Antitrust and the Age of Asset Management

Recent decades have witnessed the rise of both finance and monopoly power in the United States. Although seemingly unrelated, these developments are in fact intimately linked. As Andrew McLean makes clear, asset managers--especially private equity houses and large index investors--are key contributors to the decline of competition in the American economy.

Antitrust and the Age of Asset Management explores two primary ways in which asset managers drive consolidation. First, there is the private equity practice of strategically acquiring numerous companies in a single industry. Such "roll-up" acquisitions are responsible for consolidation across many sectors, from local newspapers to ski resorts, and have been particularly prominent in healthcare, harming patients, workers, and the medical system at large. Second, a subtler form of consolidation is created by "horizontal shareholding," in which asset managers hold shares in multiple companies operating in the same market. This phenomenon has grown alongside the increasing popularity of index funds from providers such as BlackRock, Fidelity, State Street, and Vanguard, and is associated with anticompetitive effects in a range of industries, from airlines to agriculture.

McLean proposes several ambitious reforms to contest finance-led consolidation, including banning acquisitions that would give a private equity house control of more than 30 percent of a market and imposing a maximum cap on the amount of equity capital that an asset manager may manage. Highlighting the close ties between monopoly and finance, Antitrust and the Age of Asset Management is a timely addition to debates about market power and the dangers of an excessively large and influential financial sector.