Competition: it’s not me, it’s not you, it’s us

Last year, Toyota increased its shareholding in Subaru, and Subaru bought shares in Toyota for the first time.  There is no intention it is said of Toyota actually acquiring Subaru but they need to work more closely together in the light of global changes and autonomous cars. Similarly Ford and Volkswagen have joint shareholdings in each other and in another company for similar reasons. This kind of cooperation looks modest in comparison with the recent Fiat Chrysler merger with Peugeot. But it is nevertheless strategic and in fact it is a considered alternative to a merger.

Cross-shareholdings are the method by which companies try to increase their competitiveness by what looks like an anti-competitive maneuver. We can see similar patterns of small cross shareholdings in many internationalised industries, including airlines. (Here the purpose is not so much to improve technological advances as to reap the benefits of scale by enabling coordination of passenger transfer, including rationalization of routes.) Usually, competition law is only concerned with shareholdings that give effective control, and this allows structures of smaller cross-holdings to provide both companies with information and communication channels, formal and informal, for strategy and technology development.

Is all this anti-competitive? Perhaps, in that the companies are deterred, to a degree determined by the shareholdings, from competing with each other, but more importantly through the impetus given to alternative directions for each of them, which derives from the enhanced perceptions of the other’s strategy. Each may identify something better to do than going head-to-head. All the paraphernalia of international competition law, including that of the EU, is irrelevant in the face of this cleverness. Big companies are learning that there are better things to do than to seek dominant positions.