European Union: Institutional Investor Shareholdings Come Under European Commission Scrutiny

Last Updated: March 8 2018
Article by Yvan N. Desmedt, Matt Evans, Patrick G. Stafford and Victoria M. Yuan
Most Read Contributor in United States, September 2019

In Short

The Situation: A recent study examining common corporate shareholdings in the United States argues that the holding of even minority stakes in rival companies by institutional investors affects competition. The European Commission is considering whether the same could apply under European Union competition law.

The Analysis: EU competition law has tools in place to scrutinize minority shareholdings. The EU Merger Regulation can capture minority shareholding acquisitions when they confer control, and minority shareholdings are included in the Commission's merger analyses. Existing competition laws also address unlawful coordination between competitors where facilitated by common shareholders or directors.

Looking Ahead: Despite the availability of existing tools to address any concerns, the Commission may take enforcement measures, such as a sector inquiry or investigations into particular investors, to test this theory of harm.

EU Competition Commissioner Vestager recently called for scrutiny of the effect of institutional investors holding stakes in multiple companies in the same industry. Her comments follow a 2016 Harvard Business Review article observing that three private equity funds hold significant stakes in competing U.S. airlines and banks. The study argued that rival companies with such common shareholders may be less incentivized to compete with each other.

Commissioner Vestager's speech reflects the conclusions of the Harvard study. She indicated that the Commission is examining "whether this sort of common ownership is really common in practice.... [T]here was an assumption that companies acted independently ... but that picture of our markets might not always be right. [I]t's becoming more common for the same investors to hold shares in different companies in the same industry. And for those investors, fierce competition might not seem so appealing."

The Commission has several options. If it examines this issue as a matter of competition policy, it can dedicate a staff unit to it and/or launch a sector inquiry (generally leading to significant involvement by the relevant stakeholders). Another possibility would be to identify a test case to pursue in an enforcement action.

Before deciding what steps to take, the Commission may wish to consider whether existing EU laws are sufficient to curb any hypothetical negative effect on competition arising from minority shareholdings by institutional shareholders, whether in its antitrust, merger control, or other regimes.

Merger Control Rules

Under the EU Merger Regulation, an acquisition of minority shareholdings can trigger EU review if it gives the buyer "decisive influence" over the target. Minority shareholders may have control through veto rights on key decisions, such as the annual budget or business plan. Control can also arise when the other shareholdings are widely dispersed and smaller shareholders tend not to exercise their voting rights. The larger-but-minority shareholder may find that its stake gives it a de facto veto.

The Commission examined as recently as 2014 whether it should broaden its jurisdiction to noncontrolling stakes. In its final report, the Commission concluded that cases in which minority stakes can be problematic are relatively rare, and no legislative changes were proposed. Conversely, some national merger control rules have a lower concept of control (Germany and the United Kingdom are notable) and may trigger a filing and regulatory review.

Minority shareholdings nevertheless do not go unaddressed in European merger control.

In its substantive review of actual proposed mergers, the Commission does evaluate minority (including noncontrolling) shareholdings. In practice, the Commission sometimes has cleared mergers subject to divestment of minority stakes.

Antitrust Rules

Besides merger control, ex post antitrust enforcement can capture potential anticompetitive practices resulting from common minority shareholdings. Directors who sit on the boards of actual or potential competitors cannot act as a conduit for exchanges about competitively sensitive information between those competitors. The same principle applies to shareholders. While precedents are somewhat dated, they confirm that the EU rules concerning restrictive practices and agreements cover these types of situations.

Common Ownership in Practice

A major hurdle facing Commissioner Vestager's investigation is likely to be a lack of evidence that institutional funds have the means, or the desire, to influence the European companies in which they have made minority investments. This is especially true for passive funds that replicate market indices. The rules set forth above would not capture such passive investors. The Commissioner acknowledged in her speech "that there are certainly ways for these funds to make their voices heard. But we can't just assume they have the power to change minds. We need to look closely at what actually happens—whether they can really get companies to compete less hard."

On the behavioral side, compliance restricting information flows is well-established and familiar to professional investors and managers. Nevertheless, the recent announcement may lead to enforcement actions to investigate effective observance by investors with common shareholdings. The relatively dated precedents may be a reason for the Commission to take on a case and consider the issue and effective compliance afresh.


Existing EU and national competition law rules address the hypothesis that common ownership by institutional investors may restrict competition. It is questionable whether the Commission should devote material resources reacting to the U.S. study. The Commission recently concluded against an extension of the merger control review, and it has adequate enforcement powers to investigate anticompetitive practices, even covering the effect of common minority shareholdings if appropriate. Yet enforcement initiatives may follow.

Three Key Takeaways

  1. The European Commission intends to assess whether private equity ownership of minority stakes in competing companies can restrict competition between those companies.
  2. The Commission has not yet decided how to investigate, but the tools available include a sector inquiry, which could prove burdensome to companies expected to cooperate with information demands.
  3. Existing EU competition rules likely suffice to address any concerns. Institutional investors should consider how best to join the debate and the Commission's early actions to shape the scope and impact of potential changes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions