An op-ed in The New York Times today lays out the case for imposing new restrictions on how index funds operate. The rationale, according to the authors, is to prevent the reduction in competition in industries that is a direct consequence of indexing. If the proposal is implemented as outlined, the indexing strategy for equity investing that’s widely practiced could be headed for extinction.

At issue is the tendency of index funds to hold large stakes of several companies within industries in order to replicate an index, such as the S&P 500. For example, there are five airline stocks in the S&P 500. In order to properly track this index, it’s necessary to hold all five stocks in the relevant weights, based on current market capitalization. It’s standard operating procedure for indexing, but it’s also the basis for reducing competition and raising prices, write Eric Posner, a professor at the University of Chicago Law School; Fiona Scott Morton, a former deputy assistant attorney general for economics at the antitrust division of the Department of Justice and a professor at the Yale School of Management; and Glen Weyl, a visiting scholar in economics and law at Yale.

“The problem is not just the size of the institutional investors, but the way they invest,” the authors charge. “Institutional investors often own stakes in all the competitors in concentrated industries.”

This concentration, we’re told, leads to higher prices for consumers.

The empirical impact of institutional investors was revealed in two blockbuster academic papers. One — written by José Azar, Martin C. Schmalz and Isabel Tecu — found that airline ticket prices increased as much as 10 percent because of common ownership. Another — by Mr. Azar, Mr. Schmalz and Sahil Raina — found large increases in bank fees and reductions in interest rates to savers from common ownership of banks.