The Competitive Effects Of Minority Shareholdings PDF Download

Following the standard (acquisition of control) merger logic, merger control regimes have typically treated horizontal minority shareholdings as a matter of coordinated effects. As in a standard horizontal merger case, the transaction implies full control of the target firm and joint profit maximization post-merger, it is easy to see the acquisition of minority shares being analysed as a matter of information flows and influencing conduct. In that sense, competitive effects of shareholdings are not systematically different from a standard merger, although the effects of the shareholding are attenuated by the more limited degree of influence exerted by the minority shareholder. This has led to a focus on the acquired rights of minority shareholders in an effort to gauge the actual influence that such a shareholder may exert on the company. In other words, the focus has been on coordinated effects resulting from the influence of the minority shareholder to the detriment of a non-coordinated effects analysis. This article focusses on the non-coordinated effects of minority shareholdings in oligopolistic markets. It is demonstrated that minority shareholdings even when they fall below the usual thresholds can lead to a significant impediment of effective competition (SIEC) on a purely non-coordinated basis. This is particularly likely in a market with differentiated products, when a firm partially acquires shareholdings in its closest competitor and when the next best alternative products are only weak substitutes. While share thresholds may be a decent rough proxy for coordinated effects to the extent that they convey different degrees of direct influence, it is shown that such thresholds are much less meaningful in the context of non-coordinated effects as general market conditions and in particular closeness of competition, which is independent of the magnitude of the shares, becomes much more important.