A number of scholars and pundits have alleged that market concentration is steadily increasing across the U.S. economy, leading to a decline in competition. But a new report released today by the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, finds that in spite of the rise in concentration in some industries from 2002 to 2012 (the most recent year for which federal government data is available), in the vast majority of markets concentration levels remain well below the threshold that would normally trigger antitrust concerns.
“When looked at more closely, the problem of market concentration is far less serious than the broad pronouncements would suggest. In fact, in many industries concentration has simply not risen,” says Joe Kennedy, senior fellow at ITIF, who authored the report. “Overall evidence suggests that, even in those cases when concentration has indeed increased, in most industries it remains significantly lower than the thresholds that would call for antitrust action.”
The report shows that standard methods of calculating concentration have many flaws, including not measuring imports or lumping together companies in separate markets. Also, in some cases, nationwide concentration does not reflect the relevant market. When researchers use more detailed industry definitions at the local level, they find concentration has fallen.
Claims that concentration is increasing have been used by experts and pundits to call for a radical restructuring of antitrust policy, including imposing much stricter limits on mergers. “Yet evidence about rising concentration provides little justification for a wholesale change in current antitrust policy,” adds Kennedy. “Attacking perceived high levels of concentration without any evidence of consumer harm is far more likely to harm consumer welfare and innovation than to help it.”
The Information Technology and Innovation Foundation (ITIF) is an independent, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized as the world’s leading science and technology think tank, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress. Learn more at itif.org.