Concentration corner
A round-up of some recent news, reports and articles on market concentration
Market concentration - both industry and ownership - is a topic that may be starting to work its way in the Responsible Investment world. Here are a few bits and pieces that caught my eye recently.
Since market concentration is a ‘pet’ subject of mine, I was very interested to see the CMA open up a Market Investigation into the veterinary sector. CVS Group shares didn’t like it, Pets at Home also down a bit.
The official announcement that the CMA is undertaking a market study (the step before a market investigation) of the infant formula market in the UK. (As mentioned previously, worth noting this sector has attracted attention in the US too.)
A piece from Rana Foroohar on differing US / EU views on market concentration. (I’m not convinced the shift away from a ‘consumer welfare’ orientation is having a big impact in the US in practice yet, but that’s another story.)
A report from the Columbia Center on Sustainable Investment written by market concentration superstar Denise Hearne.
I was interested to find that UNPRI put in a submission to the Australian inquiry into ‘common ownership’ a couple of years back. General thrust seems to be that the evidence of harm from common ownership was patchy and it is too early to think about public policy responses.
A couple of bits here and here from Toby Nangle on index concentration. Some counterintuitive stuff there about the relatively un-concentrated nature of US indices. Here is the underlying GS research he quotes in the second piece.
That in turn reminded me to plug The Vanishing American Corporation, a book from a few years back, not brilliant but worth a read. A key point here is that the small number of companies that dominate today have far few employees than their equivalents in the 1970s or earlier.
Relatedly, The Great Reversal by Thomas Phillipon is really great book on growing market concentration in the US.
And tangentially: Virtual Competition is the toughest book I’ve (largely…) read in a long time. I found it because I was interested in what a ‘market’ looks like when algorithms are driving both pricing and pricing comparisons and was looking for what people had already written on the topic. Reading this book (which was published in 2016!) made me realise I am well off the pace. Competition authorities have already been grappling with issues like algorithmic tacit collusion. That just makes me more perplexed about the nature of some ‘markets’. To what extent is individual consumer behaviour determining prices? More on that another day