Since index funds became widely available in 1976, they’ve upended the business of money management and made investing for the masses easier and cheaper. They’ve also had an unexpected side effect: Because they’re so large, index fund families are among the top shareholders in many companies, including those that compete with one another. Despite this, funds’ share purchases get no review from antitrust regulators.

That could change under an initiative by the U.S. Federal Trade Commission—possibly radically. Two proposals could result in investments by all the giant mutual fund families coming under scrutiny for the first time from both the FTC and the U.S. Department of Justice, which share antitrust enforcement. It’s the index funds that appear to be causing regulators the most heartburn. Just three companies—BlackRock, Vanguard Group, and State Street—manage about 80% of all indexed money, and together their portfolios own more than 20% of the typical S&P 500 company. The Vanguard Total Stock Market Index Fund just became the first stock fund to hit $1 trillion in assets.

…

Regulatory review could make operating an index fund more complex. In cases where companies have to notify regulators of share purchases, the agencies can request more information, and more time, to determine if the deal might harm competition. “They ought to limit outright the amount these companies can own, but at least a review is worthwhile, because it gives the commission a hook to ask” if ownership is too concentrated, says Graham Steele, a senior fellow at the anti-monopoly group American Economic Liberties Project. He published a paper in November describing the fund companies as part of a new “money trust.”