Since the dawn of civilization, human beings have been driven by the instinct to survive, a notion famously captured by Charles Darwin in his theory of the ‘survival of the fittest’. The business world is no exception to this fundamental principle. The pursuit of survival and profit often pushes firms toward strategies that may include collusion, even among direct competitors. On the face of that, an issue of Common Investors also known as issue of ‘Common Ownership’ is on the rise.
Common Ownership is looked through the lens of supply side, wherein a common investor invests in the competing businesses on the pretext of diversifying portfolios. This investment is made in the same relevant market where the competitors are operating directly opening the door for anti-competitive concerns. The main principle behind competition law is regulation and maintenance of competition in the market. Common Ownership challenges this objective in the form of tacit collusion between the competitors.
These investments are done by Institutional Investors who have a high portfolio value as a percentage of market capitalization in India increasing to 32.3% in 2024.1 Institutional investors tend to diversify portfolios to focus on shareholders’ profit maximization.2
A major issue which arises is that it may lead to reduced competition between the firms as they held by the same investor. A loss for firm X maybe a profit for firm Y and vice-versa, wherein a win-win situation is created for the investors in any case. Additionally, there arises a high probability of tacit alignment of interests of the competitors harming the consumers and the market leading to lower competition, higher prices and a loss of effective choice on the part of consumers.
The threshold of material influence
One of the contentious issue in enforcement of competition law is ‘material influence’ which is measured through voting rights, board representation apart from extant of shareholding in the firm. However, in common ownership it is asserted that even if the investor does not have a material influence in the entities it may still lead to coordinated efforts due to common owners. Whereas economic theory and a large set of empirical literature show that increased coordination due to common ownership softens competition in the horizontal market.3
Example
The chokehold to prevent these anti-competitive concerns lies in the identification and proof of collusion which is difficult to establish in the absence of material influence threshold. However, CCI has dealt with such cases in a curated manner. Chrys Capital’s case is a noteworthy example wherein Chrys Capital invested in Intas Pharma and simultaneously held stakes in Mankind Pharma, Eris Lifesciences and GVK Biosciences. All these firms were direct competitors and possessed the ability to pursue anti-competitive goals. The combination was approved subject to Chrys Capital removing its director from Mankind Pharma, restricting information sharing between Intas, Curatio, and Mankind, and limiting certain veto rights.
Regulation in India
The Competition Act, 2002 does not explicitly penalise common ownership, however such structures are examined thorough the lens of anti-competitive agreements under Section 3 Abuse of Dominance under Section 4 and Combinations under Section 5 and 6. However, the major focus of CCI has remained on material influence which maybe difficult to be establish in every case. Section 3(3A) was introduced through Competition (Amendment) Act, 2023 explicitly bringing Hub and Spoke Cartel within the statutory framework. Hub and Spoke Cartel involve competition firms coordinating indirectly through a common intermediary without direct communication between them. Such agreements are presumed to have appreciable adverse effects on competition [AAEC] even without proof or intent of knowledge.
While India does not yet recognize common ownership as a standalone theory of harm, it’s enforcement practice reflects a growing sensitivity to the risks of indirect coordination and reduced competitive incentives arising from overlapping shareholdings.
Comparative Regulation in US and EU
While neither EU nor US specifically bans common ownership, there is an increasing debate about the consequences arising thereby. Across India, the EU, and the U.S., common ownership is not regulated through dedicated statutory provisions but is addressed indirectly via existing competition law frameworks. A key similarity is the reliance on effects-based analysis, focusing on whether overlapping ownership leads to coordination, reduced rivalry, or access to sensitive information. However, the jurisdictions differ in maturity and emphasis: the U.S. is the most advanced in terms of academic development and policy debate, the EU adopts a cautious, evidence-driven approach grounded in established legal principles and India is at an emerging stage with the CCI increasingly scrutinizing such arrangements through merger control and behavioral remedies.
