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US: ETF giants draw antitrust scrutiny

By  |  January 23, 2020

US antitrust officials have started asking companies about their communications with major shareholders amid merger investigations, according to a Bloomberg report.

Citing people close to the matter, the report stated the Federal Trade Commission is asking firms to identify their largest shareholders and their influence over them.

The news adds to the growing scrutiny of the power the major ETF players have over the companies they own.

It is well documented how BlackRock, Vanguard, and State Street, known as the Big Three, see the majority of passive flows and control over 80% of the US ETF market.

The huge flows have led the Big Three to become the largest owners of many US publicly traded firms. Typically, the trio collectively own 22% of the S&P 500, according to Bloomberg data. This gives the companies significant influence over major decisions such as mergers.

This dominance has led to anticompetition criticism from academic circles. For example, José Azar, professor at IESE Business School, Universidad de Navarra, argued competition issues benefitted shareholders, but impacted consumers and savers.