Common Ownership and Collusion

We provide the first empirical evidence that common ownership can facilitate explicit collusion. Our unique setting, the population of legal cartels in Sweden, lets us observe cartel formation, duration, and dissolution without the sample-selection bias that plagues studies of detected cartels. Combining hand-collected ownership data with the universe of registered cartels, we compute firm-pair profit weights (κ) that measure how much one firm internalizes a rival's profits. Higher profit weights are associated with a greater likelihood of cartel participation, predict future cartel involvement, and are linked to longer cartel duration. Firms also reduce their profit weights immediately after a cartel dissolves. However, this relationship is concentrated among pairs in which the firm that internalizes the rival firm's profits colludes while the rival does not. Common ownership therefore complements a firm’s own participation in explicit collusion but substitutes for cartel participation by the rival whose profits it internalizes.