By Martin C. Schmalz (University of Michigan)
Competition requires that firms have incentives to compete. Common ownership reduces these incentives. There is no known reason or mechanism by which firms are supposed to compete in the absence of incentives to do so. All arguments in the defense of the asset management industry amount to a distraction from this key point, the absence of evidence to the contrary, as well as from the existing empirical evidence that current levels of common ownership are very likely to reduce competition. This note exposes the alternative talking points the industry and its defendants have brought forward, and contrasts them with empirical facts.