The anticompetitive effect of passive investment.

Michigan Law Review, October, 2000 by Gilo, David

INTRODUCTION

There are many cases in which a firm passively invests in its competitor.(1) For example, Microsoft passively invested in $150 million worth of the nonvoting stock of Apple, its historic rival in the operating systems market.(2) Also, in November 1998, Northwest Airlines, the nation's fourth-largest airline, purchased 14%(3) of the common stock of Continental Airlines Inc., the nation's fifth-largest (and fastest growing) airline.(4) Northwest competes with Continental on seven routes, serving 3.6 million passengers per year.(5) In another example, TCI, the nation's largest cable operator, became a passive investor with a 9% stake (which can be increased, under the terms of a settlement with the Federal Trade Commission, to a 14.99% stake) in Time...

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