The classic non-compete approach would be in, say banking, where maybe an ETF packager such as State Street puts pressure on one of the ETF holdings to focus on mortgages, another on middle-market commercial another on high net worth individuals etc. whereby competition is reduced in specific areas and profit margins are able to rise.
But we aren't seeing that, yet.
From The Hill:
Common ownership scare shows flaws in economic research
In December, the Federal Trade Commission (FTC) held a hearing in New York on “common ownership.” This bland phrase disguises a topic of vindaloo hotness: Are index funds really cartels? Should they be regulated out of existence?
Last year, the FTC stirred this pot repeatedly. In June, at the Global Antitrust Economics Conference, in his first public remarks FTC Commissioner Noah Joshua Phillips aired the theory that it is harmful for “diversified institutional investors to hold partial interests in competing corporations.”
Phillips was skeptical but saw a need to give the idea a respectful hearing. The claim that index funds somehow benefit fund managers and investors at the expense of consumers has been rattling around since 2015 — rattling like a chain without an anchor.
The problem for the anti-indexers is that they have no real evidence. The chain of inference was first hauled out when a paper by Professors José Azar, Martin Schmalz and Isabel Tecu started circulating in unpublished form in 2015 and eventually published form in 2018 in the Journal of Finance.
Azar, Schmalz and Tecu conjured the specter that “common ownership” dampens competition among companies and thus raises prices to consumers. Their evidence? They have none. What they have is a model.
Their statistical analysis conjures a ghostly clue that when the asset management firm BlackRock invested in airline companies, airline ticket prices went up....MORE
The normal fluctuation of prices in the volatile airline industry could be correlated just as easily with rebound averages in the NBA. Never mind that. Suddenly someone had a theory that the evil asset management firms had a magic trick to manipulate markets. The sweet scent of government regulation was wafted toward would-be regulators.
To its credit, the FTC has not taken the bait. Commissioner Phillips intoned, “The large institutional investors do not appear to be at the apex of a massive antitrust conspiracy.”
But conspiracies, as we all know, die hard. The FTC has continued to indulge the conspiracy theorists, most recently by giving them a stage at the eighth FTC hearing on "Competition and Consumer Protection in the 21st Century."...
