Antitrust books written for popular audiences often begin with a story or two about the illusion of choice that pervades our consumer markets. In one such story, the reader is asked to think about all the beers they can find at their local supermarket: Budweiser, Corona, Stella Artois, Michelob, Pilsener, Busch, and Rolling Rock, to name a few. It is then revealed that this cornucopia of options is really just the brand portfolio of a single company, AB InBev, that produces nearly half of the beer consumed in the country.
The point of these kinds of stories is to illustrate a broader trend in American industry. In the last few decades, waves of mergers and acquisitions coupled with virtually non-existent antitrust enforcement have greatly consolidated industry in America. Markets that were once home to robust competition from dozens of firms are now dominated by a select few. The proliferation of brands sometimes keeps up the illusion of choice, but if we look through the brands to the parent companies, we find that, no matter which beer we buy, the money all goes to the same place.
The new antitrust movement argues that a long list of negative consequences result from this kind of economic concentration. Consumer prices go up, wages go down, startup activity wanes, innovation slows, and our industrial systems become much more fragile. Advocates of this position have won the enthusiastic endorsement of the Democratic party, which has made antitrust one of the centerpieces of the party’s new agenda.
At the same time as the new antitrust movement has gained steam, others have been raising the alarm about the way companies are owned. Like the antitrust advocates, these folks also argue that our economy features an illusion of choice. But for them, the source of the illusion is not that massive holding companies own most of the brands we choose from. Rather, the illusion results from the fact that all public companies, no matter their size, are commonly owned by the same diversified investors.
The most popular example of this kind of common ownership has been the airline industry. There consumers can choose between companies like American Airlines, United Airlines, Delta Airlines, and Southwest. However, since the stock of these companies is all owned in significant part by the same set of investors, it hardly matters which one you choose: the money all goes to the same place.
The common ownership arguments are not yet as advanced or proven as those made by the new antitrust movement. It is not clear, for instance, whether common ownership should only refer to situations where all the companies in a given sector are owned by a small set of institutional investors, or if the concept should refer more broadly to any company owned in large part by diversified shareholders. It is also too early to say whether the theorized problems with these arrangements—namely that common ownership will sap the incentive of managers to compete because the owners of their companies do not care whether they win the business of any particular consumer—actually present themselves significantly in reality.
Despite its lower stage of development, the movement against common ownership presents an interesting challenge to the new antitrust movement. If the common ownership critics are right about the source of our economy’s rot, then antitrust remedies aimed at increasing the number of firms in a given market will be inadequate. After all, multiplying the number of firms operating in a particular sector will do nothing about the fact that those larger number of firms will still be jointly owned by the same people who owned the smaller number of firms that preceded them.
Antitrust advocates have two possible ways of responding to the common ownership challenge, both of which might cause them trouble.
The first option is to deny that common ownership really matters. Sure, they might say, we can imagine a world where owners wake up to the reality that certain kinds of zero-sum competition for consumers is of no use to diversified shareholders and then put pressure on managers to stop being so competitive. But, they might continue, this is not what actually happens. Whether because of norms, regulation, or some other set of forces, the fact is that shareholders appoint boards that appoint managers that really do compete hard and even retain and compensate managers based on their competitive success.
The trouble with this option is that it leads directly to the market socialist conclusion. Market socialists have long argued that it would be possible for all of the companies to be collectively owned and yet still be made to simulate competition with one another in order to reap the benefits competition supposedly brings. People who think common ownership through diversified shareholders can work well enough also believe, whether they realize it or not, in the viability of simulated competition in a socialist society.
At the point at which we say it is not economically necessary to have competing ownership groups provided we have competing firms, it becomes hard to understand what the economic purpose of individual equity ownership actually is. Why not, at that point, just have the government own most or all of the stock equity through diversified social wealth funds that are themselves in simulated competition with one another, just like the funds that already exist in Alaska and Norway? That is, if common ownership is not a problem, then it seems like truly common ownership is not a problem.
The second option is to say that common ownership is a serious problem that must be addressed. The trouble here is that antitrust advocates do not seem to have any proposals for how to do that, and the proposals that do exist from others would generally increase the role of the financial industry that antitrust advocates mostly loathe.