should not itself be a concern, particularly where the common ownership occurs in highly fragmented markets or where the merging parties’ closest competitors have controlling shareholders. Additionally, Council members emphasized the practical difficulties of accessing data about merging parties and their shareholders and beneficial owners.
The Competition Policy Council comprises top-ranked academics and practitioners active in the field of competition policy. The Council provides analysis of emerging competition policy issues and is co-chaired by Elisa Kearney, Partner, Competition and Foreign Investment Review and Litigation at Davies Ward Phillips & Vineberg LLP, and Grant Bishop, Associate Director, Research, at the C.D. Howe Institute. Professor Edward Iacobucci, Dean at the University of Toronto Faculty of Law and Competition Policy Scholar at the Institute, advises the program. The Council, whose members participate in their personal capacities, convenes a neutral forum to test competing visions and to share views on competition policy with practitioners, policymakers and the public.
For more information contact: Grant Bishop, Associate Director, Research; or Nancy Schlömer, Communications Officer, C.D. Howe Institute, phone 416-865-1904 ext. 0247, email: firstname.lastname@example.org.
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